India's rural economy has more access to banking now

India's financial inclusion in the hinterland and the credit flow to the rural economy are improving along with a rise in household sector's financial savings, setting a stage for an accelerated growth of non-urban centres.

The net financial savings of the household sector grew more than 3 percentage points to 11.5 percent with insurance and pension funds leading the gains, RBI annual report shows. Total banking outlets in villages had grown around 52 percent in the last calendar year led by business correspondents even as the total branches fell. In December last year total banking outlets were over 19 lakh versus 12.53 lakh a year ago.

To capture the extent of financial inclusion across the country, the Reserve Bank has constructed a composite FI-Index with three subindices, viz., FI-Access, FI-Usage and FI-Quality, incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with the government and respective sectoral regulators.

The FI-Index computed for end-March 2021 stood at 53.9 as against 43.4 for end-March 2017, registering a compound annual growth rate (CAGR) of 5.5 percent.