RBI not sharing data on Financial Inclusion success
The Reserve Bank of India (RBI) released the Financial Inclusion (FI) Index for March 2022 “at 56.4 vis-à-vis 53.9 in March 2021, with growth witnessed across all the sub-indices” and also announced the Digital Payments Index for March 2022 at 349.30 as against 304.06 for September 2021. Unfortunately, in the absence of visibility into the sub-components, these indices mean little. It is time to replug an op-ed Laveesh Bhandari and I wrote in the Mint when the FI index was announced - The purpose of any data or index is to offer us pointers on moving ahead. For meaningful financial inclusion, we must have meaningful metrics in the public domain. We can only hope that the RBI steps up soon and begins release of more detailed data, with geographic and gender cuts.
In reply to a query in the Parliament, the Minister of State for Finance Mr. Karad recently said that 17.65% of PMJDY accounts are inoperative, down from 39.62% in 2017. Moreover, the PMJDY website shows that only 69% of the PMJDY accounts have RuPay debit cards issued, leaving 14.21 crore accounts still to be covered. Granular data helps identify for example locations or user segments with inoperative accounts, or with low linkage of RuPay, whether there is a gender-gap in access or operation and so on. Without a spotlight on such data, the factors restricting universal coverage and usage will remain unaddressed.
The need for more detailed data showed up again in our latest research from ICFI, where we looked at one of the challenges of direct benefit transfers - the role of biometric authentication failures in accessing cash benefits, which results in significant inconvenience and loss to the beneficiaries. A large share of the failures can be eliminated through improved training and monitoring, some investment in maintenance and superior scanning equipment, and grievance redressal mechanisms. Public accessibility of detailed data on failures on an ongoing basis is therefore critical to monitor the ongoing improvements and remaining gaps in a growing national service, the direct benefits transfers.
Meanwhile, all major public sector banks and private sector banks have now joined the Account Aggregator platform, enabling more than a billion accounts to the framework, as announced by Sahamati. The first analysis of the benefits of this new mode of data sharing with consent is already out by Finbox - 71 per cent of people choose the account aggregator to share data, compared to other options like uploading bank statements. There was also a 75% reduction in financial statement fraud. More such insights should come out as adoption increases, the glitches should also be registered openly and resolved.
On the digital payments front, UPI scales higher records, crossing 6 billion transactions in July, and is set to make its presence in more than 30 countries. NPCI is also working out the modalities for UPI-Rupay credit card linkage, to be operational within two months once RBI approves. As Raghu Mohan reports, while the UPI-RuPay credit card linkage is set to be a game changer in the landscape, there are serious issues to be resolved - has the zero MDR on UPI and small transactions impacted investment and competition in the digital payments ecosystem? He concludes, “had UPI been profitable for banks, they may have been able to settle for a lower MDR on RuPay credit cards. And RuPay could have taken the fight to Visa and MasterCard in a bigger way!”
Another unintended consequence of the government policy on banking shows up in AePS. The government mandate to roll out PMJDY was taken up by the public sector banks in full mission mode, but now the private sector seems to have moved into the last mile agent network, picking up the interchange fees. Anand Raman has a very insightful piece on the uneven playing field providing cash to rural India - "the economics of the crucial mechanism of making cash available in remote rural locations are unfavourable to those who are servicing it – the public sector banks." Here again, incentives need to be aligned.
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