This Diwali, we did a quick roundup of India’s financial inclusion progress and picked out the key challenges we need to crack. Laveesh
have been analysing and researching financial inclusion in India for fifteen years now, and for the past year, Anantha
has joined us. Looking back, this is one sector that had been chugging along steadily, yet slowly, for decades but burst into activity from 2014. India has set the pace globally in a) raising access to banking through the PMJDY mission, b) setting up a phenomenal mechanism for increasing efficiency in the delivery of government benefits through PMJDY accounts and c) last but not the least, innovating towards seamless digital payments. There are many more game-changing moves in the pipeline, for instance, the adoption of the Account Aggregator Framework across various financial services. However, our country being incredibly diverse, it is critical that the gains made do not cloud over the still unserved segments. Going forward, we identify three fundamental issues.
1. Focus on women.
Any progress in inclusion cannot leave our women behind. This calls for a gender-sensitive approach across all levels. CGAP has a guide
out on designing for impact and the very first step is one that we at ICFI have been pushing for years - that is, monitoring and measuring access and impact. It is high time all of us raise the drumbeat on getting the RBI to publish gender-disaggregated data so that we know exactly where we stand on access and usage of bank accounts (not just PMJDY ones), on credit, on agents, etc. Monami Dasgupta has a concise write-up in the Mint
using existing data to show the gender gap. Amit Arora and Alreena Pinto have an excellent report on the female business correspondent (BC) agent banking model
with considerable data showing the way to fixing the gender imbalance in underserved rural geographies.
2. Get our act together on data and monitoring
. With rapid advances in technology and the adoption of digital transactions, there are new consumer risks coming in from easy access to digital products, as flagged once again by Majorie Chalwe-Mulenga and Eric Duflos of CGAP
. While regulators need to be nimble in their response, we still have no publicly available guidelines or regulations from the RBI on digital lending apps, though the Working Group was set up in January this year. Meanwhile, new products like cryptocurrency
grab eyeballs on our screens and the possible risks for consumers need to be understood and addressed asap. IFC has a discussion paper out
on the emergence of new data ecosystems in financial services and the implications for regulators, consumers, and industry. The other aspect is ensuring effective, forward-looking legislation, and the Personal Data Protection Bill in the Parliament must be expanded to include non-personal data, as the lines are increasingly getting blurred with AI and ML technologies. On payments and settlements, Shehnaz Ahmed and Aryan Babele
have set out their views on the changes needed to modernize the Payment and Settlement Systems Act, 2007. Lastly, there is an urgent need to set up an overarching policy framework for data governance, as explained by Deepak Maheshwari in the Mint
3. Work together across sectors
. As flagged in our ICFI Policy Brief India’s Financial Inclusion Agenda 2019-24
, this new digital finance ecosystem calls for collaboration and coordination across sectors. Regulators must work together, as well as with industry stakeholders to resolve issues as they emerge. For instance, RBI and TRAI must work together to facilitate data sharing of mobile usage or recharging history to facilitate the Account Aggregator platform; NPCI needs to take a granular look into the connectivity challenges that currently curb adoption of digital payments in the hinterland and so on.