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PM Narendra Modi's PMJDY makes India #1 in commitment to financial inclusion: Brookings

Economic Times:  September, 2015

New Delhi: Prime Minister Narendra Modi's push for financial inclusion has enabled India to earn the no. 1 rank in commitment to financial inclusion in the latest Brookings Institution's 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard.

The report that aims at evaluating the access to and usage of affordable financial services by underserved people across 21 countries gave India ninth rank overall. The scorecard is prepared upon examining individual countries on four key parameters: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services.

According to the report, India accounts for 21 per cent of world's and 67 per cent of South Asia's unbanked population. "Current guidelines, such as those for payment banks, and the overall JAM framework (Jan Dhan-Yojana, Aadhaar and Mobile numbers) are expected to facilitate a more enabling environment for digital financial services by allowing a multiplicity of providers to offer innovative financial services to underserved populations," the report states. It notes the importance of recent government initiatives in helping India enhance its access to formal banking services by the underserved population, remarkably. It goes on to commend the prime minister's Pradhan Mantri Jan-Dhan Yojana -- one of the biggest financial inclusion initiatives in the world -- for helping the country make huge strides in financial inclusion and financial literacy.

The initiative launched on August 28th, 2014 has already facilitated the opening of 185 million bank accounts as of September 2015. The report credited the government for its JAM (Jan-Dhan, Aadhar and Mobile) framework which seeks to allow government to transfer benefits and subsidies directly to the bank accounts of entitled households. "Further digitization of government payments could benefit both the government and recipients alike, as some sources project the government could save over $22 billion a year by paying subsidies for services like health care and education directly to the beneficiaries," the report states.

It goes on to acknowledge the various steps taken at regulatory levels to enhance the accessibility of Indians to mobile money and, further financial inclusion. India received a respectable seventh ranking on the regulatory environment component of the FDIP scorecard. The Reserve Bank of India's recent steps such as notification of guidelines for payment bank services in November 2014 and more recently, the provision of payment bank licenses to 11 applicants, including five mobile operators are seen by the report to be major steps towards making Indian financial services sector more open and inclusive, especially, for the underserved population of the country. Although, the report has commended the advances made in the regulatory environment of the country's financial system, it does suggest that there is room for improvement.

"Strong digital payments infrastructure, development of policies and regulations promoting digital financial services in India, and government's commitment to financial inclusion should allow India to better take advantage of its technological capacity and mobile penetration rates in order to increase financial inclusion in the country," the report said.