India is only at the halfway point in meeting financial inclusion goals, according to a new index developed by the Reserve Bank of India.

The first reading of the RBI’s annual Financial Inclusion (FI) Index for the period ended March 2021 has come in at 53.9, a little over the halfway mark, with 100 being the full financial inclusion score.

The central bank said the FI Index reading for the period ended March 2017 was 43.4.

The FI Index 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.

Madan Sabnavis, Chief Economist, CARE Ratings, said: “There has been a very good improvement of 10.5 points in the FI Index between 2017 and 2021. The important thing is that this was the period when the government and RBI gave a big push to financial inclusion.”

Three broad parameters

The FI Index comprises three broad parameters (weights indicated in brackets) — Access (35 per cent), Usage (45 per cent), and Quality (20 per cent), with each of these consisting of various dimensions, which are computed based on a number of indicators.

The index, which has been constructed without any ‘base year’ and as such reflects cumulative efforts of all stakeholders over the years towards financial inclusion, is responsive to ease of access, availability and usage of services, and quality of services relating to all 97 indicators, the RBI said in a statement.

A unique feature of the index is the Quality parameter that captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services, it added.

The index, which will be published annually in July every year, has been conceptualised as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with government and respective sectoral regulators.

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