The Reserve Bank of India’s (RBI’s) composite financial inclusion index (FI-Index) that captures the extent of financial inclusion across the country, rose to 56.4 in March 2022, up from 53.9 in March 2021, reflecting growth across all sectors.
“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 RBI said in a press release.
According to the RBI, 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.
The FI-Index comprises three broad parameters, namely, 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 FI-Index is responsive to ease of access, availability and usage of services, and quality of services, comprising in all 97 indicators. A unique feature of the FI-Index is the quality parameter, which captures the quality aspect of financial inclusion as reflected by financial literacy, consumer protection, and inequalities and deficiencies in services.
Incidentally, the FI-Index has been constructed without any ‘base year’. Therefore, it reflects the cumulative efforts of all stakeholders over the years towards financial inclusion.
The RBI had conceptualised the FI-Index as a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with the government and respective sectoral regulators. The FI-Index is published annually in June every year.
In its bi-monthly policy monetary policy statement in 2021, the RBI had said that financial inclusion has been viewed as a key enabler for achieving inclusive and sustainable development worldwide. This has also been a thrust area for government, the RBI and other regulators, with a number of steps having been taken and significant progress made over the years.
As such, to measure the extent of financial inclusion in the country, “the Reserve Bank will construct and periodically publish a “Financial Inclusion Index” (FI-Index). The FI Index would be based on multiple parameters and shall reflect the broadening and deepening of financial inclusion in the country. To begin with, the FI-Index will be published annually in July for the financial year ending previous March,” it had announced in a statement.