Financial Inclusion in India and Its Challenges

RBI unveils Financial Inclusion Index

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Financial Inclusion Index

Mains level : Financial inclusion of masses

The Reserve Bank of India (RBI) has announced the formation of a composite Financial Inclusion Index (FI-Index) to capture the extent of financial inclusion across the country.

Financial Inclusion Index

  • The FI-Index will be published in July every year.
  • 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.
  • It has been conceptualized as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with the government and respective sectoral regulators.
  • It has been constructed without any ‘base year’ and as such it reflects cumulative efforts of all stakeholders over the years towards financial inclusion.

Parameters of the index

  • The FI-Index comprises three broad parameters viz.,
  1. Access (35%),
  2. Usage (45%), and
  3. Quality (20%)
  • These parameters are the identification of the customer, reaching the last mile, and providing relevant, affordable and safe products.
  • The index is responsive to ease of access, availability and usage of services, and quality of services for all 97 indicators.

This year’s highlight

  • The annual FI-Index for the period ended March 2021 stood at 53.9 compared with 43.4 for the period ended March 2017.
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