19 Aug 2021 The first composite Financial Inclusion Index: RBI Published

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The first composite Financial Inclusion Index: RBI Published

According to the Reserve Bank of India’s first composite Financial Inclusion Index (FI-Index), which attempts to quantify the amount of financial inclusion across the country, a large portion of the country remains financially excluded.
According to the RBI, the annual FI-Index for the financial year ending March 2021 was 53.9, up from 43.4 in the previous year.
The index will reflect multiple dimensions of financial inclusion in a single number ranging from 0 to 100, with 0 representing complete financial exclusion and 100 representing complete financial inclusion.

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It will be released once a year in July.
According to the central bank, the FI-Index was developed in conjunction with government and sectoral regulators as a comprehensive index encompassing details of banking, investments, insurance, postal, and pension sectors.
The FI-Index is made up of three main parameters: access (35% weightage), usage (45%), and quality (20%), each of which is made up of multiple dimensions that are calculated using a variety of indicators. The index responds to ease of access, service availability and utilisation, and service quality, with a total of 97 indicators.
The index was created without the use of a “base year” and reflects the combined efforts of all stakeholders.
The component relating to the quality of financial inclusion as expressed by financial literacy, consumer protection, and disparities and shortcomings in services is a distinctive characteristic of the index.
Despite the launch of the Pradhan Mantri Jan Dhan Yojana for unbanked sections of society, the digital payment revolution, and the entry of a slew of new players into the insurance and mutual fund segments in recent years, according to the FI-Index for 2020-21, 46.1 percent of the characteristics analysed are still financially excluded.

Source: The Hindu
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Yojna IAS Current Affairs Team