Reserve Bank of India (RBI) has released the latest financial inclusion index (FI-Index) on 17 August 2021, indicating the scope of financial inclusion in the country. The index for the period ended in March 2021 is 53.9, which ranges from 0 to 100. 0 represents complete financial exclusion, and 100 represents full financial inclusion.
The latest index has seen an improvement of 10.5 points from 43.4 for the period ended in March 2017. The index covers banking, investments, postal, insurance and pension sectors in consultation with the Central Government and respective sectoral regulators.
There are three broad parameters on which the calculation is based, including access (35%), usage (45%) and quality (20%). These parameters are further divided into several dimensions based on different indicators. According to the RBI, the quality parameter is a unique feature of this index, reflecting financial literacy, consumer protection, and inequalities and deficiencies in services. This index does not have a base year and reflects the aggregate of stakeholders over the years. It is responsive to ease of access, availability and usage of services and quality of services. The index is published in July every year.
One of the significant contributors to improving financial inclusion is the Pradhan Mantri Jan Dhan Yojana (PMDJY). There are over 42 crore accounts under PMJDY, and over 55% of the account holders are women. The increase in the usage of accounts has been due to the rise in direct benefit transfers (DBT) through digital platforms and Aadhaar.
The growth of digital payment systems and Aadhaar have contributed in the parameters of access and usage significantly. However, the third parameter, quality, requires demand and supply-side interventions, which PMJDY has tried to address the supply side to an extent.
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