The Financial Inclusion Index
Reserve Bank of India (RBI) has introduced the Financial Inclusion Index (FI-Index) to measure the improvements in financial access. RBI will publish the index every year in July. The FI-Index, as per the current assessment by RBI, stands at 53.9 for the period ended in March 2021 against 43.4 for the period ended in March 2017.
The index will be a single value between 0 and 100, where 0 represents complete financial exclusion and 100 shows full financial inclusion. And, it will have three broad parameters with weights — access (35 percent), usage (45 percent), and quality (20 percent). Each of these parameters has various dimensions, computed based on several indicators.
A unique feature of the index is the quality parameter, which will capture the financial literacy, consumer protection, and inequalities and deficiencies in services. The index has no base year, reflecting the cumulative efforts of all stakeholders over the years towards financial inclusion.
RBI has taken the right step by introducing a systematic approach to measuring financial inclusion on a periodic basis. After the introduction of Pradhan Mantri Jan Dhan Yojana (Yojana), and the payment transfers using Direct Benefit Transfers (DBT), there has been a significant improvement in the overall status.
The task at hand is to enhance the financial literacy and capabilities of the citizens who were underserved or unserved for a long. They need to learn basic principles of savings, insurance, and goal-based investments.