On August 17, 2021, the Reserve Bank of India (RBI) introduced the ‘Financial Inclusion Index’ (FI-Index) to measure the extent of financial inclusion across India.
- The FI-Index will be published annually in July month (for the financial year (FY) ending previous March).
- The annual FI-Index for the FY21 (period ending March 2021) is 53.9 as against 43.4 of FY17.
- Background: In April 2021, at the bi-monthly monetary policy report, RBI has mentioned about the construction and periodic publishing of the FI Index.
About the FI-Index in brief:
i.The FI-Index will contain the details of banking, investments, insurance, postal, and the pension sector in consultation with Government and respective sectoral regulators.
ii.Single value ranging between 0 and 100 will be provided under the index for the various factors of financial inclusion.
iii.The value 0 represents complete financial exclusion and 100 means full financial inclusion.
iv.Different Parameters of FI-Index:
- The FI-Index contains 3 different parameters with variant weightage viz, Access (35 percent), Usage (45 percent), and Quality (20 percent).
- The index will contain information regarding the ease of access, availability and usage of services, and quality of services in all 97 indicators.
v.The FI-Index will reflect the efforts of all stakeholders over the year towards financial inclusion. It has no ‘base year’.
What is Financial inclusion?
i.Financial inclusion refers to the ‘universal access’ to the financial services and adequate credits at an affordable cost (especially for the vulnerable groups such as weaker sections and low income groups).
ii.Financial inclusion will remove the barriers that exclude people from participating in the financial sector.
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Under section 45W of the RBI Act, 1934 read with section 45U of the Act, RBI issued The Master Direction on RBI (Certificate of Deposit(CD)) Directions, 2021 to all persons and agencies eligible to deal in CD.
About Reserve Bank of India (RBI):
Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
Governor – Shaktikanta Das
Deputy Governors – Mahesh Kumar Jain, Michael Debabrata Patra, and M Rajeshwar Rao, T. Rabi Sankar