An all-India financial inclusion score of 40.1, as captured by credit-rating firm Crisils Inclusix, is undoubtedly a poor one though, it is true, there has been a 13% improvement over the past two years. The score, though, shouldnt really come as a surprise since it is well known that the performance in the sub-components of the indexbank penetration, credit penetration and deposits penetrationis very poor. Indeed, over the past few years, the proportion of household savings being invested in financial assets has also been falling.
What is important, in this context, is what drives financial inclusion at a general level and what interventions are possible at a policy level. Crisils Inclusix suggests economic well-being is an important parameter since it is the richer states, and the larger cities, that score betterso, as India prospers, Inclusix will automatically rise. More important, one reason for poor banking presence has been the fact that, at current income levels, it doesnt make financial sense for banks to open branches in most areas. The advent of banking correspondents (BCs) and mobile money transfers, the saving grace is, will give big fillip to inclusion. In other words, financial inclusion will take place on its own as long as the institutional space is created to allow private players to offer their services.