Introduction Financial inclusion is increasingly being recognized as a key driver of economic growth and poverty alleviation the world over. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investments in human capital. Without adequate access to formal financial services, individuals and firms need to rely on their own limited resources or rely on costly informal sources of finance to meet their financial needs and pursue growth opportunities. At a macro level, greater financial inclusion can support sustainable and inclusive socio-economic growth for all. An inclusive financial system supports stability, integrity and equitable growth. Therefore, financial exclusion because of several barriers like physical, socio-cultural and psychological, warrants attention from the policy makers. Some of the key reasons resulting in involuntary exclusion are: Lack of surplus income Lack of trust in the system Not suitable to customer’s requirements High transaction costs Lack of requisite documents Remoteness of service provider Lack of awareness about the product Poor quality of services rendered It is also noteworthy to state that, seven of the seventeen United Nations Sustainable Development Goals (SDG) of 2030 view financial inclusion as a key enabler for achieving sustainable development worldwide by improving the quality of lives of poor and marginalized sections of the society. Defining Financial Inclusion in the Indian Context Financial inclusion has been defined as “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”. (Committee on Financial Inclusion - Chairman: Dr C Rangarajan, RBI, 2008). The Committee on Medium-Term Path to Financial Inclusion (Chairman: Shri Deepak Mohanty, RBI, 2015) has set the vision for financial inclusion as, “convenient access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance and pension products to small and marginal farmers and low income households at reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs and improve service delivery, …. National Strategy for Financial Inclusion National Strategy for Financial Inclusion for India (NSFI) 2025-2030 Continuing the journey and leveraging the gains in the bank account ownership to near saturation, expansion in physical and digital access infrastructure, and improvements in customer awareness and protection measures, NSFI: 2025-30 envisions upscaling the financial inclusion efforts towards seamless and effective access to a bouquet of formal financial services, coupled with financial literacy, consumer awareness and customer protection. It emphasises adoption of a synergistic ecosystem approach and focusing on improving the quality and consistency of last mile access, and effective usage of financial services through linkages with skilling and livelihood initiatives. The NSFI document underscores that the mandate of financial inclusion goes beyond access to financial services to ensure effective usage of financial services towards wellbeing of people that can lead to desirable outcomes in terms of financial safety, financial security, financial resilience, and financial discipline. The vision of NSFI: 2025-30 is to strengthen the financial inclusion ecosystem with the synergised efforts of stakeholders for ensuring delivery of equitable, responsible, suitable, and affordable financial services duly supported by livelihood enablers, financial literacy, digital public infrastructure, and customer protection. The timeline of NSFI: 2025-30 is synchronized with the 2030 UN Agenda for Sustainable Development. The principle of universality: ‘Leave No One Behind’ and omni-dimensional development as the global agenda for 2030, aligns well with the NSFI’s strategic objectives intended towards ensuring wellbeing of people, especially the vulnerable and marginalised. Strategic objectives The following five strategic objectives (Panch-Jyoti) towards elevating the state of financial inclusion in the country. Improving the availability and use of Equitable, Responsible, Suitable, and Affordable Bouquet of Financial Services to achieve Financial Safety and Financial Security for households and micro enterprises. Adopting Gender-Sensitive Approach for Women-led Financial Inclusion and Differentiated Strategies for Improving Financial Resilience of Households, especially for the Underserved and Vulnerable segments. Synergizing Livelihood, Skill Development and Support Ecosystem and its linkages with Financial Inclusion. Leveraging Financial Education as a tool for Promoting Financial Discipline. Strengthening the Quality and Reliability of Customer Protection and Grievance Redressal Measures. Recommendations The strategic objectives under Panch-Jyoti have structured recommendations to be implemented through 47 action points, including three measurement related action points on Monitoring and Measurement Mechanism. The focus of the recommendations is on enhancing the usage and quality dimensions of financial inclusion, while improving the last mile access and ensuring effectiveness and granularity in the monitoring and measurement mechanism. The action-points and timelines under NSFI: 2025-30 are distributed across financial sector regulators (Reserve Bank of India – RBI, Securities and Exchange Board of India – SEBI, Insurance Regulatory and Development Authority of India – IRDAI, and, Pension Fund Regulatory and Development Authority – PFDRA), and financial services providers under their respective jurisdictions, along with National Bank for Agriculture and Rural Development – NABARD, National Skill Development Corporation – NSDC, and National Centre for Financial Education – NCFE. To access the complete Strategy document, click here. National Strategy for Financial Inclusion for India 2019-2024 The National Strategy for Financial Inclusion sets forth the vision and key objectives of the financial inclusion policies in India to help expand and sustain the financial inclusion process at the national level through a broad convergence of action involving all the stakeholders in the financial sector. The strategy aims to provide access to formal financial services in an affordable manner, broadening & deepening financial inclusion and promoting financial literacy & consumer protection. The National Strategy for Financial Inclusion for India 2019-2024 has been prepared by RBI under the aegis of the Financial Inclusion Advisory Committee and is based on the inputs and suggestions from Government of India, other Financial Sector Regulators viz., Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority of India (PFRDA). Strategic Pillars of National Strategy for Financial Inclusion To achieve the vision of ensuring access to an array of basic formal financial services, a set of guiding objectives have been formulated with special relevance in the Indian context. Universal Access to Financial Services : Every village to have access to a formal financial service provider within a reasonable distance of 5 KM radius. The customers may be on boarded through an easy and hassle-free digital process and processes should be geared towards a less-paper ecosystem. Providing Basic Bouquet of Financial Services : Every adult who is willing and eligible needs to be provided with a basic bouquet of financial services that include a Basic Savings Bank Deposit Account, credit, a micro life and non-life insurance product, a pension product and a suitable investment product. Access to Livelihood and Skill Development : The new entrant to the financial system, if eligible and willing to undergo any livelihood/ skill development programme, may be given the relevant information about the ongoing Government livelihood programmes thus helping them to augment their skills and engage in meaningful economic activity and improve income generation. Customer Protection and Grievance Redressal : Customers shall be made aware of the recourses available for resolution of their grievances. About storing and sharing of customer’s biometric and demographic data, adequate safeguards need to be ensured to protect the customer’s Right to Privacy. Effective Co-ordination : There needs to be a focused and continuous coordination between the key stakeholders viz. Government, the Regulators, financial service providers, Telecom Service Regulators, Skills Training institutes etc. to make sure that the customers are able to use the services in a sustained manner. The focus shall be to consolidate gains from previous efforts through focus on improvement of quality of service of last mile delivery viz., capacity building of Business Correspondents, creating payments system ecosystems at village levels to deepen the culture of digital finance leading to ease of use and delivery. Key recommendations 1. Universal Access to Financial Services The digital infrastructure in the country needs to be expanded through better networking of bank branches, BC outlets, Micro ATM, PoS terminals and stable connectivity etc. coupled with electricity. Efforts are needed to be undertaken through co-ordination with various stakeholders to ensure creation of the requisite infrastructure for moving towards completely digital on-boarding of customers. Encourage adoption and acceptance for digital payments and bringing people into the fold of formal financial system. In addition to the traditional banking outlets, efforts may also be taken to involve co-operative banks, Payments Banks, Small Finance Banks and other non-bank entities such as fertilizer shops, fair price shops, Office of the Local Government Bodies, Panchayat, Common Service Centres, educational institutions, etc., to promote efficiency and transparency through digital transactions. Some of the issues such as remuneration to the BCs, need for furnishing cash-based collaterals, cash management issues and lack of insurance for cash in transit which act as deterrents in smooth functioning of the BC network, need to be redressed by banks in a timely manner. 2. Providing Basic Bouquet of Financial Services The banks may undertake periodic review of their existing products and adopt a customer centric approach while designing and developing financial products. Ensure efficient delivery by leveraging on Fin-tech and BC network. Initiate measures for capacity building of the BCs by encouraging and incentivizing them to acquire requisite certifications and enabling them to deliver a wide range of financial products. 3. Access to Livelihood and Skill Development There should be convergence of objectives of the National Rural Livelihood and Urban Livelihood Missions to deepen Financial inclusion through an integrated approach. Inter-linkages may be developed between banks and other financial service providers with ongoing skill development, and livelihood generation programmes through RSETIs, NRLM, SRLM, Pradhan Mantri Kaushal Vikas Yojana etc. 4. Financial Literacy and Education Customers need to be explained in simple language the nature of the product, its suitability to their requirements and the cost vis-à-vis return. Concerted efforts are needed to ensure coordination among the ground level functionaries viz. Lead District Manager (LDM), District Development Manager (DDM) of NABARD, Lead District Officer (LDO) of RBI, District and Local administration, Block level officials, NGOs, SHGs, BCs, Farmers’ Clubs, Panchayats, PACS, village level functionaries etc. while conducting financial literacy programmes. 5. Customer Protection and Grievance Redressal A robust customer grievance redressal mechanism at different levels helps banks in timely redressal of grievances. Develop a portal to facilitate inter-regulatory co-ordination for redressal of customer grievance. 6. Effective Co-ordination Strengthen the various fora under Lead Bank Scheme viz., SLBC / DCC / BLBC to ensure the achievement of the vision of the strategy at the ground level. Leverage on the emerging developments in technology to promote effective stakeholder co-ordination by having in place a digital dashboard/ MIS monitoring. Encourage decentralized approach to planning and development by creating a forum to actively involve Gram Panchayats/ Civil Society/ NGOs to accelerate financial inclusion using various tools like social audit. Measuring Financial Inclusion Quantifying financial inclusion progress is usually undertaken across the three dimensions of access, usage and quality. Access Indicators show the details pertaining to access points in the form of Banking Outlets (Bank Branches, Business Correspondent outlets), Automated Teller Machines (ATMs) and Point of Sale (PoS) terminals. The access parameters can be represented both in terms of geography (e.g number of banking outlets per 1000 sq km) as well as demography (e.g number of banking outlets per 100000 adult population). Usage Indicators show how the products are being used by the target customers. Data for usage can be collected through primary and secondary sources. While data on number of accounts, products, etc. can be collected from financial service providers, insights into the usage of different financial products and services may be obtained through surveys/ feedback from customers. The Quality indicators describe the supporting pillars that ensure that the customers can use the financial services to their satisfaction. To access the complete Strategy document, click here. Outcomes During the five-year period of the strategy, the extent of financial inclusion has improved significantly. The total number of banking outlets in villages has increased from 5.97 lakh in March 2019 to 15.98 lakh in March 2024. The total number of basic savings bank deposit accounts has increased from 57.42 crore in March 2019 to 70.59 crore in March 2024 The enrolment in case of insurance and pension schemes has also shown improvement during the strategy period, with enrolment in Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) improving from 5.34 crore in March 2019 to 16 crores in March 20243, with a CAGR of 25 percent. Enrolment in Pradhan Mantri Suraksha Bima Yojana (PMSBY) improved from 13.52 crore to 33.78 crore during the period, with a CAGR of 20 percent. Cumulative number of subscribers to Atal Pension Yojana (APY) grew at a CAGR of 42 percent from 97 lakh to 555 lakhs during the period of strategy. Furthermore, during the period of strategy, the Reserve Bank launched two specific indices viz. Digital Payments Index (DPI) and Financial Inclusion Index (FI-Index) in 2021, to capture the extent of digitalisation of payments and assess the level of financial inclusion across the country, respectively. The DPI, which stood at 153.47 in March 2019, has risen to 445.50 in March 2024. The FI-Index has improved from 49.9 in 2019 to 64.2 in 2024, with Access sub-index improving from 67.5 in 2019 to 79.3 in 2024, usage sub-index improving from 38.7 in 2019 to 55.5 in 2024 and quality sub-index improving from 52.6 in 2019 to 65.8 in 2024. Source : RBI