In a recent announcement by the Reserve Bank of India (RBI), the Financial Inclusion (FI) Index has shown significant improvement, reaching a score of 60.1 in March 2023, compared to its previous reading of 56.4 in March 2022. This noteworthy advancement in the FI Index is attributed to growth across all sub-indices.
Key Contributors to Improved FI Index
The boost in the FI Index can be primarily attributed to enhancements in the usage and quality dimensions, signifying a deepening of financial inclusion, as highlighted in the central statement released by the RBI.
When the FI Index was first introduced in August 2021, the score for the fiscal year ending March 2021 stood at 53.9. To provide historical context, it’s worth noting that in March 2017, the FI Index languished at a mere 43.4.
A Holistic Approach to Financial Inclusion
The FI Index is designed as a comprehensive tool, encompassing insights from various sectors including banking, investments, insurance, postal services, and pension. This collaborative effort involved consultations with the government and relevant sectoral regulators to ensure a holistic perspective on financial inclusion.
Understanding the FI Index Scale
The FI Index offers a single numerical value on a scale ranging from 0 to 100. In this scale, a score of 0 indicates complete financial exclusion, while a perfect score of 100 signifies full financial inclusion.
Components of the FI Index
Breaking down the FI Index, it comprises three major parameters, each with its respective weightage:
Access (35%): This component evaluates the accessibility of financial services to the population.
- Usage (45%): The usage parameter assesses the extent to which financial services are actively utilized.
Quality (20%): Quality dimensions gauge the effectiveness and efficiency of financial services.