The digital financial inclusion in India has seen an exponential growth in past few years. Identify the factors responsible for it and steps taken by the government in this regard. Also, discuss the challenges that remain.
India has seen a revolution in the form of digitalization of financial transactions with such a sharp increase in this sector, being equal to what was envisaged to happen in decades.
Factors facilitating digital financial inclusion:
- Penetration of mobile phones in India.
- Government policies (like digital payment infrastructure – UPI, BHIM) and government incentives such as DigiGrahak Yojana, etc.
- Demonetisation played a major role in behavioural change.
- Telecom industry – through its infrastructure and low average revenue per user.
- Jandhan-Aadhar alliance.
Steps taken by government:
- UPI (unified payment interface) brought to ease the digital transactions.
- BHIM app brought to initiate payments made workable even on simple mobiles.
- Incentivizing transactions through cashbacks, Lucky Grahak schemes, etc.
- Eliminating merchant discount rate to facilitate digital transaction.
- Removing charges on NEFT and RTGS by RBI on suggestion from government.
- Rupay card launched to ensure functioning of JanDhan accounts.
- Flagship scheme (Digital India) promoting digital infrastructure in financial transaction.
- Policy intervention with exclusive focus on increasing digital transaction through limit on cash transactions.
Challenges remaining:
- Security of digital platforms is the most prominent concern.
- Increasing digital literacy to reduce frauds.
- Reducing digital divide and countering inequality in rural and urban areas.
- Creating infrastructure to speed up network connectivity, since data speed is a major concern.
Digital financial inclusion has seen a manifold increase in last few years and is continuously growing. Government needs to promote awareness and facilitate access to digital gadgets to improve their use and also focus on their security to minimise fear of frauds.
Topics: GS-II: Government Policies and Interventions for Development in Various Sectors • GS-III: Economic Growth Development • GS-III: Inclusive Growth and Issues Arising From It