From scale to depth: Dismantling frictions within India’s financial inclusion juggernaut India’s financial inclusion journey has transitioned from expanding access to addressing deeper structural challenges that hinder the effective use of financial services. While the country has achieved significant progress in bank account penetration, the focus must now shift toward improving service quality, enhancing resilience, and dismantling systemic barriers that prevent marginalized groups from fully leveraging financial tools. This analysis explores the current state of financial inclusion in India, highlighting the gaps in service delivery and the need for policy reforms to drive inclusive growth. The 2024 World Bank Findex report reveals that 89% of Indian adults hold bank accounts, surpassing the 75% average for low- and middle-income countries and approaching levels seen in high-income economies. Average account balances have grown from $12 in 2015 to $50 in 2024, reflecting a 17% compound annual growth rate. This expansion has been driven by digital public infrastructure (DPI), particularly the Jan Dhan-Aadhaar-Mobile (JAM) framework and the Unified Payments Interface (UPI). UPI has revolutionized retail payments, reaching 260 million users and laying the groundwork for broader financial services. However, the shift from access to meaningful financial engagement remains incomplete. In 2023, 14% of adults—16% of account holders—remained inactive, more than double the global average. This suggests that for many, bank accounts function primarily as passive repositories for funds rather than active tools for managing finances. The design of the Direct Benefit Transfer (DBT) system exacerbates this issue.#india #world_bank #direct_benefit_transfer #unified_payments_interface #jan_dhan_aadhaar_mobile
