Financial Inclusion in India and Its Challenges

[op-ed snap] India scores on financial inclusion


From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Financial Inclusion in India


According to the report, Global Microscope report on inclusion, by the Economist Intelligence Unit (EIU), India has the fifth most conducive environment among emerging countries for inclusive finance.

Facts of report

    • Only Columbia, Peru, Uruguay and Mexico are ahead of India. 
    • The EIU’s analysis takes four basic parameters into account: 
      • whether non-banks can issue e-money
      • the presence of financial service agents
      • proportionate customer due diligence
      • effective financial consumer protection
    • Of the 55 countries assessed, only four scored perfectly across all four enablers.  India is among them.

India – Financial Inclusion

    • Amartya Sen has famously once remarked that “poverty is the deprivation of opportunity”. 
    • Former US president Bill Clinton, on a visit to an Indian village, was quoted as saying all that India’s poor needed was “education and some credit”. 
    • It’s the credit part that financial inclusion initiatives aim to provide. 
    • The poor opened bank accounts under the government’s Jan Dhan Yojana. In 2011, only 40% of Indian adults had an account, according to the Global Findex report; now almost 80% have one.

Way ahead

    • It remains unclear whether poverty itself is being alleviated as a result of such inclusion. 
    • At least it’s possible for the government to directly reach a vast chunk of the population with cash transfers. 
    • Such handouts could help bridge gaps in people’s ability to use these accounts. 
    • Over time, if rural incomes witness an uptrend and non-financial inclusion goes up, India could fulfill the objective of the whole exercise.



Financial Inclusion in India: Need and future; PMJDY; Payment Banks and Small Banks

Notify of
Inline Feedbacks
View all comments