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International Journal of Economics, Commerce and Management United Kingdom Vol. II, Issue 5, 2014

Licensed under Creative Common

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FINANCIAL INCLUSION AND HUMAN DEVELOPMENT: A STATE-WISE ANALYSIS

FROM INDIA

Gupta, Anurag

Birla Institute of Technology and Science, Pilani, India

[email protected]

Chotia, Varun

Department of Economics and Finance, Birla Institute of Technology and Science, Pilani, India

[email protected]

Rao, NV Muralidhar

Department of Economics and Finance, Birla Institute of Technology and Science, Pilani, India

[email protected]

Abstract

This paper analyzes the extent of financial inclusion across the 28 states and the 6 regions of

India. As the inclusiveness of a financial system depends on various criteria, an Index for

Financial Inclusion (IFI) has been constructed using a multidimensional approach. Using the

data for three dimensions i.e. penetration, availability and usage of banking services, IFI has

been computed for various states and regions of India. It is found that the states of Goa, Punjab

and Kerala are the most financially inclusive states of India. Further, the relationship between

financial inclusion and human development has been investigated for 21 major Indian states.

The empirical results show that the index of financial inclusion and human development index

are positively correlated with each other. It is observed that although various measures have

been implemented to increase financial inclusion, a large population of India does not have

access to formal financial system. Thus, the promotion of financial inclusion should be a policy

priority in India to achieve the central goals of inclusive growth, human and economic

development.

Keywords: financial inclusion, human development, banking

INTRODUCTION

Financial inclusion aims to ensure easy accessibility, wide-spread availability and usage of the

formal banking system to every individual in an economy. The purpose of financial inclusion is

to ensure financial services to vast sections of poor and vulnerable groups at a reasonable cost

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in a transparent manner. Access to financial services will lead to the empowerment of the

disadvantaged sections of our society. An inclusive financial system will lead to better

employment opportunities, economic upliftment and poverty alleviation for the weaker groups of

the society. Financial inclusion through secure deposits, suitably priced loans and insurance

services, remittances and other payments would lead to better integration of individuals with the

economy. A progressive and efficient society requires easy and unrestrained access to public

goods and services. The policy makers should ensure that as banking services are in the nature

of public services, they should be made available to each and every individual without any

discrimination. Financial inclusion is basically ensuring delivery of financial services to the low-

income sections of the country that tend to be excluded. Access to finance, especially by the

socially and economically weaker groups, would help them to increase their income, acquire

capital and eventually lead them to break the chain of poverty.

Financial inclusion is one of the most important aspects in the context of human

development and inclusive growth. An inclusive financial system promotes efficient allocation of

resources in a productive manner and therefore diminishes the cost of capital. Availability of

proper financial services can have a major effect on improving the day-to-day management of

finance related issues. It tends to curb the expansion of informal sources of credit such as

moneylenders which are somewhat exploitative. During his tenure as UN Secretary-General,

Kofi Annan stated in 2003 that the harsh reality lies in the fact that majority of the poor people

around the world still do not have access to sustainable financial services which include deposit,

credit etc. He stressed the fact that our main focal point should be to deal with the constraints

that restrict complete participation of people in the financial sector and we must develop a

financially inclusive economy to improve the lives of people. A Committee on Financial Inclusion

in India chaired by Rangarajan (2008) said that financial inclusion is a process that ensures

adequate and timely access to financial services to the weaker sections of the society at a

reasonable cost.

Several countries across the world have realized the importance of an inclusive financial

system and have implemented various policies promoting financial inclusion. Financial inclusion

has been recognized as a means to integrate every citizen with the economy and contribute

towards the country's progress. Many legislative measures have also been implemented

throughout the world. The Community Reinvestment Act (1997) enacted in the United States

which requires banks to help meet the credit needs of borrowers of all segments and not just

rich-income neighborhoods. The law on exclusion introduced in France in 1998 focused on a

person's right to have a bank account. A legislation introduced in Canada in 2001 requires all

banks to offer bank accounts without minimum opening balances. To supervise the progress in

financial inclusion, a Financial Inclusion Task Force was established by United Kingdom

government in 2005. In South Africa, a basic, debit card based savings account called 'Mzansi'

International Journal of Economics, Commerce and Management, United Kingdom


was initiated in 2004 to promote financial inclusion. A voluntary code was introduced by the

German Bankers’ Association 1996 which makes provision for an ‘everyman’ current account

that allowed basic banking transactions without an overdraft facility.

India has experienced unprecedented growth and progress post liberalization. The

banking sector has played a key role in putting India on the trajectory of growth in the past two

decades and has grown itself simultaneously. The benefits of this growth have failed to reach a

large section of the rural poor and they still lack access to basic banking services. India has

realized the importance of financial inclusion for a long time now. Nationalization of banks in

1969 was the first major initiative by the government to improve financial services in rural areas.

It allowed rapid expansion of the banking system especially in rural areas and allowed them to

increase lending in the 'priority sector' areas. To cater to the needs of rural population, the

government established Regional Rural Banks (RRBs) in the 1970s. These banks provided

simple and flexible financial products specifically designed for the rural population. Also, the

National Bank for Agriculture and Rural Development (NABARD) was established in 1982, to

deal with all matters related to agriculture and rural development.

Financial inclusion gained prominence in India since 2005-06 when the Reserve Bank of India in

its Annual Policy Statement recognized the concerns regarding the banking practices that lead

to exclusion of vast sections of the people. The RBI initiated a series of reforms and urged

banks to promote financial services among the low-income groups and work towards achieving

greater financial inclusion. RBI has asked banks to provide a basic no-frills banking account with

nil or very minimal balance or charge. Other steps initiated by RBI to achieve greater financial

inclusion include providing general-purpose credit card (GCC) facility with a view to offer easy

access to credit in rural and semi-urban areas. In 2007-08, two funds namely the Financial

Inclusion Fund and Financial Inclusion Technology Fund were also launched with NABARD.

Another major step towards promoting financial inclusion was the introduction of business

correspondents in 2006. RBI allowed banks to engage business correspondents (BCs) and

business facilitators (BFs) as intermediaries for providing financial services to vast section of

rural population. With the help of Business Correspondent model, banks have been able to

provide doorstep delivery of services in the rural areas using a network of third party agents.

With the help of information and communications technology, banks have been able to provide

secure banking using biometrics to the poor and illiterate rural population through the BC model.

In this paper, first we calculate the region-wise and state-wise Index of Financial Inclusion (IFI)

for India. Subsequently, after computing the IFI for the states, we compare it with Human

Development Index (HDI) and analyze the relationship between financial inclusion and human

development.



LITERATURE REVIEW

Literature on financial inclusion (or financial exclusion) has described it in the context of bigger

concern of social inclusion (or exclusion) of some sections of society. Financial exclusion was

defined by Leyshon and Thrift (1995) as processes that serve to prevent certain social groups

and individuals from gaining access to the formal financial system. According to Asian

Development Bank (2000), financial inclusion is the provision of a wide range of financial

services like credit facilities, deposits, payment services, insurance and remittances to poor and

underprivileged households and their micro-enterprises. Sinclair (2001) describes financial

exclusion as the inability to access basic financial services in a suitable form. Financial

exclusion may be an effect of problems due to access, costs, situations, marketing or self-

exclusion because of negative experiences or perceptions. According to the Treasury

Committee, House of Commons, United Kingdom (2004), financial inclusion is the ability of

individuals to access appropriate financial products and services. Carbo et al. (2005) have

defined financial exclusion as the inability (although occasioned) of some segments of society to

access the financial system. Conroy (2005) states that financial exclusion prevents low-income

and disadvantaged social groups from gaining access to the formal financial systems of their

countries. According to Mohan (2006), financial exclusion indicates the lack of access to

suitable, fair, low-priced and secure financial services and products by certain sections of the

society from mainstream providers. According to United Nations (2006), a financial sector is

considered inclusive if it provides access to credit, insurance, savings and payments for all

bankable people and enterprises.

The literature on how to measure the extent of financial inclusion has started to develop

in the recent years. Measuring financial inclusion depends on the way it is defined. Some

studies have measured financial inclusion by the proportion of population having access to

financial services i.e. having a bank account. As such data can only be obtained by nation-wide

surveys which may not be economically viable; it is difficult to conduct studies based on survey

data. Evidence on financial exclusion is scarce, because it is hard to measure, and data on the

use of financial services by households and firms is limited (Claessens 2006). Despite several

limitations, Honohan (2008) used an econometric approach to estimate the number of

households having access to banking services for many countries based on survey information.

Measuring financial inclusiveness only on the basis of the proportion of population having a

bank account does not consider many aspects which affect financial inclusion. People having a

bank account may not be utilizing it adequately due to physical or psychological barriers.

According to Beck et al. (2006), the term banking sector outreach or financial inclusion refers to

the access to banking services and their use by households and firms. Claessesns (2006)

describes the various dimensions to access which include availability, costs, scale, type and

quality of banking services offered. Access is not synonymous to use. Some households or



firms might decide not to use financial services, either for socio-economic reasons or because

opportunity costs are too high (Beck et al. 2006). Financial exclusion, on the other hand, may be

caused by (1) geographic limitations due to under-provision of banking services in remote and

scarcely populated areas, (2) socio-economic limitations when financial services appear

inaccessible to specific income, socio or ethnic groups, or (3) limitations of opportunity when

new or small firms with profitable projects are credit rationed because of lack of information and

collaterals (Beck/de la Torre 2006, Anderloni/Carluccio 2007, p. 9).

Various indicators have been used in the literature to measure financial inclusion (Table

1). Indicator (i) measures access to bank accounts. According to Peachy/Roe (2006), complete

access can be achieved, if the number of bank accounts per adult is above 0.5. The availability

of financial services through its physical outlets like branches, ATMs is measured by indicators

(ii) – (v), thereby measuring the banking penetration. Higher geographic penetration indicates

easier geographic access while higher demographic branch and ATM penetration indicates

easier access because of fewer clients per physical outlet of the bank. Indicators (vi) – (ix)

measure the amount of credit and deposit thus indicating the usage of financial services. A

higher demographic credit or deposit penetration implies greater use, and a higher loan or

deposit-income ratio denotes that these services are majorly used by rich people or large firms.

According to Beck et al. (2006), the loan to income ratio is above 2 in rich countries and above 8

in poor countries. Other indicators of deposit penetration are the deposit-GDP ratio or the cash-

deposit ratio. Peachy and Roe (2006) stated that an economy has attained complete access, if

the deposit-GDP ratio is 100 per cent or the cash-deposit ratio is below 20 per cent. For the

indicators (ii)-(ix), a nation may be considered moving towards complete access, if indicator

value is above the mean value of developed nations (Beck and de la Torre 2006).

Table 1: Indicators used to measure financial inclusion

Indicator Measurement

(i) Bank accounts per adult Number of bank accounts per adult

(ii) Geographic branch penetration Number of branches per 1000 km2

(iii) Demographic branch penetration Number of bank branches per 1,00,000 people

(iv)Geographic ATM penetration Number of bank ATMs per 1000 km2

(v) Demographic ATM penetration Number of bank ATMs per 1,00,000 people

(vi)Demographic Loan penetration Number of loans per 1,00,000 people

(vii)Loan-income ratio Average size of loan to GDP per capita

(viii)Demographic deposit penetration Number of deposits per 1,00,000 people

(ix) Deposit-income ratio (or deposit- GDP Ratio)

Average size of Deposits to GDP per capita (or total bank deposits to GDP)

(x) Cash-Deposit Ratio Cash in circulation to total bank deposits

Source: Conrad, et al. (2008)



Thus, several indicators have been used to measure inclusiveness of a financial system.

However, these indicators when used individually fail to adequately provide a comprehensive

picture of financial inclusion in an economy. Thus, in this paper, we have used a comprehensive

measure, i.e. Index of Financial Inclusion (IFI), to evaluate the extent of financial inclusion

across the various states of India. IFI was developed by Sarma (2012) to incorporate various

dimensions of financial inclusion such as penetration, availability and usage of financial services

in one single number. This measure is extremely useful to compare the level of financial

inclusion across economies and can be used to examine the impact of policy initiatives on

financial inclusion in a country.

METHODOLOGY

As any single parameter is not able to effectively encapsulate the scale of financial inclusion,

Index of Financial Inclusion is calculated, which incorporates information across various

dimensions in a single number between 0 and 1, where 0 indicates complete financial exclusion

and 1 represents complete financial inclusion. We have developed the Index of Financial

Inclusion based on the approach followed by Sarma (2012) which is also similar to the approach

followed by UNDP (United Nations Development Programme) for the calculation of various

indices like HDI, HPI and many others. IFI is constructed as a multidimensional index that

captures information on various aspects of financial inclusion namely penetration, availability

and usage of the banking system. Such an Index is useful to evaluate the extent of financial

inclusion across regions at a particular time. It can also be employed to examine the effect of

various policies for financial inclusion in a geographical region over a period of time.

In this study, state-wise Index of Financial Inclusion (IFI) for India is calculated. For computing

IFI, we have to calculate a dimension index for each dimension of financial inclusion. A weight

wi, where wi is between 0 and 1, is added to the dimension i demonstrating the relative

significance of the dimension i with respect to other dimensions, in measuring the inclusiveness

of region.

A dimension index for the ith dimension, di, is calculated by the subsequent formula:

where,

wi = Weight for dimension i, wi is between 0 and 1

Pi = Specific value of dimension i

mi = lower boundary for dimension i, taken as the observed minimum for dimension i

Mi = upper boundary for dimension i, taken as the empirical 94th quantile for dimension i



The above formula ensures that 0 ≤ di ≤ wi. A greater value of di indicates higher achievement

by a region in dimension i. For r dimensions of financial inclusion, a state will correspond to a

point D = (d1, d2, d3, ….dr) on the r-dimensional Cartesian space. In the r-dimensional space,

the point O = (0, 0, 0,…0) corresponds to the point representing the worst scenario while the

point W = (w1, w2, …..wr) corresponds to the highest achievement in all dimensions.

The distance of a point D = (d1, d2, d3, ….dr) from the worst point O and best possible point W

determines the value of the corresponding IFI value for a state. Greater the distance between D

and O, higher is the financial inclusion. Also, smaller the distance between D and W, higher is

the financial inclusion. Two points in the r-dimensional space can be at the same distance from

O but different distances from W and vice versa.

So, two states can have their index points at same distance from either O or W but at

different distances from the other point. If the index points of two states have the same distance

from O but different distance from I, then the state with the point nearer to W is more financially

inclusive whereas if the index points are at same distance from W but at different distance from

O, then the state with the point farther from O has greater financial inclusion. Thus, to account

for the distances, we take a simple average of the normalized Euclidian distance between D and

O and the normalized inverse Euclidian distance between D and W. While calculating the

average, we use the inverse Euclidian distance between D and W to ensure that the value lies

between 0 and 1.

The formulae used are:

In this study, we consider three dimensions for evaluating the extent of financial inclusion:

banking penetration to measure accessibility, availability of banking services and usage of

banking services.

Dimension I – Banking Penetration

One of the major requirements for a financial system to be inclusive is to have as many

consumers as possible. Ideally, in an inclusive financial system, the entire population must be

banked. Thus, the extent of the banked population is a degree of the banking penetration of the



financial system. This implies that the value of this dimension would be 1 if every person in the

economy has a bank account. As the information on the number of banked people is not

available, we use the number of deposit bank accounts per total population as the parameter for

this dimension.

Dimension II – Availability

For a financial system to be inclusive, users should have easy availability of financial services.

Availability is basically measured in terms of banking outlets which include bank offices,

branches, ATMs, banking personnel etc. We have used three parameters to evaluate the

availability dimension. Firstly, the major parameter for availability of banking services is the

number of bank branches. Nowadays, ATMs have also started to play a important role in the

financial sector of India. In India, another concept has been introduced in the banking system

which is known as Banking Correspondent (BC) model. The Business Correspondent model

allows the rural population to have access to the banking services through a network of third

party agents.

We use five parameters for the computation of the availability dimension: number of

bank branches per 10,000 population (Parameter 1), number of branches per square km

(Parameter 2), number of ATMs per 10,000 population (Parameter 3), number of ATMs per

square km (Parameter 4) and number of Banking Correspondents (BCs) per 10,000 population

(Parameter 5). Thus, five separate indexes are first calculated, one for each of the five

parameters. A weighted average of these five indexes, using 0.3 weight for parameter 1 and 2,

0.175 weight for parameter 3 and 4 and 0.05 weight for parameter 5 is considered as the index

for the availability dimension. Realizing the importance of bank branches over ATMs, the two

branch parameters have been giver higher weight than the ATM parameters. Also, as the

concept of Business Correspondents is relatively very new, the BC parameter has been given

the lowest weight. Although many studies mention that the number of staff per customer can

also be an important indicator while computing availability of banking services but we think that

perhaps in the era of technology, number of staff does not matter.

Dimension III – Usage

Kempson et al (2004) observed that a lot of individuals with bank accounts in some apparently

very highly banked countries make very little use of financial services. The usage dimension

covers these marginally banked people. Thus, although the population may be banked but if the

banking services are adequately utilized, the financial system cannot be completely inclusive.

The usage of the services can be in various forms such as deposit, credit, remittances, transfers

etc. Due to unavailability of data, to calculate the usage dimension, we take into account two

basic services of the banking system – outstanding credit and deposit. Thus, we use the volume



of outstanding deposit and credit as proportion of the Gross State Domestic Product (GSDP) to

determine this dimension.

As all the three dimensions considered here are equally important for an inclusive financial

system, we assign an equal weight to all the dimensions such that wi = 1. Although, it can be

argued that for the availability dimension, with the advent of technology, some countries might

have moved towards internet banking and mobile banking thus an analysis developed on just on

physical outlets can give an incomplete picture of the availability of banking services. But, for

India, we believe that still physical bank outlets are the major provider of banking services.

Therefore, the formulae can now be written as

With the three mentioned dimensions – penetration, availability and usage – we can represent a

state by any point P (p1, p2, p3) in the three dimensional Cartesian space, where p1, p2 and p3

denote the dimension indexes for that state. In the three dimensional Cartesian space, the point

(0, 0, 0) indicates the worst scenario i.e. zero financial inclusion and the point (1, 1, 1) indicates

ideal situation i.e. total financial inclusion.

ANALYSIS AND RESULTS

The Index for Financial Inclusion was calculated for 6 Regions and 28 States using the data on

all three dimensions (penetration, availability and usage). Depending on the value of the IFI, the

respective regions and states are placed in one of the following three categories:

1. 0.7 ≤ IFI ≤ 1 – High financial inclusion

2. 0.3 ≤ IFI < 0.7 – Medium financial inclusion

3. 0.0 ≤ IFI < 0.3 – Low financial inclusion



Table 2: IFI for Regions and States of India

Region/ State Index for Financial Inclusion Rank

Region

High Financial Inclusion (0.7 ≤ IFI ≤ 1)

Northern Region 0.7802 1

Southern Region 0.7677 2

Western Region 0.7477 3

Medium Financial Inclusion (0.3 ≤ IFI < 0.7)

Low Financial Inclusion (0.0 ≤ IFI < 0.3)

Eastern Region 0.2283 4

Central Region 0.2202 5

North-Eastern Region 0.005 6

State

High Financial Inclusion (0.7 ≤ IFI ≤ 1)

Goa 0.9843 1

Punjab 0.9415 2

Kerala 0.875 3

Tamil Nadu 0.8404 4

Karnataka 0.7971 5

Haryana 0.7065 6

Medium Financial Inclusion (0.3 ≤ IFI < 0.7)

Maharashtra 0.6891 7

Andhra Pradesh 0.6801 8

West Bengal 0.6005 9

Himachal Pradesh 0.5968 10

Uttarakhand 0.5575 11

Jammu & Kashmir 0.5026 12

Gujarat 0.4772 13

Uttar Pradesh 0.4393 14

Sikkim 0.4068 15

Odisha 0.3611 16

Jharkhand 0.3207 17

Madhya Pradesh 0.3165 18

Tripura 0.3102 19

Low Financial Inclusion (0.0 ≤ IFI < 0.3)

Meghalaya 0.2872 20

Assam 0.2528 21

Chhattisgarh 0.2442 22

Rajasthan 0.2424 23

Bihar 0.2259 24

Arunachal Pradesh 0.2154 25

Mizoram 0.1902 26

Nagaland 0.104 27

Manipur 0.0202 28



Region-wise, we find that Northern Region has the highest level of financial inclusion while the

North-Eastern Region has performed poorly. This can be attributed to the mountainous terrain

and low levels of development in the North-Eastern parts of India. Also, the Eastern Region and

the Central Region come under low financial inclusion category which can be related to the low

levels of growth and various socio-economic problems faced by these regions.

Among the states, Goa, Punjab and Kerala have shown impressive results with respect

to financial inclusiveness. It can be observed that the states falling under high financial inclusion

are the states having high GDP per capita and good Human Development Index. Also, as

expected, most of the north-eastern states fall under low financial inclusion category. The states

of Bihar, Chhattisgarh and Rajasthan also come under low financial inclusion owing to the social

backwardness and slow economic progress in these states.

Relationship between IFI and HDI

A comparison of index of financial inclusion (IFI) with human development index (HDI) for 21

Indian states has been presented along with their ranks. Human Development Index for the

states has been taken from India Human Development Report 2011. For the calculation of HDI,

three indices have been considered which are income index, education index and health index.

Table 3: Comparison between IFI and HDI

State Index of Financial Inclusion Human Development Index

Value Rank Value Rank

Goa 0.9843 1 0.6170 3

Punjab 0.9415 2 0.6050 4

Kerala 0.8750 3 0.7900 1

Tamil Nadu 0.8404 4 0.5700 6

Karnataka 0.7971 5 0.5190 10

Haryana 0.7065 6 0.5520 7

Maharashtra 0.6891 7 0.5720 5

Andhra Pradesh 0.6801 8 0.4730 13

West Bengal 0.6005 9 0.4920 11

Himachal Pradesh 0.5968 10 0.6520 2

Uttarakhand 0.5575 11 0.4900 12

Jammu & Kashmir 0.5026 12 0.5290 8

Gujarat 0.4772 13 0.5270 9

Uttar Pradesh 0.4393 14 0.3800 16

Odisha 0.3611 15 0.3620 20

Jharkhand 0.3207 16 0.3760 17

Madhya Pradesh 0.3165 17 0.3750 18

Assam 0.2528 18 0.4440 14

Chhattisgarh 0.2442 19 0.3580 21

Rajasthan 0.2424 20 0.4340 15

Bihar 0.2259 21 0.3670 19



Observations

IFI and HDI for the set of 21 Indian states seem to move in the same direction and closely with

each other. It is supplemented statistically by the fact that the correlation coefficient between IFI

and HDI values and ranks was calculated to be 0.81 and 0.84 respectively implying significant

positive correlation between the two indices. This result shows that states with high level of

human development are also the states with relatively high level of financial inclusion and vice

versa.

The states of Goa, Punjab, Kerala and Tamil Nadu which rank the best in financial

inclusion are also found to have high human development index. Furthermore, the states of

Jharkhand, Madhya Pradesh, Chhattisgarh and Bihar which are among the lowest on index of

financial inclusion, perform poorly on human development index as well.

On one hand, states such as Maharashtra, Jammu and Kashmir, Gujarat and Assam have

relatively higher levels of human development as compared to their levels of financial inclusion.

On the other hand, there are states such as Haryana, West Bengal, Uttarakhand and Uttar

Pradesh that perform relatively better in financial inclusion than in human development.

The states of Karnataka, Andhra Pradesh, Himachal Pradesh, Odisha and Rajasthan do not

demonstrate a consistent relationship between IFI and HDI. Karnataka, Andhra Pradesh and

Odisha have relatively higher index of financial inclusion when compared to their corresponding

levels of human development. On the contrary, Himachal Pradesh and Rajasthan display better

levels of human development than financial inclusion.

Talking about the case of Karnataka, Bangalore has developed as a major services

industry hub especially in information technology services sector. This might have led to a

drastic increase in the total volume of credits and deposits. The increase in deposits must have

had a substantial effect on GDP as well. Since, the GDP calculation takes into account only

savings and not credit and many other factors also, the final proportion of Karnataka for usage

dimension of IFI increases. This ultimately leads to Karnataka gaining the highest index for the

usage dimension and 5th rank in the overall IFI index. Karnataka performs average in income

index and above average in education index and health index. Karnataka performs average on

the HDI levels which is evident from its 10th Rank among the Indian states. Similarly, in Andhra

Pradesh, Hyderabad and Vishakhapatnam have come up as major industrial centres and

Hyderabad is also a major hub of IT industry. As described earlier, this explains the high rank in

the usage dimension. Andhra Pradesh also performs well in banking penetration and thus

performs moderately good on the IFI index (8th rank). It performs average in all the indices of

HDI and has maintained the same HDI rank (13th rank) in 2008 as in 2000. Odisha has not

performed well either in HDI or in financial inclusion. It has demonstrated below average

performance in all the dimensions of IFI and is poor on income and health index of HDI as well.



Although Himachal Pradesh performs moderately well on banking penetration, its IFI is pretty

low. Its mountainous terrain can be the major reason behind its average performance on the

availability dimension of IFI. Also, because of geographical constraints, not much industrial

development has taken place in the state which may have led to the poor performance in the

usage dimension. As far as HDI is concerned, it performs very well on all the three human

development indices and that is why Himachal Pradesh is ranked 2nd on HDI. Rajasthan fares

very poor on the financial inclusion index and below average on HDI as well. Its desert terrain

might have contributed to its low score on the availability and usage dimension.

CONCLUSION

In this paper, we have computed the state-wise and region-wise Index of Financial Inclusion for

India. With the help of the constructed IFI, we have been able to examine the extent of financial

inclusion across different Indian states and regions. Goa, Punjab and Kerala were the top three

ranked states on the index of financial inclusion. We observe that there is a positive relationship

between financial inclusion and economic prosperity of a region or a state. The geographical

and socio-cultural factors also have an effect on the extent of financial inclusion.

From our quantitative analysis, we infer that index of financial inclusion and human

development index are positively correlated to each other. States such as Goa, Punjab, Kerala

and Tamil Nadu which were high on IFI were found to be doing well on HDI as well.

Furthermore, the states of Madhya Pradesh, Chhattisgarh and Bihar which performed poorly on

financial inclusion, ranked low on human development index as well. Till now, the cause of

promoting financial inclusion has majorly been the responsibility of Reserve Bank of India and

Ministry of Finance, Government of India. As from this study, we realize that there is a strong

positive relationship between financial inclusion and human development, the Government of

India should put in a coordinated effort towards encouraging financial inclusion. The policies

introduced in various sectors like health, education, income and infrastructure should also

include financial inclusion as one of their objectives. The policy makers should incorporate

financial inclusion in the bigger objective of economic and social development of the citizens of

the country.

We observe that although India has registered enormous growth especially in the last

couple of decades, the effects of this growth have not percolated down to the poor and

underprivileged sections of our society. One of the major reasons for this is the lack of adequate

and safe banking facilities to these groups. While India has made continuous efforts towards

greater financial inclusion, there is still a long way to go. The financial system in India has

grown rapidly in the last three decades. However, the data still shows that there is exclusion and



that the poorer sections of the society do not have adequate access to financial services from

the organized financial system.

Financial inclusion will pull individuals out of dismal poverty conditions and lead to their

social as well as economic development. There is a need for a coordinated endeavor by the

Government, banks, Micro-finance institutions and NGOs to facilitate access to financial

services amongst the low-income and less aware groups of the society. Financial access to

everyone will open new opportunities for enterprises to grow which will attract more global

organizations to our country. It will not only lead be a boost for the gross domestic product of

the country but will also lead to an improvement in the standard of living of the citizens.

Financial inclusion will lead to inclusive growth and thereby allow more people to participate

effectively in the economic and social progress of the country. India needs to travel on the path

of financial inclusion on its way towards becoming a global superpower.

In this study, we have not been able to quantify various initiatives taken by Reserve

Bank of India and Government of India due to inadequacy of data. Some new technological

advances in banking sector such as mobile banking and internet banking could not be included

in our empirical analyses due to unavailability of relevant data. Information on various

parameters such as affordability, timeliness and quality of banking services is also not

obtainable. The Gross State Domestic Product of Lakshadweep, Daman & Diu and Dadra &

Nagar Haveli could not be included in the total Gross Domestic Product of their respective

Regions as it has not been declared by the governments of these union territories in the recent

years. Also, the relationship between IFI and HDI could be investigated for only 21 states out of

a total of 28 states as the HDI for only 21 major states was computed in the India Human

Development Report 2011.

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APPENDIX

Dimension I - Banking Penetration Table 4: Data for Dimension I

Region/ State No. of Deposit Accounts Population

NORTHERN REGION 132,530,278 158,891,685

Chandigarh 2,457,216 1,054,686

Delhi 30,920,716 16,753,235

Haryana 21,452,633 25,353,081

Himachal Pradesh 6,640,304 6,856,509

Jammu & Kashmir 9,099,470 12,548,926

Punjab 29,961,307 27,704,236

Rajasthan 31,998,632 68,621,012

NORTH-EASTERN REGION 20,509,126 44,980,294

Arunachal Pradesh 667,235 1,382,611

Assam 14,729,086 31,169,272

Manipur 700,539 2,721,756

Meghalaya 1,204,583 2,964,007

Mizoram 411,568 1,091,014

Nagaland 648,501 1,980,602

Tripura 2,147,614 3,671,032

EASTERN REGION 129,144,629 271,053,601

Andaman & Nicobar Island 318,201 379,944

Bihar 33,758,144 103,804,637

Jharkhand 15,951,505 32,966,238

Orissa 22,260,468 41,947,358

Sikkim 390,470 607,688

West Bengal 56,465,841 91,347,736

CENTRAL REGION 171,024,982 307,835,990

Chhattisgarh 11,215,598 25,540,196

Madhya Pradesh 35,066,520 72,597,565

Uttar Pradesh 116,258,080 199,581,477

Uttarakhand 8,484,784 10,116,752

WESTERN REGION 131,932,356 174,800,087

Dadra & Nagar Haveli 286,419 342,853

Daman & Diu 256,811 242,911

Goa 3,619,735 1,457,723

Gujarat 42,418,349 60,383,628

Maharashtra 85,351,042 112,372,972

SOUTHERN REGION 224,987,982 252,621,765

Andhra Pradesh 73,614,383 84,655,533

Karnataka 53,580,133 61,130,704

Kerala 33,860,495 33,387,677

Lakshadweep 61,203 64,429

Puducherry 1,368,486 1,244,464

Tamil Nadu 62,503,282 72,138,958

Source:No. of Deposit Accounts (as on March 2011): Reserve Bank of India Population: Census of India, 2011 Table 5: Calculation of Dimension I:

Region/ State Total Accounts/ Population Dimension I

Region

Central Region 0.5556 0.2292

Eastern Region 0.4765 0.0472

North-Eastern Region 0.4560 0

Northern Region 0.8341 0.8700

Southern Region 0.8906 1

Western Region 0.7548 0.6875

State

Andhra Pradesh 0.8696 0.8089

Arunachal Pradesh 0.4826 0.2976

Assam 0.4726 0.2844



Bihar 0.3252 0.0896

Chhattisgarh 0.4391 0.2401

Goa 2.4831 1

Gujarat 0.7025 0.5881

Haryana 0.8462 0.7780

Himachal Pradesh 0.9685 0.9396

Jammu & Kashmir 0.7251 0.6180

Jharkhand 0.4839 0.2993

Karnataka 0.8765 0.8180

Kerala 1.0142 1

Madhya Pradesh 0.4830 0.2981

Maharashtra 0.7595 0.6635

Manipur 0.2574 0

Meghalaya 0.4064 0.1969

Mizoram 0.3772 0.1583

Nagaland 0.3274 0.0925

Odisha 0.5307 0.3611

Punjab 1.0815 1

Rajasthan 0.4663 0.2760

Sikkim 0.6426 0.5090

Tamil Nadu 0.8664 0.8047

Tripura 0.5850 0.4329

Uttar Pradesh 0.5825 0.4296

Uttarakhand 0.8387 0.7681

West Bengal 0.6181 0.4766

Dimension II - Availability of Banking Services Table 6: Data for Dimension II

Region/ State/ Union Territory

Population

Number of Branches of Scheduled Commercial Banks (as on March 2012)

Number of branches of SCBs per 10,000 population (Parameter 1)

Area (per square km.)

Number of branches of SCBs per square km (Parameter 2)

NORTHERN REGION

158,891,685 16,926 1.0653 716,319 0.0236

Chandigarh 1,054,686 296 2.8065 114 2.5965

Delhi 16,753,235 2,665 1.5907 1,483 1.7970

Haryana 25,353,081 2,882 1.1367 44,212 0.0652

Himachal Pradesh 6,856,509 1,137 1.6583 55,673 0.0204

Jammu & Kashmir 12,548,926 1,077 0.8582 222,236 0.0048

Punjab 27,704,236 4,132 1.4915 50,362 0.0820

Rajasthan 68,621,012 4,737 0.6903 342,239 0.0138

NORTH-EASTERN REGION

44,980,294 2,442 0.5429 255,089 0.0096

Arunachal Pradesh

1,382,611 91 0.6582 83,743 0.0011

Assam 31,169,272 1,574 0.5050 78,438 0.0201

Manipur 2,721,756 87 0.3196 22,327 0.0039

Meghalaya 2,964,007 231 0.7794 22,429 0.0103

Mizoram 1,091,014 104 0.9532 21,081 0.0049

Nagaland 1,980,602 99 0.4998 16,579 0.0060

Tripura 3,671,032 257 0.7001 10,492 0.0245

EASTERN REGION

271,053,601 15,746 0.5809 433,681 0.0363

Andaman & Nicobar Island

379,944 45 1.1844 8,249 0.0055

Bihar 103,804,637 4,503 0.4338 94,163 0.0478

Jharkhand 32,966,238 2,118 0.6425 79,714 0.0266

Odisha 41,947,358 3,196 0.7619 155,707 0.0205

Sikkim 607,688 88 1.4481 7,096 0.0124

West Bengal 91,347,736 5,796 0.6345 88,752 0.0653



CENTRAL REGION

307,835,990 19,092 0.6202 737,847 0.0259

Chhattisgarh 25,540,196 1,522 0.5959 135,191 0.0113

Madhya Pradesh 72,597,565 4,600 0.6336 308,245 0.0149

Uttar Pradesh 199,581,477 11,567 0.5796 240,928 0.0480

Uttarakhand 10,116,752 1,403 1.3868 53,483 0.0262

WESTERN REGION

174,800,087 14,886 0.8516 508,042 0.0293

Dadra & Nagar Haveli

342,853 40 1.1667 491 0.0815

Daman & Diu 242,911 32 1.3174 112 0.2857

Goa 1,457,723 482 3.3065 3,702 0.1302

Gujarat 60,383,628 5,279 0.8742 196,024 0.0269

Maharashtra 112,372,972 9,053 0.8056 307,713 0.0294

SOUTHERN REGION

252,621,765 26,966 1.0674 636,268 0.0424

Andhra Pradesh 84,655,533 7,947 0.9387 275,045 0.0289

Karnataka 61,130,704 6,810 1.1140 191,791 0.0355

Kerala 33,387,677 4,783 1.4326 38,863 0.1231

Lakshadweep 64,429 12 1.8625 32 0.3750

Puducherry 1,244,464 161 1.2937 479 0.3361

Tamil Nadu 72,138,958 7,253 1.0054 130,058 0.0558

Source: Population: Census of India, 2011 State-wise Number of Branches of Scheduled Commercial Banks: Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, Reserve Bank of India, March 2012 Area : Official website of Census of India, Official Websites of the State Governments, Report on Comparative Statistics of States by the Government of Andhra Pradesh Table 7: Data for Dimension II


Population Number of ATMs (as on March 2012)

Number of ATMs per 10,000 population (Parameter 3)

Area (per square km.)

Number of ATMs per square km. (Parameter 4)

NORTHERN REGION 158,891,685 18,557 1.1679 716,319 0.0259

Chandigarh 1,054,686 605 5.7363 114 5.3070

Delhi 16,753,235 6,108 3.6459 1,483 4.1187

Haryana 25,353,081 3,016 1.1896 44,212 0.0682

Himachal Pradesh 6,856,509 630 0.9188 55,673 0.0113

Jammu & Kashmir 12,548,926 893 0.7116 222,236 0.0040

Punjab 27,704,236 3,607 1.3020 50,362 0.0716

Rajasthan 68,621,012 3,698 0.5389 342,239 0.0108


44,980,294 2,086 0.4638 255,089 0.0082

Arunachal Pradesh 1,382,611 71 0.5135 83,743 0.0008

Assam 31,169,272 1,531 0.4912 78,438 0.0195

Manipur 2,721,756 71 0.2609 22,327 0.0032

Meghalaya 2,964,007 154 0.5196 22,429 0.0069

Mizoram 1,091,014 50 0.4583 21,081 0.0024

Nagaland 1,980,602 78 0.3938 16,579 0.0047

Tripura 3,671,032 131 0.3568 10,492 0.0125

EASTERN REGION 271,053,601 11,123 0.4104 433,681 0.0256


379,944 56 1.4739 8,249 0.0068

Bihar 103,804,637 2,291 0.2207 94,163 0.0243

Jharkhand 32,966,238 1,307 0.3965 79,714 0.0164

Odisha 41,947,358 2,555 0.6091 155,707 0.0164

Sikkim 607,688 75 1.2342 7,096 0.0106

West Bengal 91,347,736 4,839 0.5297 88,752 0.0545

CENTRAL REGION 307,835,990 14,207 0.4615 737,847 0.0193

Chhattisgarh 25,540,196 1,360 0.5325 135,191 0.0101

Madhya Pradesh 72,597,565 3,786 0.5215 308,245 0.0123

Uttar Pradesh 199,581,477 8,016 0.4016 240,928 0.0333

Uttarakhand 10,116,752 1,045 1.0329 53,483 0.0195

WESTERN REGION 174,800,087 17,837 1.0204 508,042 0.0351

Dadra & Nagar Haveli 342,853 51 1.4875 491 0.1039

Daman & Diu 242,911 59 2.4289 112 0.5268

Goa 1,457,723 541 3.7113 3,702 0.1461



Gujarat 60,383,628 5,473 0.9064 196,024 0.0279

Maharashtra 112,372,972 11,713 1.0423 307,713 0.0381

SOUTHERN REGION 252,621,765 31,876 1.2618 636,268 0.0501

Andhra Pradesh 84,655,533 8,753 1.0340 275,045 0.0318

Karnataka 61,130,704 8,180 1.3381 191,791 0.0427

Kerala 33,387,677 4,485 1.3433 38,863 0.1154

Lakshadweep 64,429 9 1.3969 32 0.2813

Puducherry 1,244,464 315 2.5312 479 0.6576

Tamil Nadu 72,138,958 10,134 1.4048 130,058 0.0779

Source: State-wise Number of ATMs: Quarterly Statistics by Reserve Bank of India, March 2012 Table 8: Data for Dimension II


Population Number of Business Correspondents (as on March 2012)

Number of BCs per 10,000 population (Parameter 5)

NORTHERN REGION 158,891,685 6,604 0.4156

Chandigarh 1,054,686 0 0

Delhi 16,753,235 84 0.0501

Haryana 25,353,081 1,727 0.6812

Himachal Pradesh 6,856,509 41 0.0598

Jammu & Kashmir 12,548,926 618 0.4925

Punjab 27,704,236 1,355 0.4891

Rajasthan 68,621,012 2,779 0.4050


44,980,294 1,238 0.2752

Arunachal Pradesh 1,382,611 4 0.0289

Assam 31,169,272 629 0.2018

Manipur 2,721,756 95 0.3490

Meghalaya 2,964,007 12 0.0405

Mizoram 1,091,014 11 0.1008

Nagaland 1,980,602 73 0.3686

Tripura 3,671,032 414 1.1277

EASTERN REGION 271,053,601 17,480 0.6449


379,944 9 0.2369

Bihar 103,804,637 7,097 0.6837

Jharkhand 32,966,238 1,487 0.4511

Odisha 41,947,358 1,738 0.4143

Sikkim 607,688 41 0.6747

West Bengal 91,347,736 7,108 0.7781

CENTRAL REGION 307,835,990 16,895 0.5488

Chhattisgarh 25,540,196 802 0.3140

Madhya Pradesh 72,597,565 2,439 0.3360

Uttar Pradesh 199,581,477 13,452 0.6740

Uttarakhand 10,116,752 202 0.1997

WESTERN REGION 174,800,087 6,765 0.3870

Dadra & Nagar Haveli 342,853 23 0.6708

Daman & Diu 242,911 6 0.2470

Goa 1,457,723 36 0.2470

Gujarat 60,383,628 2,712 0.4491

Maharashtra 112,372,972 3,988 0.3549

SOUTHERN REGION 252,621,765 13,486 0.5338

Andhra Pradesh 84,655,533 6,262 0.7397

Karnataka 61,130,704 3,035 0.4965

Kerala 33,387,677 104 0.0311

Lakshadweep 64,429 0 0

Puducherry 1,244,464 34 0.2732

Tamil Nadu 72,138,958 4,051 0.5616

Source: State-wise Number of Business Correspondents: State-wise Financial Inclusion Progress, Reserve Bank of India, March 2012



Table 9: Calculation of Dimension II Region/ State Index for

Parameter 1 Index for Parameter 2

Index for Parameter 3



Dimension II

Region

Central Region 0.1474 0.4970 0.0600 0.2649 0.7401 0.2872

Eastern Region

0.0724 0.8140 0 0.4153 1 0.3886

North-Eastern Region

0 0 0.0627 0 0 0.0110

Northern Region

0.9960 0.4268 0.8897 0.4224 0.3798 0.6754

Southern Region

1 1 1 1 0.6995 0.9850

Western Region

0.5886 0.6006 0.7165 0.6420 0.3024 0.6096

State

Andhra Pradesh

0.5283 0.3436 0.7245 0.4021 1 0.5087

Arunachal Pradesh

0.2889 0 0.2608 0 0 0.1323

Assam 0.1582 0.2349 0.2410 0.2425 0.2432 0.2147

Bihar 0.0974 0.5773 0 0.3048 0.9212 0.3018

Chhattisgarh 0.2358 0.1261 0.2777 0.1206 0.4011 0.1983

Goa 1 1 1 1 0.3068 0.9653

Gujarat 0.4732 0.3189 0.6108 0.3515 0.5912 0.4356

Haryana 0.6972 0.7923 0.8631 0.8742 0.9177 0.7968

Himachal Pradesh

1 0.2386 0.6219 0.1362 0.0435 0.5064

Jammu & Kashmir

0.4596 0.0457 0.4373 0.0415 0.6522 0.2680

Jharkhand 0.2755 0.3152 0.1566 0.2023 0.5940 0.2697

Karnataka 0.6779 0.4252 0.9954 0.5435 0.6579 0.6331

Kerala 0.9497 1 1 1 0.0031 0.9351

Madhya Pradesh

0.2679 0.1706 0.2679 0.1492 0.4320 0.2261

Maharashtra 0.4147 0.3498 0.7319 0.4838 0.4586 0.4650

Manipur 0 0.0346 0.0358 0.0311 0.4503 0.0446

Meghalaya 0.3924 0.1137 0.2663 0.0791 0.0163 0.2131

Mizoram 0.5407 0.0470 0.2117 0.0208 0.1012 0.2221

Nagaland 0.1538 0.0606 0.1542 0.0506 0.4779 0.1241

Odisha 0.3774 0.2398 0.3460 0.2023 0.5422 0.3082

Punjab 1 1 0.9632 0.9183 0.6474 0.9616

Rajasthan 0.3163 0.1570 0.2834 0.1297 0.5291 0.2407

Sikkim 0.9630 0.1397 0.9028 0.1271 0.9086 0.5565

Tamil Nadu 0.5852 0.6761 1 1 0.7494 0.7659

Tripura 0.3247 0.2892 0.1212 0.1518 1 0.2819

Uttar Pradesh 0.2219 0.5797 0.1611 0.4215 0.9076 0.3878

Uttarakhand 0.9107 0.3103 0.7235 0.2425 0.2403 0.5474

West Bengal 0.2687 0.7936 0.2753 0.6965 1 0.5388

Dimension III – Usage Table 10: Data for Dimension III


Deposits (in Rs. billion)

Credit (in Rs. billion)

Deposits + Credit (in Rs. billion)

Gross State Domestic Product at Current Prices (in Rs. billion)

NORTHERN REGION

12874.61 11601.19 24475.80 14435.45

Chandigarh 399.96 454.47 854.43 234.87

Delhi 6863.38 6542.65 13406.03 3,107.36

Haryana 1467.03 1497.90 2964.93 3054.05

Himachal Pradesh 384.33 142.83 527.16 638.12

Jammu & Kashmir 495.77 169.85 665.62 653.44

Punjab 1744.33 1423.52 3167.85 2580.06

Rajasthan 1519.83 1369.96 2889.79 4167.55


1087.70 368.01 1455.71 2031.59

Arunachal Pradesh 61.19 13.76 74.95 108.59

Assam 674.55 251.71 926.26 1265.44

Manipur 42.35 12.74 55.09 104.10

Meghalaya 112.34 28.40 140.74 161.73

Mizoram 34.28 13.06 47.34 69.91

Nagaland 58.39 15.63 74.02 122.72

Tripura 104.61 32.70 137.31 199.10

EASTERN REGION 7399.13 3696.98 11096.11 11507.57


20.39 7.74 28.13 47.53

Bihar 1413.08 411.51 1824.59 2469.95

Jharkhand 889.21 298.99 1188.20 1421.65

Odisha 1254.20 588.46 1842.66 2158.99



Sikkim 41.47 13.28 54.75 86.16

West Bengal 3780.78 2376.99 6157.77 5323.29

CENTRAL REGION 7293.36 3450.85 10744.21 12223.68

Chhattisgarh 689.17 368.60 1057.77 1395.15

Madhya Pradesh 1689.53 965.72 2655.25 3096.87

Uttar Pradesh 4347.32 1914.48 6261.80 6790.07

Uttarakhand 567.35 202.06 769.41 941.59

WESTERN REGION

19401.50 16127.83 35529.33 18472.47

Goa 366.72 106.03 472.75 359.32

Gujarat 3061.13 2134.47 5195.60 6117.67

Maharashtra 15936.94 13878.27 29815.21 11995.48

SOUTHERN REGION

13685.18 12970.422 26655.60 21106.05

Andhra Pradesh 3468.00 3826.99 7294.99 6551.81

Karnataka 4117.24 2912.36 7029.60 4606.07

Kerala 2005.73 1515.26 3520.99 3152.06

Puducherry 76.72 54.96 131.68 142.99

Tamil Nadu 4011.82 4660.31 8672.13 6653.12

Source: Gross State Domestic Product: GSDP at Current Prices for 2011-12 (as on 01-08-2013) by Planning Commission Deposits and Credit (as on March 2012): Statistical Tables Relating to Banks in India 2011 - 2012 Note: The GSDP of Lakshadweep in Southern Region and of Daman and Diu & Dadra and Nagar Haveli in Western Region could not be included in the total Gross Domestic Product of the Regions as it has not been declared by the respective governments in the recent years. Table 11: Calculation of Dimension III

Region/ State Deposit + Credit/GSDP Dimension III Region Central Region 0.8790 0.1346 Eastern Region 0.9642 0.2053 North-Eastern Region 0.7165 0 Northern Region 1.6955 0.8112 Southern Region 1.2629 0.4528 Western Region 1.9234 1 State Andhra Pradesh 1.1134 0.7428 Arunachal Pradesh 0.6902 0.2047 Assam 0.7320 0.2578 Bihar 0.7387 0.2664 Chhattisgarh 0.7582 0.2911 Goa 1.3157 1 Gujarat 0.8493 0.4070 Haryana 0.9708 0.5615 Himachal Pradesh 0.8261 0.3775 Jammu & Kashmir 1.0186 0.6223 Jharkhand 0.8358 0.3898 Karnataka 1.5262 1 Kerala 1.1170 0.7474 Madhya Pradesh 0.8574 0.4173 Maharashtra 2.4855 1 Manipur 0.5292 0 Meghalaya 0.8702 0.4336 Mizoram 0.6772 0.1881 Nagaland 0.6032 0.0940 Odisha 0.8535 0.4123 Punjab 1.2278 0.8883 Rajasthan 0.6934 0.2088 Sikkim 0.6354 0.1351 Tamil Nadu 1.3035 0.9844 Tripura 0.6897 0.2040 Uttar Pradesh 0.9222 0.4997 Uttarakhand 0.8171 0.3661 West Bengal 1.1568 0.7979



Index of Financial Inclusion Table 12: Calculation of Index of Financial Inclusion

Region/ State Dimension I Dimension II Dimension III

Region

Central Region 0.2292 0.2872 0.1346

Eastern Region 0.0472 0.3886 0.2053

North-Eastern Region 0 0.0110 0

Northern Region 0.8700 0.6754 0.8112

Southern Region 1 0.9850 0.4528

Western Region 0.6875 0.6096 1

State

Andhra Pradesh 0.8089 0.5087 0.7428

Arunachal Pradesh 0.2976 0.1323 0.2047

Assam 0.2844 0.2147 0.2578

Bihar 0.0896 0.3018 0.2664

Chhattisgarh 0.2401 0.1983 0.2911

Goa 1 0.9653 1

Gujarat 0.5881 0.4356 0.4070

Haryana 0.7780 0.7968 0.5615

Himachal Pradesh 0.9396 0.5064 0.3775

Jammu & Kashmir 0.6180 0.2680 0.6223

Jharkhand 0.2993 0.2697 0.3898

Karnataka 0.8180 0.6331 1

Kerala 1 0.9351 0.7474

Madhya Pradesh 0.2981 0.2261 0.4173

Maharashtra 0.6635 0.4650 1

Manipur 0 0.0446 0

Meghalaya 0.1969 0.2131 0.4336

Mizoram 0.1583 0.2221 0.1881

Nagaland 0.0925 0.1241 0.0940

Odisha 0.3611 0.3082 0.4123

Punjab 1 0.9616 0.8883

Rajasthan 0.2760 0.2407 0.2088

Sikkim 0.5090 0.5565 0.1351

Tamil Nadu 0.8047 0.7659 0.9844

Tripura 0.4329 0.2819 0.2040

Uttar Pradesh 0.4296 0.3878 0.4997

Uttarakhand 0.7681 0.5474 0.3661

West Bengal 0.4766 0.5388 0.7979

Table 13: Calculation of Index of Financial Inclusion

Region/ State A1 A2 Index of Financial Inclusion Region

Central Region 0.2259 0.2145 0.2202

Eastern Region 0.2552 0.2014 0.2283

North-Eastern Region 0.0064 0.0037 0.0050

Northern Region 0.7897 0.7706 0.7802

Southern Region 0.8515 0.6840 0.7677

Western Region 0.7113 0.7841 0.7477

State

Andhra Pradesh 0.6988 0.6614 0.6801

Arunachal Pradesh 0.2221 0.2086 0.2154

Assam 0.2539 0.2517 0.2528

Bihar 0.2381 0.2138 0.2259

Chhattisgarh 0.2461 0.2422 0.2442

Goa 0.9886 0.9800 0.9843

Gujarat 0.4835 0.4709 0.4772

Haryana 0.7201 0.6929 0.7065

Himachal Pradesh 0.6537 0.5400 0.5968

Jammu & Kashmir 0.5295 0.4758 0.5026

Jharkhand 0.3237 0.3177 0.3207

Karnataka 0.8307 0.7635 0.7971

Kerala 0.9006 0.8494 0.8750

Madhya Pradesh 0.3236 0.3093 0.3165



Maharashtra 0.7431 0.6351 0.6891

Manipur 0.0257 0.0146 0.0202

Meghalaya 0.3012 0.2731 0.2872

Mizoram 0.1913 0.1891 0.1902

Nagaland 0.1046 0.1034 0.1040

Odisha 0.3630 0.3591 0.3611

Punjab 0.9511 0.9318 0.9415

Rajasthan 0.2434 0.2413 0.2424

Sikkim 0.4424 0.3713 0.4068

Tamil Nadu 0.8570 0.8238 0.8404

Tripura 0.3207 0.2998 0.3102

Uttar Pradesh 0.4415 0.4371 0.4393

Uttarakhand 0.5841 0.5308 0.5575

West Bengal 0.6202 0.5807 0.6005

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