India’s Financial Inclusion Index has improved to 56.4 from 53.9 in the previous year 2021.
The improvement has been seen across all its sub-indices (Access, Usage and Equality).
What is the Financial Inclusion Index?
It is 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 was developed by the RBI in 2021, without any ‘base year', and is published in July every year.
To capture the extent of Financial Inclusion across the country.
The FI-Index is responsive to ease of access, availability and usage of services and quality of services, consisting of 97 indicators.
It 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 comprises three broad parameters (weights indicated in brackets) viz., Access (35%), Usage (45%), and Quality (20%) with each of these consisting of various dimensions, which are computed based on a number of indicators.
The index is responsive to ease of access, availability and usage of services, and quality of services for all 97 indicators.
What is the Significance of FI Index?
Measures Level of Inclusion:
It provides information on the level of financial inclusion and measures financial services for use in internal policy making.
It can be used directly as a composite measure in development indicators.
Fulfil the G20 Indicators:
It enables fulfilment of G20 Financial Inclusion Indicators requirements.
The G20 indicators assess the state of financial inclusion and digital financial services, nationally and globally.
It also facilitates researchers to study the impact of financial inclusion and other macroeconomic variables.
What is Financial Inclusion?
Financial inclusionis defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost.
In a diverse country like India, financial inclusion is a critical part of the development process. Since independence, the combined efforts of successive governments, regulatory institutions, and civil society have helped in increasing the financial-inclusion net in the country.
Being able to have access to a transaction account is a first step toward broader financial inclusion since a transaction account allows people to store money, and send and receive payments. A transaction account serves as a gateway to other financial services.
What are the Initiatives to Increase Financial Inclusion in India?