Financial Inclusion Index by RBI
The Reserve Bank of India (RBI) released its Financial Inclusion Index (FI Index) score of 67 for the year ending March 2025, marking steady progress since the index's inception in 2021. This suggests improved access to financial services, but it lacks in providing deeper insights due to heterogeneity in spatial differences and index components.
Components of the Index
- Access: Availability of financial services.
- Usage: Extent to which financial services are utilized.
- Quality: User experience and effectiveness of financial services.
Improvements were mostly seen in usage and quality, yet the absence of separate scores for these sub-indices makes it challenging to identify specific areas needing attention.
Challenges in Financial Inclusion
- The single all-India index masks regional financial exclusion.
- Disaggregated data at state or district levels would better capture spatial heterogeneity.
India's Progress and Challenges
- Noteworthy progress in the past decade includes the Pradhan Mantri Jan Dhan Yojana and the deployment of Aadhaar, enhancing financial access and benefit transfers.
- Mobile-phone penetration has further enabled digital financial access. However, there are persistent issues:
- Insurance and pension coverage remain low, especially among informal workers.
- Inactive accounts persist due to high service costs or distant bank branches/ATMs.
Path Forward
Financial inclusion must extend beyond mere access to bank accounts to encourage the use of a full suite of financial products like savings, credit, insurance, and pensions. This requires:
- Enhanced digital infrastructure.
- Better connectivity and more acceptance points.
- An ecosystem that prioritizes data privacy and user consent.
The RBI's FI Index is valuable, yet its utility is limited without granular data for targeted policy intervention. Publishing detailed data could foster more informed public discussions and precise policy actions.
