India has got a composite ‘Financial Inclusion Index’ (FI- Index) to capture the extent of financial inclusion across the country.
• Accordingly, the Reserve Bank of India has constructed a composite FI-Index which was announced in the ‘Statement on Developmental and Regulatory Policies’ in the first ‘Bi-monthly Monetary Policy Statement’ for FY22.
• The annual FI-Index for the period ending March 2021 is 53.9 as against 43.4 for the period ending March 2017.
• 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.
• The 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 comprises of three broad parameters:
o Access (35 per cent)
o Usage (45 per cent)
o Quality (20 per cent)
The index is responsive to ease of access, availability and usage of services, and quality of services, comprising 97 indicators in all.
A unique feature 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.
Three challenges in improving the financial inclusion infrastructure in India are the identification of the customer, reaching the last mile, and providing relevant, affordable and safe products.
The opening of the Pradhan Mantri Jan-Dhan Yojana accounts has given millions of Indians access to financial products, the steps taken on the demand side are aimed at increasing public awareness.