News Excerpt:
The Financial Inclusion Index (FI-Index) rose to 64.2 in March 2024, up from 60.1 in March 2023, according to the Reserve Bank of India (RBI).
More about the news:
- The annual FI-Index for March 2021 was 53.9, compared to 43.4 in March 2017.
- The index is published annually every July.
- This improvement reflects growth in all sub-indices, showcasing the cumulative efforts of various stakeholders over the years.
- The recent improvement in the index is primarily attributed to the Usage dimension, indicating a deepening of financial inclusion.
About the Financial Inclusion Index:
- This Index measures the extent of financial inclusion across India.
- The FI-Index condenses information on various aspects of financial inclusion into a single value ranging from 0 to 100, where 0 represents complete financial exclusion and 100 represents full financial inclusion.
- The FI-Index consists of three main parameters:
- Access (35% weight),
- Usage (45% weight)
- Quality (20% weight)
Access (35% weight) |
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Usage (45% weight) |
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Quality (20% weight) |
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- Each is composed of various dimensions calculated from a total of 97 indicators.
- It is sensitive to factors like ease of access, availability, and usage of services, and the quality of those services.
- The index is built without a base year, making it a comprehensive measure of ongoing efforts toward financial inclusion.
- Conceptualized as a comprehensive tool, the FI-Index incorporates data from banking, investments, insurance, postal services, and the pension sector, developed in consultation with the government and sectoral regulators.
Steps to Enhance Financial Inclusion
- In 2020, the Reserve Bank of India (RBI) released the National Strategy for Financial Inclusion 2019-2024.
- Financial inclusion has a significant multiplier effect, boosting overall economic output, reducing poverty and income inequality, and promoting gender equality and women’s empowerment.
- RBI identified six strategic objectives for the national strategy on financial inclusion:
- Universal access to financial services,
- Providing a basic suite of financial services,
- Access to livelihood and skill development,
- Financial literacy and education,
- Customer protection and grievance redressal, and
- Effective coordination.
- To achieve universal access to financial services, the RBI noted that while initiatives like PM Jan Dhan Yojana have established the necessary banking infrastructure, further efforts are needed to improve access to insurance and pension services.
- For financial literacy and education, the RBI proposed developing specific modules for various target audiences (such as children, entrepreneurs, and senior citizens) through the National Centre for Financial Inclusion.
- Additionally, it suggested expanding centers for financial literacy to every block in the country by March 2024.