Financial Inclusion Index | 18 Aug 2021

Why in News

Recently, the Reserve Bank of India (RBI) has unveiled the first composite Financial Inclusion Index (FI-Index).

• The annual FI-Index for the financial year ended March 2021 crossed the halfway mark to 53.9, as compared to 43.4 for the year ended March 2017.

Key Points

• About:
  
  • The index has been conceptualised 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 will be published annually in July every year.
  • It has been constructed without any ‘base year’ and as such it reflects cumulative efforts of all stakeholders over the years towards financial inclusion.
• Aim:
  
  • To capture the extent of financial inclusion across the country.
• Parameters:
  
  • 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.
• Importance 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.
  • Development Indicators: It can be used directly as a composite measure in development indicators.
  • Fulfill 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.
  • Facilitate Researchers: It also facilitates researchers to study the impact of financial inclusion and other macroeconomic variables.
• Related Initiatives:
  
  • Pradhan Mantri Jan Dhan Yojana:
    
    • It was announced in August 2014, which proved to be a steady vehicle for financial inclusion.
    • Till now nearly 43 crore poor beneficiaries in the country now have a basic bank account under the yojana.
  • Digital Identity (Aadhaar):
    
    • It has catalyzed inclusion and innovation in the delivery of financial services. 
  • National Centre for Financial Education (NCFE):
    
    • The RBI has released the (NCFE): 2020-2025 document for creating a financially aware and empowered India.
  • Centre for Financial Literacy (CFL) Project:
    
    • The CFL project has been conceptualised by the RBI in 2017 as an innovative and participatory approach to financial literacy at the Block level involving select banks and non-governmental organisations (NGOs).
    • Initially set up in 100 blocks on a pilot basis, the project is now being scaled up across the country to every block in a phased manner by March 2024.

Source: IE