The Reserve Bank of India (RBI) has announced that the Financial Inclusion Index (FI-Index) rose to 64.2 in March 2024, up from 60.1 in March 2023. This growth reflects the significant strides India is making toward financial inclusion, ensuring broader access to banking, insurance, and financial services for underserved populations

What is the Financial Inclusion Index?

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 respective sectoral regulators.
The index captures information on 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.
The FI-Index has been constructed without any ‘base year’ and as such it reflects cumulative efforts of all stakeholders over the years towards financial inclusion.
The FI-Index will be published annually in July every year

Parameters of the FI-Index

The FI-Index comprises of three broad parameters (weights indicated in brackets) viz., Access (35%), Usage (45%), and Quality (20%) 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.
A unique feature of the Index is the Quality parameter which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services.

Benefits of the Financial Inclusion Index

Gives information on the level of financial inclusion in the country.
Helps in policymaking.
Can be used as a composite measure in development indicators.
Aids in the fulfilment of G20 Financial Inclusion Indicators requirements.
Helps in research regarding financial inclusion and other macroeconomic variables.

Understanding Financial Inclusion

financial inclusion’ is defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost.

Why Financial Inclusion Matters

Reduce Poverty: Financial inclusion means greater access to financial services and an increase in savings. This would help in decreasing income inequality & poverty and would lead to increase in employment levels.
Growth: It encourages the habit to save, thus enhancing capital formation in the country and giving it an economic boost. Also, the availability of sufficient and transparent credit from formal banking institutions will promote the entrepreneurial spirit among the people, leading to an increase in productivity and prosperity in rural areas.
Service delivery: Direct cash transfers to beneficiary bank accounts rather than physical cash payments against subsidies have become possible. Thus funds actually reach the targeted beneficiaries instead of being siphoned off along the way.
Banks’ efficiency: Banks which are operating in a financial inclusion sector could experience higher operating efficiency in financial intermediation

Challenges To Financial Inclusion

In India, where nearly 1/4th of the population is illiterate and below the poverty line. Thus, ensuring financial inclusion is a challenge.
Low income and the inability to provide collateral security.
Lack of enough bank branches in rural areas continues to be the roadblock to financial inclusion.
More reliance on informal lending.
Difficulty in understanding different product offerings, financial terms, and conditions.
A lot of hidden bank charges have demotivated poor persons from availing financial services.
Low-income groups don’t see banks as welcoming and often believe they are not for them.
Lack of credible, low-cost and high-quality financial advice.
Most women are being excluded from the formal financial system.
Disabled people find it difficult to access banks.
The rising level of Non-Performing Assets (NPAs) of banks due to the large corporates makes it difficult to improve financial inclusion situation in India.

Key Government Initiatives Promoting Financial Inclusion

Pradhan Mantri Jan Dhan Yojana (PMJDY)

The purpose behind it is that goal to expand affordable access such as like Bank Accounts of peoples, Credits, Insurance and pension.
Pradhan Mantri Jan Dhan Yojanawas launched on 28th of August 2014 by our honourable Prime minister Shri Narendra Modi.
This scheme comes under the ministry of finance of India.
On inauguration day itself i.e., on 28th of August 2014, 15 million bank accounts were opened on the very first dayand by the end of the first week of this scheme, there were 18 million accounts were opened.
The main purpose of this scheme is that females have to chance to open a bank account freely and become financially independent.

MUDRA Yojana

The Government of India launched a flagship scheme called Prime Minister Mudra Yojana (PMMY)on 8th April 2015 in order to boost the economy.
This scheme helps bring affordable loans to the non-corporate, non-farm micro and small enterprises to fund their needs.
Another goal of this scheme was to bring the target audience into the recognised financial fold, i.e., Financial Inclusion.
MUDRA (Micro Units Development and Refinance Agency Limited)is a refinancing group providing loans up to Rs ten lakhs to the eligible enterprises at lower interest rates.
This has been achieved through the Commercial Banks, RRBS, Cooperative Banks, NBFC and MFI.

PM Jeevan Jyoti Bima Yojana

Life Insurance is a way to ensure that the family members of the deceased who might be the only bread-winner in the family, don’t have to face financial troubles paying for the daily expenses, housing payments or other loans or mortgages.
Pradhan Mantri Jeevan Jyoti Bima Yojanais one such kind of insurance scheme that offers insurance for a year, subject to the mandatory renewal on an annual basis, providing coverage for death.
Launched on 9^thMay 2015 by Prime Minister Narendra Modi

PM Suraksha Bima Yojana

Pradhan Mantri Suraksha Bima Yojana is a Government scheme launched on 9th May 2015by Prime Minister Narendra Modi for India.
It is a scheme introduced for accidental death proposed by finance minister Arun Jaitley during his budget speech in February 2015.
Pradhan Mantri Suraksha Bima Yojana (PMSBY) gives an insurance policy and financial aid to the people belonging to the lower section of the society in case of any mishap or accident.
All the Insurance companies from both the Private and Public sectors control this scheme.

Atal Pension Yojana (APY)

Atal Pension Yojana is a government-initiated pension scheme for workers employed in the unorganized sector in India.
The Atal Pension scheme is an attempt to provide old-age security to the blue-collar workers like street vendors, rickshaw pullers, rag pickers, cobblers, workers in the agricultural sector and construction, landless labourers etc.
Launched on 9th May 2015, the scheme replaces a government-run previous scheme named “Swavalamban Yojana” and is implemented and controlled by the Pension Fund Regulatory and Development Authority through NPS (National Pension System).

Stand Up India Scheme

The Stand-Up India schemeaims to provide bank loans ranging from 10 lakh to 1 Crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for the establishment of a greenfield enterprise.
This business could be in manufacturing, services, agriculture-related activities, or trading.
In the case of non-individual enterprises, at least 51 percent of the shareholding and controlling stake must be held by a SC/ST or female entrepreneur.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Pradhan Mantri Vaya Vandana Yojana (PMVVY)is a pension schemefor elderly citizens above the age of 60 years or above, which provides a guaranteed pension for a span of 10 years.
Due to the unstable market conditions and a matter of social security, a simplified scheme of assured pension of 8% was launched, which has been implemented through Life Insurance Corporation (LIC) of India.
An investor is at the liberty of opting for the pension amount he/she wants or for the purchase price one wants to invest in.
Launched in 2017by the Ministry of Finance, the scheme was opened for enrolment till 31st March 2020.

Varishtha Pension Bima Yojana (VPBY)

Varishtha Pension Bima Yojanais a senior citizen pension scheme initiated by the Government of India with administrative assistance from Life Insurance Corporation of India (LIC).
Under this scheme, the subscribers receive annuity pay-outs until the maturity of the pension plan.
VPBY was first announced in 2003-04 and later revived again in 2014-15, followed by 2017.
The much-needed social security for senior citizens is promised with this scheme that ensures pension at 9% rate per year for 10 years with the period of pension return ranging from monthly to yearly.
People above 60 years of age can subscribe to the plan.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana (SSY)was launched on 22 January 2015 by Prime Minister Narendra Modi as part of the Beti Bachao Beti Padhao campaign, with the primary goal of securing the future of a girl child.
The Sukanya Samriddhi Yojana scheme aims to improve the lives of girls in the country.
The Sukanya Samriddhi scheme was launched to provide a means of saving for every family’s girl child.
The SSY is valid for 21 years from the date of opening the account or until the girl reaches the age of marriage after reaching the age of 18.

National Strategy for Financial Inclusion

The Reserve Bank of India (RBI)has devised a National Strategy for Financial Inclusion (NSFI) for the period 2019-2024.
It is an ambitious strategy that aims to strengthen the ecosystem for various modes of digital financial services in all Tier II to Tier VI centresin order to build the infrastructure needed to transition to a cashless society by March 2022.
RBI identified six strategic objectives of a national strategyfor financial inclusion:
universal access to financial services
providing basic bouquet of financial services
access to livelihood and skill development
financial literacy and education
customer protection and grievance redressal, and
effective coordination.

Conclusion

The rising FI-Index is a testament to India’s strong momentum toward financial inclusion. While challenges remain, continuous policy support, innovative schemes, and a collaborative ecosystem are driving the nation closer to its goal of universal financial access.

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