India is doing well on financial inclusion


  • Poverty, said Nobel laureate Amartya Sen, is not merely lowness of income, but deprivation of basic capabilities.
  • This is a fair point. An inclusive financial ecosystem is quintessential to the social contract. It surmounts both physical and, more importantly, psychological barriers, and helps achieve sustainable economic growth.

CRISIL Inclusix:

  • India’s first financial inclusion index was launched in 2013 with the objective of becoming that crucial gauge and policy input. It is based on four dimensions—branch penetration, deposit penetration, credit penetration and insurance penetration. The last dimension was added for the first time this year as data became available.


  • CRISIL Inclusix measures progress on financial inclusion down to the level of each of the 666 districts in the country, and is based on data provided by the RBI, the MicroFinance Institution Network, and the Insurance Information Bureau of India.

What made the difference?

  • The Pradhan Mantri Jan Dhan Yojana, and the RBI’s steadfast focus on unbanked regions, have really made a difference.
  • As many as 600 million deposit accounts were opened between fiscals 2013 and 2016, or twice the number between 2010 and 2013. Nearly a third of this was on account of Jan Dhan. This gets well reflected in the deposit penetration index of CRISIL Inclusix, which surged over 16 points.
  • On the credit side, there was a sharp 31.7 million increase in new credit or loan (banks and microfinance) accounts in the two years up to fiscal 2016, which is the most since fiscal 2013.
  • Notably, microfinance institutions contributed significantly to the financially under-penetrated regions.
  • The Digital India initiative, payments banks and small finance banks have all helped improve the reach of formal financial services to economically disadvantaged sections of the populace and geographically remote regions.

State Performances:

  • Among states, Kerala was well ahead with a CRISIL Inclusix score of 90.9, while Rajasthan moved up from “below average” to “above average” and Haryana from “above average” to “high”.
  • Underserved pockets, particularly in the North-East and the east, have logged a sharp rise in credit penetration. The credit penetration index of these two regions is up an average 9 points compared with 6 points at the all-India level.

The need of the hour:

  • The upshot from the scores is that financial inclusion can spread faster if there is sharper focus on enhancing branch and credit penetration beyond south India.
  • Policy makers need to continue incentivizing branch and credit penetration in districts with low CRISIL Inclusix scores. Coverage through protection-linked insurance and pension schemes also needs to be ratcheted up significantly.
  • There is still a long way to go before India reaches acceptable levels of financial inclusion, but there’s little to complain about the policy approach today. More of a good thing would serve very well here.


  • Given CRISIL Inclusix’s modular construction, we look forward to more data—both consistent and comprehensive—on other financial services and providers, too, to make the index even more rounded. To build on Amartya Sen’s point, inclusive growth also would mean going beyond simple access to formal finance. It’s great to see that concerted efforts are being made in aid of this.


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