Financial Inclusion in India and Its Challenges

India now ahead of China in financial inclusion metrics: SBI report


From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Financial inclusion in India

India is now ahead of China in financial inclusion metrics, with mobile and Internet banking transactions rising to 13,615 per 1,000 adults in 2020 from 183 in 2015.

What does one mean by Financial Inclusion?

  • Financial inclusion is defined as the availability and equality of opportunities to access financial services.
  • It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services.
  • These include banking, loan, equity and insurance products etc.

Key highlights of the Report

  • Boosted by PM Jan-Dhan Yojana, the number of bank branches per 100,000 adults in India rose to 14.7 in 2020 from 13.6 in 2015.
  • It is higher than Germany, China and South Africa.
  • Data shows that states with higher Jan-Dhan accounts balances have seen a perceptible decline in crime.

How did India achieve financial inclusion?

  • Financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.
  • India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014.
  • It was enabled by a robust digital infrastructure and also careful recalibration of bank branches and thereby using the BC model judiciously.
  • Such financial inclusion has also been enabled by use of digital payments.

What is the BC Model?

  • The report highlighted that the Banking Correspondent (BC) model in India is enabled to provide a defined range of banking services at low cost.
  • The new branch authorisation policy of 2017 –recognises BCs that provide banking services for a minimum of 4-hours per day and for at least 5-days a week as banking outlets.
  • The BCs are enabled to provide a defined range of banking services at low cost and hence are instrumental in promoting financial inclusion.
  • This has progressively done away the need to set up brick and mortar branches.


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