A significant segment of the country is still financially excluded, according to the Reserve Bank of India’s first composite Financial Inclusion Index (FI-Index) unveiled Tuesday, which seeks to capture extent of financial inclusion across the country.
The annual FI-Index for the financial year ended March 2021 crossed the halfway mark to 53.9, as compared to 43.4 for the year ended March 2017, the RBI said. The index will reflect various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion, it said.
As per the central bank, the FI-Index has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with government and sectoral regulators.
“The FI-Index comprises three broad parameters — access (35 per cent weightage), usage (45 per cent) and quality (20 per cent) — with each of these consisting of various dimensions, which are computed based on a number of indicators … The index is responsive to ease of access, availability and usage of services, and quality of services, comprising, in all, 97 indicators,” the RBI said. The index has been constructed without any “base year”, and reflects cumulative efforts of all stakeholders. It will be published annually in July. A unique feature of the index is the parameter related to the quality of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services, it said.
The FI-Index of 53.9 for 2020-21 indicates that 46.1 per cent of the parameters considered are still financially excluded, despite the launch of the Pradhan Mantri Jan Dhan Yojana for unbanked sections of society, digital payment revolution and entry of a host of players in the insurance and mutual fund segments over the last couple of years. Six years after its implementation, the total number of accounts opened under Jan Dhan Yojana has touched 41.4 crore, with deposits adding up to Rs 1.30 lakh crore as on December 2 last year. Nearly two-thirds of accounts are operational in rural and semi-urban areas. Total assets under management of mutual funds added up to Rs 35.31 lakh crore as on July 31 this year.
Digital identity (Aadhaar), along with the proliferation of mobile phones with new payment systems, have addressed the first two challenges of access and usage to a large extent. “The third challenge, i.e. quality, requires both demand and supply side interventions. Opening of Pradhan Mantri Jan Dhan Yojana accounts has enabled millions to have access to financial services. This has addressed the supply side issue to a considerable extent,” RBI Governor Shaktikanta Das said at an event on financial inclusion last month.