Financial Inclusion Index (FI-Index)

The Financial Inclusion Index (FI-Index) is a comprehensive composite measure developed to assess the extent and quality of financial inclusion in an economy. In India, the FI-Index is published by the Reserve Bank of India to capture progress in providing accessible, affordable, and useful financial services to the population. It serves as an important analytical and policy tool in the domains of banking, finance, and the Indian economy by enabling evidence-based evaluation of inclusion efforts.

Concept and Purpose of the FI-Index

Financial inclusion is multidimensional, encompassing access to financial services, their actual usage, and the quality of services delivered. The FI-Index is designed to reflect these multiple dimensions in a single numerical value, allowing policymakers, regulators, and researchers to track improvements and identify gaps.
The index moves beyond simple indicators such as the number of bank accounts by incorporating depth, frequency, and sustainability of financial service usage.

Development of the FI-Index in India

India’s FI-Index was introduced to provide a holistic assessment of financial inclusion outcomes resulting from policy initiatives, digital infrastructure expansion, and regulatory reforms. The RBI conceptualised the index to support ongoing monitoring of inclusion as a continuous process rather than a one-time achievement.
By publishing the index periodically, the RBI enables comparison across time and evaluation of the effectiveness of financial inclusion strategies.

Dimensions and Structure of the Index

The FI-Index is constructed using three broad dimensions. The access dimension measures the availability of financial services, such as bank branches, ATMs, and digital access points. The usage dimension captures the extent to which financial services are actively used, including deposits, credit, payments, and remittances. The quality dimension reflects aspects such as consumer protection, transparency, and the sustainability of financial services.
Each dimension is assigned a weight, and multiple indicators are aggregated to arrive at a composite index score.

Indicators Covered Under the FI-Index

The FI-Index draws upon a wide range of banking and financial data, including:

• Number of deposit and credit accounts.
• Volume and value of digital transactions.
• Reach of payment systems.
• Penetration of credit and insurance.
• Availability of financial service points.

These indicators collectively provide a nuanced picture of inclusion across different segments of the economy.

Role in Banking and Financial Policy

For banks and financial institutions, the FI-Index acts as a benchmark for assessing outreach and performance in inclusive banking. It encourages institutions to focus not only on account opening but also on customer engagement, product suitability, and service quality.
From a regulatory perspective, the index supports risk-based and targeted policy interventions by highlighting areas of underperformance or regional disparities.

Significance for the Indian Economy

At the macroeconomic level, the FI-Index reflects the degree to which households and businesses are integrated into the formal financial system. Higher financial inclusion enhances savings mobilisation, improves access to credit, and strengthens the transmission of monetary policy.
By linking financial inclusion with economic participation, the index underscores the role of inclusive finance in supporting sustainable and balanced economic growth.

Relationship with Digital Financial Inclusion

The FI-Index captures the impact of digitalisation on financial inclusion. Growth in electronic payments, mobile banking, and interoperable payment platforms contributes significantly to improvements in the usage dimension of the index.
This highlights the importance of digital public infrastructure in reducing transaction costs, expanding outreach, and improving efficiency within the financial system.

Regional and Social Dimensions

Although the FI-Index is a national-level measure, its underlying data help identify disparities across regions, income groups, and population segments. Such insights are valuable for designing targeted inclusion strategies for rural areas, small enterprises, and vulnerable groups.
Addressing these disparities is essential for ensuring that financial inclusion translates into equitable economic development.