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.
Financial Inclusion Index:
- 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.