35% bank account holders in India had inactive accounts in 2021: World Bank

Nearly half of respondents with inactive accounts cited distance from financial institutions, lack of trust in financial institutions and no need for an account as reasons for having inactive accounts

Over a third of bank account holders in India were no longer using the banking facilities and had inactive accounts, a World Bank report titled ‘Global Findex 2025’ released on Wednesday said, as it cited Jan Dhan Yojana accounts as one of the likely reasons for the country’s high share of account inactivity.

 

“The share of inactive users was far higher in India than in the other surveyed developing economies,” the report said. It estimated that 35 per cent account holders in India in 2021 had an inactive account, seven times larger than the 5 per cent average for all developing economies, excluding India. An inactive account refers to a bank account that has had no customer-initiated transactions for a specific period, usually 12 months for most banks.

 

“One reason for India’s high share of account inactivity may be that many of these accounts were opened as part of the Indian government’s Jan Dhan Yojana scheme to increase account ownership. Launched in August 2014, the programme had by April 2022 brought an additional 450 million Indians into the formal banking system,” the report said.

 

Besides, the report notes that nearly half of respondents with inactive accounts in India cited distance from financial institutions, lack of trust in financial institutions and no need for an account as the reasons for having inactive accounts.

 

“As for other reasons, nearly 40 per cent said they did not have enough money to use an account, and about 30 per cent cited not feeling comfortable using an account by themselves,” the report noted.

 

The share of adults with an inactive account in India remained about the same between 2017 and 2021. 

 

In contrast, the report noted that in developing economies, only 9 per cent of adults overall, 13 per cent of account holders, have what could be considered an inactive account.

 

The share of account holders in developing economies in 2021 with an inactive account fell from 17 per cent in 2017 to reach about the level (12 per cent) it was in 2014.

 

On the other hand, in high-income economies, virtually all account holders had an active account in 2021.

 

The report also noted that in developing economies, women account holders are, on average, 5 percentage points more likely than men account holders to have an inactive account.

 

However, India is driving this gap with a 12 percentage point difference between women account holders who had an inactive account (42 per cent) and men account holders who did so (30 per cent).

 

Notably, more men with an inactive account (34 per cent) than women with an inactive account (26 per cent) said they did not feel comfortable using an account by themselves.

 

The report is based on a representative survey of about 128,000 adults in 123 economies during the Covid-19 pandemic and contains updated indicators on access to and use of formal and informal financial services, including on the use of cards, mobile phones, and the internet to make and receive digital payments.

 

Globally, in 2021, 76 per cent of adults had an account at a bank or regulated institution such as a credit union, microfinance institution, or mobile money service provider.

 

Account ownership around the world increased by 50 per cent in the 10 years spanning 2011 to 2021, from 51 per cent of adults to 76 per cent of adults.