An inclusive index: More data needed to strengthen financial inclusion

The Reserve Bank of India (RBI) last week released its financial inclusion index (FI Index) score of 67 for the year ended March 2025, reflecting steady progress since the index was introduced in 2021. The upward trend is certainly welcoming, indicating improved access to financial services and inclusion. However, the headline number masks considerable heterogeneity, both in terms of spatial differences and the components of the index. To improve transparency and better guide policymaking, it will help if more details are made available. 

The index is composed of three key parameters — access, usage, and quality — all of which have shown improvement this year. Notably, progress has largely been driven by improvement in usage and quality. Naturally, this raises important questions. Is increased access to financial services translating into meaningful use? However, the RBI does not release the sub-indices scores separately, making it difficult to evaluate which aspects are lagging and where targeted intervention is required. Moreover, a single all-India index value offers limited insight into regional disparities. Financial inclusion, much like development itself, is uneven across states, districts, and even within communities. By aggregating the data at national level, the index runs the risk of masking persistent financial exclusion faced by people in remote or underserved regions, for example. Instead, a state-wise disaggregation of the index — and ideally, district-level figures — would do well to capture spatial heterogeneity. That way, policymakers, financial institutions, and researchers alike would be able to make use of the index to design more localised and responsive financial strategies. 

India’s progress in financial inclusion over the past decade, to be sure, has been noteworthy. The Pradhan Mantri Jan Dhan Yojana, combined with the rollout of Aadhaar, has not only brought millions into the formal banking system but has also enabled the identification of beneficiaries and the transfer of benefits. Further, mobile-phone penetration has facilitated digital financial access, even in areas lacking physical bank branches. Granular details, however, suggest a mixed picture. While access to basic banking may have improved, insurance and pension coverage remains low, particularly among informal-sector workers. The issue of inactive accounts continues to persist — often owing to the high cost of financial services, or because the nearest bank branch or ATM is still several kilometres away. 

Financial inclusion must now be extended beyond access to bank accounts. People should be encouraged to use a full suite of financial products, including savings, credit, insurance, and pensions products in a manner that is safe and affordable. For this, stronger digital infrastructure is essential, including more acceptance points, better connectivity, and an ecosystem that safeguards users’ data privacy and consent. While the RBI’s FI index is a valuable initiative in this direction, it offers limited utility for meaningful policy intervention. A single, all-India headline number, without any disaggregated breakdown, does little to explain where inclusion is lagging. Thus, the banking regulator would be well advised to also publish granular data alongside the index. This will help enable a more informed public discussion and targeted policy intervention.