India boosts its engine: seven steps towards financial inclusion

08 September, 2023

Financial inclusion is a fundamental step for the growth of a country. To unlock its potential, the Tiger must make financial services accessible to the underserved population. How to do? Let’s see it with Uti International

The recipe to grow stronger than ever? It is not enough to have a large and young population , open up to foreign markets and dive into technological innovation. Having a financial system accessible to all , without distinction of geographical origin or family income, is a fundamental step and the Indian government has decided to move precisely in this direction.

Under the leadership of Narendra Modi, the Tiger is moving to create real and visible change for the entire population, the main objectives are: making banks accessible for all, guaranteeing financial security even for those who historically have not enjoyed it, offering the necessary funds to those for whom they are usually inaccessible and create an increasingly dense network , so as to also reach under-served areas.

This is certainly a complex process, but as explained by Uti Internationalit is a necessary challenge to become an increasingly stronger country. Only in this way will it be possible to “ empower individuals , especially those in rural and low-income areas, by providing them with the tools and resources to manage their finances, save, invest and access credit ”.

First step: more accessible banks

Over the last 20 years, the total number of accounts in India has grown by 10% per year , always indicating a greater propensity towards investments. In fact, with the increase in income, considering that according to Economic Times the Indian middle class grows by 6.3% every year, not only have expenses increased, but the middle class has also started to invest. But we are not just talking about the middle class, thanks to various inclusive policies, the number of current accounts has skyrocketed even when looking at the most rural areas .

Second step: national inclusion program

The interest in the democratization of finance is nothing new for India: on 28 August 2014 the Pradhan Mantri Jan-Dhan Yojana came into force , a project with the aim of guaranteeing access to various financial services such as availability of a basic savings account, access to need-based credit, but also insurance and pensions for that population group that was historically excluded.

The success of this scheme is undeniable, in March 2023 the funds made available reached 5.92 million dollars, more than double those available at its launch. With the growth of the funds, the beneficiaries have also increased and are now more than 487 million.

Third step: reduce the gap

Over the past 10 years, the number of individuals able to formally apply for a loan has more than doubled, from 128 million citizens in 2013 to 360 million this year , according to data from the Bank of India. And, over time, women are also gaining more and more ground in this sense: although women account for around a third of consumers requesting loans, the number continues to grow, a positive sign especially in view of an increase in small businesses run by entrepreneurs.

Fourth step: from cash to cashless

As of June 2023, India has issued more than 470 million cards, between debit and credit cards , an unimaginable number that allows monthly transactions of about 23 billion dollars . In Tiger Country, as in the rest of the world, the value of card payments continues to grow. In India, card payments have reached 46% of the total and, with them, the value of payments itself continues to rise.

Fifth step: revolutionize payments

“Launched in 2016, UPI (Unified Payments Interface) has been the most significant success factor in promoting financial inclusion in India, enabling even the smallest transactions via mobile phones linked to a bank account ,” explain experts at Uti International . To date, more than 450 financial institutions in India have decided to participate in this system, allowing over 9 billion monthly transactions and thus helping to increasingly reduce the use of cash. The UPI system is currently accessible only in India, but the ambition is to also allow cross-border transactions with foreign countries , such as the United Arab Emirates, Singapore, Nepal, Bhutan and Mauritius.

Sixth step: investments for everyone

If until some time ago investments seemed like an opportunity available only to the highest segments of the population, the financial inclusion program has allowed people of all socio-economic backgrounds to approach this world , investing in products such as mutual funds .

Seventh step: digital investing

Through dematerialisation , i.e. the so-called DEMAT accounts, the process of purchasing shares and funds becomes electronic, thus making investments quicker and simpler. “ With access to banking and financial services, more and more people are becoming aware of investment opportunities and holding securities electronically through demat accounts,” experts explain.

It is still a long journey, but the first results are already tangible, bringing not only economic benefits, but also a sense of financial security that winks at foreign investors who have decided to focus on an economy that does not seem willing to slow down its race to become one of the most important economies in the world

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