India’s Financial Inclusion Gains Momentum

Table of Contents

Context

The Reserve Bank of India has reported an improvement in the Financial Inclusion Index, which has risen to 67% in FY 2025, up from 64.2% in FY 2024.

What is Meant By Financial Inclusion?

Financial inclusion refers to ensuring access to affordable financial products and services that cater to the needs of individuals and businesses responsibly and sustainably.
It promotes entrepreneurship, drives business expansion, empowers women, and enhances risk management—ultimately strengthening economic activity, increasing productivity, and fostering overall economic growth.

About the Financial Inclusion Index (FI-Index)

The FI-Index is a composite measure designed to track the level of financial inclusion across India.
Developed by the Reserve Bank of India in consultation with the Government and sectoral regulators (banking, insurance, pension, etc.).
It covers five key sectors: Banking, Investments, Insurance, Postal Services, and Pensions.
The FI-Index is published annually, every July, by the Reserve Bank of India.

Strategies for Financial Inclusion in India

National Strategy for Financial Inclusion (NSFI) 2019–2024: Launched in 2019, aims to remove barriers to accessing financial services and ensure inclusive participation.
National Strategy for Financial Education (NSFE) 2020–2025: Aims to improve financial literacy, enabling individuals to make informed and responsible financial decisions.
- 5-C Approach to Achieve Strategic Objectives:
  - Content: Develop relevant content and integrate financial education into school, college, and training curricula.
  - Capacity: Build capabilities of intermediaries delivering financial services.
  - Community: Utilize community-led models for spreading financial awareness.
  - Communication: Design an effective communication strategy tailored to diverse audiences.
  - Collaboration: Strengthen synergy among all involved stakeholders.

Key Initiatives for Financial Inclusion

Initiative	Objective
Pradhan Mantri Jan Dhan Yojana (PMJDY)	To provide basic banking services (savings, deposit, remittance, credit, insurance, pension) affordably to unserved and underserved citizens, enabling financial inclusion.
Centre for Financial Literacy (CFL)	To promote financial literacy through community-led, participatory methods for widespread financial inclusion.
Digital Banking Units (DBUs)	To offer digital banking services (account opening, fund transfers, loans, etc.) through physical units at the last mile.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)	To provide affordable accident insurance (death/disability) to poor and underprivileged sections of society.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)	To provide affordable life insurance cover to broader population including poor and rural citizens.
Atal Pension Yojana (APY)	To ensure old-age security by providing guaranteed pension especially to workers in the unorganised sector.
Pradhan Mantri MUDRA Yojana (PMMY)	To provide easy credit (up to ₹20 lakhs) to small/micro enterprises and entrepreneurs, promoting self-employment.
Stand Up India Scheme (SUI)	To promote entrepreneurship among SC/ST and women by supporting greenfield enterprises through loans and handholding support.
Unified Payments Interface (UPI)	To enable seamless, real-time digital payments and fund transfers for individuals and merchants, accelerating digital financial inclusion.
Mahila Sammriddhi Yojana (MSY)	To empower women from weaker sections by providing skill development, formation of self-help groups, and easy group loans.
Kisan Credit Card (KCC)	To provide timely and affordable credit to farmers for agricultural and allied activities, reducing dependence on informal sources.
Nationwide Campaign for Financial Inclusion (2025)	To saturate coverage of financial inclusion schemes at panchayat/urban local levels, covering new account openings, re-KYC, enrolments for insurance/pension, and awareness on digital fraud and grievance redressal.

Challenges of Financial Inclusion in India

Digital Divide: Limited access to smartphones, internet, and digital infrastructure in rural/remote areas restricts the reach of digital financial services.
Low Financial Literacy: Many individuals, especially in rural and low-income groups, lack the knowledge to use banking and digital platforms effectively.
Product Inaccessibility: Available financial products often do not match the unique needs of low-income or informal sector workers.
Infrastructure Bottlenecks: Inadequate power supply, poor internet connectivity, and lack of last-mile delivery systems hinder access.
Dominance of Cash Economy: A significant portion of the economy still operates in cash, especially in rural and informal sectors, resisting digital adoption.
Cost Barriers: NEFT, RTGS, mobile wallet charges, and minimum balance requirements make banking costly for low-income groups.
Lack of Trust in Digital Platforms: Fear of fraud, data breaches, and low awareness of grievance redressal mechanisms create hesitation in digital adoption.
Dependence on Physical Bank Branches: Many banks still rely on physical presence for basic services like account opening, limiting access in rural and underserved areas.
Informal Lending Dominance: A large section of the population continues to rely on unregulated moneylenders due to lack of formal credit access.

Way Forward

Strengthen Digital Infrastructure: Expand internet connectivity, provide affordable smartphones, and promote public Wi-Fi in rural areas.
Promote Financial Literacy: Launch targeted awareness programs using local languages, visual tools, and community-led models to improve understanding of financial services.
Develop Customized Products: Design financial products tailored for informal sector workers, women, small farmers, and low-income households.
Subsidize Transaction Costs: Remove or reduce charges on low-value transactions (like NEFT, UPI, wallets) and ensure no-frill, zero-balance accounts.
Encourage Mobile-First Banking: Promote simple and secure mobile apps for banking, integrated with features like cash flow tracking and voice assistance.
Build Consumer Trust: Enforce strong consumer protection rules, data privacy norms, and transparent grievance redressal systems.
Digitize Core Banking Services: Enable full digital onboarding using Aadhaar and biometrics, reducing the need for physical branch visits.
Promote Open Banking Ecosystem: Implement a well-regulated open banking framework to foster innovation, enable data portability, and increase access to credit for small borrowers.
Improve Credit Delivery: Expand micro-credit and small-ticket loans through credit guarantee schemes and alternate data (like utility bills) for credit scoring.
Link Government Schemes with Financial Access: Strengthen integration of DBT, PMJDY, APY, and insurance schemes with financial inclusion strategies to widen coverage.