- The Reserve Bank of India has released the Composite Financial Inclusion Index (FI-Index) for the year ended 31st March 2022.
- 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).
- 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.
Significance of FI Index
- 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.
- 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.
Financial Inclusion
- Financial inclusion is 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.
SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT