Nikhil Gehani

1.3 Million Square Miles of Financial Inclusion: New MIX report offers granular data on India

A startling statistic encapsulates the gravity of India’s financial inclusion problem: The country is currently home to 21 percent of the world’s unbanked adults.

In an effort to counteract the fact that nearly half of the Indian population is without a bank account, Prime Minister Narendra Modi launched an ambitious financial inclusion plan in 2014. The initiative, known as Pradhan Mantri Jan-Dhan Yojana (PMJDY), intends to open accounts for millions of households and encourage usage through linkages with government transfer programs. But, with a total population of 1.2 billion people spread across almost 1.3 million square miles, ensuring that these and other efforts are effective requires a detailed understanding of the distribution of financial service access points.

The problem in India is certainly not a shortage of demand. In fact, over the past few years, gross savings has hovered around 32 percent of the national GDP, a rate that places India second only to China – and its notoriously high savings rate – among the BRICS. However, even with this seemingly inherent propensity to save money (70 percent of total domestic savings comes from the household sector), access to formal savings accounts remains a challenge. From a national perspective, there are 1.58 billion savings accounts, which amounts to around 1.3 accounts for every person. Yet, we know this is not an accurate portrayal of the situation across the country. As stated above, only about half of the adult population has access to an account, meaning it is likely that many individuals have more than one bank account. Further, high levels of dormancy – 43 percent, as reported by the World Bank – lead us to conclude that a nationwide penetration rate is much less than 1.3 accounts per person.

It quickly becomes apparent that, in order to get an accurate picture of the financial inclusion situation in India, subnational data is necessary. Without granular data, this assessment would be akin to considering GDP per capita as a measure of economic wellbeing in countries where wealth is concentrated in the hands of a few families. With the geo-spatial mapping functionality available through the FINclusion Lab platform, our team at MIX set out to do just that. And with our partners at the Michael & Susan Dell Foundation, we created a custom tool that allows users to explore data related to the distribution of accounts at a subnational level. Our most recent report – Mapping Financial Access: Deposit-taking in India – explores data related to regional-level access points, institutional distribution and state-level penetration rates.

Here are a few key findings from the report:

Some states are lagging behind: The 10 states with the lowest share of accounts have a penetration rate of just 0.64 accounts per person.

Efforts to increase financial inclusion should consider state-level disparities when designing policies to ensure programs are targeted.

• Access varies greatly between regions: The Central region, which is home to more than 25 percent of the population, only has 20 percent of the total number of accounts. Conversely, the Southern region, which is home to just over 20 percent of the total population, has nearly 30 percent of all accounts.

These differences highlight potential opportunities for local operators and policymakers to increase access.

• Both private and public service providers are needed: Our institutional analysis shows that states in the Northeastern region must depend on the extensive branch network of India Post, as commercial banks have a limited presence in the area.

Granting India Post a banking license could deliver diversified banking products to excluded populations.

• Alternative service delivery will play an integral role in inclusion: Business correspondents provide banking services across 333,000 outlets. Additionally, of the 243 million accounts that were opened under the Reserve Bank of India’s Basic Savings Bank Deposit Account scheme, 119 million accounts were opened through these third-party entities.

Low-cost delivery channels will be crucial to increasing financial inclusion in areas of poor infrastructure or difficult geographies.

As the report examines in more detail, each state and region has unique issues to deal with, as well as unique starting points in terms of access and distribution. Exploring the situation through subnational data analysis can uncover insights that lead to more informed and targeted strategies for financial inclusion. Additionally, we found that there are gaps in data related to usage that, if filled, could inform the design of financial products and delivery channels that meet the needs of currently excluded populations.

Without doubt, the scale of India’s financial inclusion challenge is great. Having a diverse population spread across such a vast amount of land creates obstacles that many other countries do not face. Yet, with a focus on more granular data and a targeted strategy, the financial inclusion community can produce equally impressive solutions.


Nikhil Gehani is the Marketing and Communications Manager at MIX, a nonprofit data analytics organization that promotes financial inclusion through data and insight.


financial inclusion, research