Advancements in Digital Financial Inclusion in India
- ECONOMY
NEWS: Banks harnessing
JAM Trinity to the hilt for expanding reach Transformation Through Digital
Financial Inclusion.
WHAT’S
IN THE NEWS?
- Real-Life
Impact: Individuals like cab drivers and farmers now benefit from
mobile-based financial services, illustrating the penetration of digital
infrastructure.
- Ease of
Transactions:
- Instantaneous
money transfers via UPI.
- Accessibility
of government benefits (e.g., PM-Kisan scheme) through Direct Benefit
Transfers (DBT).
- Shift from
Traditional Banking: Reduction in branch visits due to mobile-based banking and
financial tools.
The
JAM Trinity: A Pillar of Financial Inclusion
- Components:
- Jan Dhan Yojana: Provides
basic savings accounts and access to credit, remittances, insurance, and
pensions for low-income groups.
- Aadhaar: Enables
authentication for direct benefit transfers.
- Mobile:
Facilitates digital payments and mobile banking adoption.
- Impact: These
initiatives have significantly improved the inclusion of weaker sections
into the financial ecosystem.
Progress
Indicators of Financial Inclusion
A.
Digital Payments (DP) Index
- Tracks payment digitization trends.
- Growth trajectory: From 153.47 (March 2019) to 445.50
(March 2024), showing rapid adoption of digital payment systems.
B.
Financial Inclusion (FI) Index
- Measures progress based on access, usage, and quality.
- Improvement: From 53.9 (March 2021) to 64.2 (March 2024).
- Key Driver: Enhanced usage dimension, reflecting deeper
engagement with financial services.
Highlights
of Digital Payment Adoption
- Transaction
Volume: Over 160 billion digital transactions annually, valued at
₹2,400 lakh crore (FY24).
- Retail
Transactions: Account for ₹720 lakh crore annually, with UPI and IMPS
contributing ₹265 lakh crore.
- Technological
Innovations: Introduction of platforms like the Unified Lending Interface (ULI)
and UPI enhances the speed and simplicity of financial operations.
Digital
Public Infrastructure as a Catalyst
- Global
Leadership Potential: Reports by organizations like BCG highlight India’s readiness to
lead global financial innovation.
- Benefits:
- Expanded
reach of banking services.
- Enhanced
efficiency and cost-effectiveness in banking.
- Simplified
access to credit, especially in rural areas.
Unified
Lending Interface (ULI): A Game-Changer
- Purpose:
Simplifies and streamlines credit delivery, particularly for those at the
bottom of the pyramid.
- Unique
Characteristics:
- Ease of
access.
- Speed of
processing.
- Simplicity
in procedures.
- Future Impact:
- Expected
nationwide rollout.
- Anticipated
to transform credit accessibility and financial inclusion.
Strategic
Role of the RBI
- Policy Push: RBI’s
initiatives like UPI and ULI align with its goal to enhance digital
financial inclusion.
- Vision for
the Future: Facilitating innovation and expanding access to ensure the
financial empowerment of underserved communities.
Concluding
Insights
- Economic
Empowerment: The synergy between government policies and RBI initiatives has
democratized access to financial services.
- Digital
Infrastructure: A robust foundation for inclusive growth, paving the way for India
to emerge as a global leader in financial innovation.
- Future
Potential: Continuous advancements in platforms like UPI and ULI promise to
further deepen financial inclusion and economic integration.
Source: https://www.thehindubusinessline.com/money-and-banking/jam-trinity-used-to-the-hilt-by-banks-for-expanding-the-reach/article68995662.ece#:~:text=These%20are%20but%20a%20few,both%20RBI%20and%20the%20government.