Just half of Indians have a savings bank account

The new CRISIL Inclusix index on financial inclusion says that the bottom 50 districts have just three banks per 100,000 of population

India's lack of financial inclusion is well known but that slightly more than 50 per cent of the population just has a simple savings bank account is distressing.

For some time now, financial inclusion has been foremost on the mind of India's policy makers, political parties and the government. In fact, financial inclusion is also the key critical parameter by which the new banking licences are expected to be issued.

But although the trend is improving at the grass-root level, financial inclusion is far lower than desirable. In a study done by Crisil, just one in two Indians has access to a savings bank account and just one in seven Indians has access to bank credit. There are merely 684 million savings bank accounts in the country with a population of 1.2 billion. (Click for graphs and table)

The picture, in fact, looks bleaker if one excludes western and southern India. Financial penetration is the highest in the southern region with a score of 62.2, while western region has 38.2.

The study conducted on the basis of three parameters - branch, deposit and credit penetration - across the 632 districts in India shows the bottom 50 districts have just three banks per 100,000 of population, just half of the 7.6 bank branches on an all-India level. These districts have just two per cent of the total bank branches in the country. Besides, they also have just 4,068 loan accounts per 100,000 of population as compared to an all-India level of 11,680 accounts.

The study also notes that there's a wide disparity in basic banking services in India. For instance, India's six largest cities have 11 per cent of the country's bank branches, while there are four districts in north-India with just one branch per district.

Southern states, however, have raced ahead in financial inclusion. On an all-India level, the score stands at 40.1 in 2011, southern states have a score of 62.2. The top five districts with the highest scores are from the southern region, four of them from Kerala.

Financial inclusion has still a long way to. Lack of awareness, low incomes, poverty and illiteracy are among the key factors that lead to a low demand for financial services and, consequently, to exclusion. No wonder the government has been focusing on improving education while the RBI in its recent guidelines for new banking licence has insisted that 25 per cent of the branches have to be opened in un-banked rural centres.