Financial inclusion gains momentum, says CRISIL

CRISIL Inclusix measures financial inclusion up to the level of each of the 638 districts in India

CRISIL on Monday said financial inclusion had gained momentum in India with a significant rise in new savings accounts, increase in agriculture credit accounts and expansion of bank branches in deeper geographies.

“India’s overall CRISIL Inclusix score has risen by 2.7 in financial year 2012 — the highest annual increase since 2009. As many as 587 out of a total 638 districts in India and 34 out of 35 states and Union territories improved their scores, reflecting a broad-based improvement in financial inclusion,” Roopa Kudva, managing director and chief executive officer of CRISIL, said in a statement.

CRISIL Inclusix, the financial inclusion index, is based on data (as of March 31, 2012) provided by the Reserve Bank of India. The index measures financial inclusion up to the level of each of the 638 districts in India.

CRISIL said 79 million savings accounts were opened in financial year 2012 across north, south, east, west and north-east — 12.6 per cent more than in financial year 2011. Agricultural credit accounts increased by 11.1 per cent, the most since financial year 2009.

The number of bank branches in the bottom 100 districts increased by six per cent, faster than the all-India growth of 5.6 per cent. Credit penetration in the top 50 districts of the country also expanded sharply as the number of small-borrower accounts surged.

There are 21 states in the “high” and “above average” categories now compared to 15 earlier, CRISIL said. Also, only one state is currently in the “low” category against three in 2011. The southern region of the country remained the leader in financial inclusion with 58 per cent of the incremental credit accounts in 2012 getting opened there.

However, the rating agency felt that the CRISIL Inclusix score at 42.8 on a scale of 100 still reflects under-penetration of formal banking in the country. Only one in two Indians have a savings account, and one in seven has access to bank credit, it said. While India's six largest cities have 10 per cent of the total bank branches in the country, the bottom 50 districts have merely two per cent of bank branches.

“To speed up inclusion, financial services need to flow beyond the south and the large cities. Specifically, policy makers will have to incentivise expansion of banking services in the districts that have low CRISIL Inclusix scores,” Kudva said.