Financial Inclusion promotes thrift and develops culture of saving and also enables efficient payment mechanism strengthening the resource base of the financial institution which benefits the economy as resources become available for efficient payment mechanism and allocation. The empirical evidence shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality (Thorat, 2008).
With these developments private sector credit is expected to gain momentum. Growing liquidity and competition forced banks to lend close to and in some instances below KIBOR and overall there was softening of lending rates.