Brief Context
Context The Reserve Bank of India (RBI) has released the National Strategy for Financial Inclusion (NSFI) 2025–30, outlining a five-year plan (Panch-Jyoti) to deepen and widen financial inclusion in India. About The strategy, approved by the Sub-Committee of the Financial Stability and Development Council (FSDC), sets out five strategic objectives supported by a comprehensive Panch-Jyoti framework and 47 actionable steps. As per the World Bank, financial inclusion means that individuals and busi
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Syllabus: GS3/ Economy
Context
- The Reserve Bank of India (RBI) has released the National Strategy for Financial Inclusion (NSFI) 2025–30, outlining a five-year plan (Panch-Jyoti) to deepen and widen financial inclusion in India.
About
- The strategy, approved by the Sub-Committee of the Financial Stability and Development Council (FSDC), sets out five strategic objectives supported by a comprehensive Panch-Jyoti framework and 47 actionable steps.
- As per the World Bank, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs — transactions, payments, savings, credit and insurance — delivered in a responsible and sustainable way.
Strategic Pillars of the Panch-Jyoti
- Enhancing Financial Services: Provide equitable, responsible, and affordable financial services for households and micro-enterprises.
- Gender-Sensitive Inclusion: Implement women-centric strategies and support vulnerable and underserved groups.
- Linking Livelihoods and Finance: Integrate skill development and livelihood programmes with formal financial services.
- Financial Education: Use financial literacy to promote responsible financial behaviour and discipline.
- Consumer Protection: Strengthen customer protection and grievance redressal mechanisms for better reliability and accessibility.
Challenges to Financial Inclusion
- Digital Divide: Many rural populations lack access to smartphones or the internet, restricting access to digital financial services.
- Low Financial Literacy: Lack of awareness about formal financial products and schemes hampers their adoption.
- Overall national financial literacy stands at only 62.6%. (According to 2023 data).
- Trust Deficit: Fear of fraud, complex procedures, and prior bad experiences discourage first-time users from participating in formal finance.
- Cybercrime reports increased 24.4% between 2021–22 (NCRB data), indicating rising digital fraud.
- Infrastructure Deficit: Inadequate banking infrastructure (ATMs, branches) in remote areas reduces outreach.
- Gender Disparity: Although bank account ownership among women has improved, actual usage remains low due to social and cultural constraints.
- Inadequate Credit Flow to MSMEs: Despite schemes, formal credit to small and medium enterprises remains limited due to collateral and documentation requirements.
Government initiatives for financial inclusion
- Pradhan Mantri Mudra Yojana (PMMY): It was launched in 2015, to support small and micro enterprises with loans up to ₹10 lakh.
- In the Union Budget 2024-25, the loan limit was increased to ₹20 lakh.
- In 2021, the Reserve Bank of India (RBI) launched a Financial Inclusion Index (FI-Index) to track 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.
- Pradhan Mantri Suraksha Bima Yojana (PMSBY): Launched in 2015, PMSBY is an accident insurance scheme covering death and disability. It is a one-year renewable policy aimed at increasing insurance penetration.
- The scheme provides coverage to individuals aged 18-70 with a savings or post office account.
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): Launched in 2015, PMJJBY is a government-backed life insurance scheme.
- The scheme provides one-year renewable life insurance covering death from any cause.
- Atal Pension Yojana (APY): It was launched in 2015 and provides social security to unorganised sector workers.
- APY is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It functions under the National Pension System (NPS) framework.
- Pradhan Mantri Jan Dhan Yojana (PMJDY): Launched in 2014, PMJDY aimed to bring the unbanked into the formal financial system by expanding access to savings accounts, credit, remittance, insurance, and pensions.
Way Ahead
- Training, incentives, and accountability of banking correspondents should be strengthened to improve last-mile service delivery.
- AI and data analytics should be leveraged to identify gaps, track financial behaviour, and enable better-targeted policies.
- FinTech companies, digital banks, and other private players should be encouraged to innovate and extend services to underserved populations.
Source: BS