India Leaps Ahead Of China In Financial Inclusion Metrics: SBI Report

The report observed states where more PMJDY accounts are opened witnessed statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products

New Delhi: India has leaped ahead of China in financial inclusion metrics on the back of Pradhan Mantri Jan-Dhan Yojana, digital infrastructure, and usage of banking correspondent or BC model, according to a report authored by Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.

 What are the key highlights of the report?

The number of bank branches in India per 100,000 adults rose to 14.7 in 2020 from 13.6 in 2015, which is higher than Germany, China, and South Africa, publication Mint quoted SBI report.

The number of ‘Banking Outlets in Villages - BCs’ has risen from 34,174 in Mar' 10 to 12.4 lakh in Dec’20.

The report stated there is both a statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in states where more PMJDY accounts are opened.

As per estimates, Rs1.0-1.5 lakh capital expenditure is required to set up a Kiosk under Bank led BC model. Apart from this, the report has also shown that states with higher Pradhan Mantri Jan-Dhan Yojana accounts balances have seen a perceptible decline in crime.

What led to this achievement?

The report, which has been authored by Soumya Kanti Ghosh, SBI's group chief economic adviser, states that financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.

The development of financial inclusion was possible as a result of Pradhan Mantri Jan-Dhan Yojana, digital infrastructure, and usage of banking correspondent or BC model.

“India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014, enabled by a robust digital infrastructure and also a careful recalibration of bank branches and thereby using the BC model judiciously for furthering financial inclusion. Such financial inclusion has also been enabled by the use of digital payments as between 2015 and 2020, mobile and internet banking transactions per 1,000 adults have increased to 13,615 in 2019 from 183 in 2015," the report said.

What suggestions have been made?

To make the BC model more rigorous and uniform across all banking entities, the bank recommends that as AePS works like a Point of Sales (PoS), logically the ‘acquiring bank’ should pay the interchange fee to the ‘issuing bank’.