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DAILY NEWS ANALYSIS

  • 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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