RBI’s financial inclusion index rises: What is it and what does it really signify?

Financial inclusion

by 5paisa Research Team Last Updated: Dec 14, 2022 - 02:06 am 20.6k Views

The Indian economy is becoming more financially inclusive, very quickly. At least that is what the latest numbers released by the Reserve Bank of India (RBI) seem to suggest.

The RBI’s composite financial inclusion index (FI-index) rose to 56.4 in March 2022, showing an uptick across all parameters.

"The value of FI Index for March 2022 stands at 56.4 vis-a-vis 53.9 in March 2021, with growth witnessed across all the sub-indices," the central bank said in a statement.

But what really is the FI-index and when was it conceptualised?

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.

In August last year, the central bank said it 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.

The FI-Index comprises three broad parameters -- 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 several indicators.

The FI-Index was constructed without any 'base year' and as such it reflects the cumulative efforts of all stakeholders over the years towards financial inclusion. The index is now published annually.

How has the FI-index grown over the last couple of years?

According to RBI Annual Report, 2022, “The annual FI-Index for the period ending March 2021 stood at 53.9 as against 43.4 for the period ending March 2017, capturing the progress made in this area. The FI-Index will be published annually in July every year.”

Why has financial inclusion been growing in India so rapidly?

According to a blog post by banker turned economist B. Yerram Raju, the real instrument for giving a big push came with the opening of Jan Dhan Account, introduction of mobile link to the accounts through Aadhaar, opening no-frills accounts were all the initiatives of the Government in the financial sector, that the RBI cannot take credit for.

The single factor responsible for India ranking high in financial inclusion is technology, low-cost network availability and easy availability of mobile phones that include smart phones. 2.5lakh villages have been provided broadband connectivity.

Payment options became easier and convenient, thanks to the National Payment Corporation of India’s Unified Payment Interface (UPI). Every Bank started mobile instrumentality for payment solution followed by NBFCs and fintechs.

How do you rate this blog?


Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account
Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Mangalam Alloys IPO : How to check the Allotment Status

The Mangalam Alloys Ltd IPO comprises of a fresh issue and an offer for sale (OFS). As part of the fresh portion of the IPO, Mangalam Alloys Ltd will issue a total of 61,26,400 shares (61.26 lakh shares approximately), which at the fixed IPO price of ₹80 per share aggregates to a total fresh fund raising of ₹49.01 crore.

  • Sep 26, 2023
India's Inclusion in JP Morgan Global Bond Index

In a significant development for India's financial landscape, JP Morgan Chase & Co. recently announced its decision to include Indian government bonds in its emerging markets bond index, starting from June 2024. This momentous move holds the promise of attracting substantial foreign investments, potentially injecting up to $25 billion into India's domestic government securities market.

  • Sep 25, 2023
From Loss to Profit - Mitshi India Ltd

Why to go for Loss to Profit Business? Potential for Rapid Growth: Companies that have turned around from losses to profits often have room for rapid growth. As they fine-tune their operations and strategies, they may experience significant increases in revenue and profitability. Undervaluation: Market sentiment may lag behind a company's actual performance.

  • Sep 25, 2023