One out of every two Indians has a savings account, but only one in seven has access to bank loan. This is revealed in a report based on a new index of financial inclusion prepared by rating agency Crisil.
Released by Finance Minister P. Chidambaram, the report states that the southern region leads in financial inclusion with a Crisil Inclusix score of 62.2 in 2011.
The western region stands second with an score of 38.2, followed by the northern region (37.1), eastern region (28.6), and north-rastern Region (28.5).
Though overall index is just 40.1, which the report terms as low, the fact is that it has improved from 35.4 in 2009. The RBI provides the data used for index computation.
The report found that the number of saving accounts (624 million) is almost four times the number of loan account (160 million). It also said that 618 out of 632 districts reported an improvement in terms of financial inclusion. The top three States in terms of financial inclusion are Puducherry, Chandigarh and Kerala.
Big differences
However, wide disparities exist across India and within States in terms of access to financial services. “India’s six largest cities have 11 per cent of the country’s bank branches while four districts have only one branch each,” the report states, adding that the bottom 50 districts have just 2 per cent of the country’s bank branches.
The new index intends to measure the extent of inclusion in India, right down to each of the 632 districts.
It uses a statistically robust and transparent methodology. It is a relative index on a scale of 0 to 100 and combines three parameters, branch penetration, deposit penetration and credit penetration, into one metric. Over time, as consistent and comprehensive data become available, additional services such as insurance and microfinance can be added.
“Besides measuring inclusion at the district, State and national levels, the index can be used to compute progress on financial inclusion by each bank,” said Roopa Kudva, MD and CEO, Crisil.
This index will enable policymakers, regulators, and bankers to identify priorities to improve financial inclusion, design focused initiatives to push the inclusion agenda and, most importantly, measure the progress made, she added.