Lack of financial literacy, high cost of banking services and excessive regulatory requirements are the key constraints in the financial inclusion goal for India, the government think-tank said in its 'Strategy for New India @75' document.
"The government has launched many flagship schemes to promote financial inclusion and provide financial security to empower the poor and unbanked in the country," it said.
There are constraints due to lack of financial literacy amongst low income households and small informal businesses and high cost of operations of traditional banking model, it noted.
Excessive regulatory requirements on products and market entry, and conservative regulatory approach to new technologies are the other impediments, the report highlighted in a chapter on 'Financial Inclusion'.
On the way forward, it said an 'Arthik Shiksha Abhiyan' will help improve financial literacy and may be integrated in the regular school curriculum.
Efforts to improve financial literacy should be complemented by mass media campaigns to spread information on financial products and how they are used, NITI Aayog said.
It also pitched for better incentives for banking correspondents.
"Given the infeasibility of locating branches in every nook and corner of the country, bank correspondents are used to reach out to prospective clients. However, an inadequate compensation structure makes correspondent banking unattractive.
"The issue of inadequate training is being addressed by the RBI which has developed a framework for certification for both basic and advanced levels. There is also a need to create better monetary incentives for banking correspondents as well as to provide them better training," the report said.
The government will also facilitate growth of online and paperless banking, leverage technology to improve the assessment of credit-worthiness for households and informal businesses besides scaling up payment banks and other platforms to expand payments systems in under-served areas.
Schemes such as Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Mudra Yojana, Stand-Up India Scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana, among others, have led to significant progress in the direction of financial literacy.
In addition, the promotion of Aadhaar and direct benefit transfer schemes facilitate financial inclusion, it said.
The report noted that in 2014, 53 per cent of adults in the country had bank accounts, which jumped to 80 per cent by 2017 and has now become comparable to China.
Also, the awareness and use of mobile payments in India had been low compared to peer nations such as Bangladesh, Pakistan and Kenya but it has increased substantially due to introduction of BHIM application post demonetisation, it said.
In terms of credit access also, India needs to make up considerable ground compared to these countries. Similarly, bank credit to GDP ratio in India is 51 per cent, as compared to 98 per cent in China in 2016, the report noted.