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GS-III : Economic Issues Financial inclusion

05 August, 2022
8 Min Read

FINANCIAL INCLUSION INDEX

FINANCIAL INCLUSION INDEX

The Composite Financial Inclusion Index (FI-Index) for the year ended March 31, 2022, has been made public by the Reserve Bank of India.
It has improved to 56.4 in March 2022 vis-à-vis 53.9 in March 2021, with growth witnessed across all the sub-indices.
The improvement has been seen across all its sub-indices Access, Usage, and Equality.
The index is published annually in July.

About financial index

The RBI created the composite financial inclusion index, which includes information on the banking, investments, insurance, postal, and pension sectors, to measure the level of financial inclusion across the nation.
The index has three major parameters:

Access: which is weighted at 35%,
Utilization: which is weighted at 45%, and
Quality: which is weighted at 20%.

It includes information about the banking, investments, insurance, postal, and pension industries.

Features:

The Index responds to accessibility, service availability and utilization, and service quality.
The index records data on different facets of financial inclusion in a single number ranging from 0 to 100, where 0 denotes total financial exclusion and 100 denotes complete financial inclusion.
This index has been constructed without any base year and reflects the cumulative efforts of all stakeholders over the years toward financial inclusion.

Significance of financial index

Information on the level of financial inclusion is provided, and financial services are measured for use in internal policy making.
It can be applied straight away as a composite measure in development indicators.

Fulfill the G20 Indicators:

This makes it possible to meet the criteria for the G20 Financial Inclusion Indicators.
The G20 indicators evaluate the status of digital financial services and financial inclusion on a national and international level.

Researcher Support:

It also makes it easier for academics to look into the effects of financial inclusion and other macroeconomic factors.

Financial inclusion

The process of ensuring vulnerable groups, such as weaker parts and low-income groups, have inexpensive access to financial services and timely and adequate financing when needed is known as financial inclusion.
Financial inclusion is a crucial component of the development process in a multiethnic nation like India. Since the country's independence, the joint efforts of succeeding governments, oversight bodies, and civil society have contributed to widening the country's financial inclusion net.
Since a transaction account enables people to keep money and send and receive payments, having access to one is the first step toward greater financial inclusion. An account for transactions acts as a doorway to additional financial services.

Source: The Indian Express

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