CFL project across India by FY24, says RBI Governor

The scaling up of Centre for Financial Literacy (CFL) project across the country at the block level by March 2024 is expected to enhance the effectiveness of community-led participatory approaches for greater financial literacy. This declaration was made by the RBI Governor, Shaktikanta Das, while addressing the inaugural session of ET financial inclusion summit in Mumbai on Thursday.

Further, recognising the importance of inculcating financial literacy concepts at a young age, one of the strategic goals of the National Strategy for Financial Education 2020-2025 (NSFE) is integrating financial literacy content in the curriculum for school children.

So far, 15 state educational boards have included modules on financial education in their school curriculum. These approaches are expected to strengthen financial education at the grass-roots level so as to realise the vision of creating a financially aware and empowered India as enunciated in the NSFE.

To measure the extent of financial inclusion in the country, the RBI has decided to construct and periodically publish a 'Financial Inclusion Index' (FI Index). The Index will have parameters across the three dimensions of financial inclusion viz., Access, Usage and Quality. Work on FI Index is underway and the Index will be published shortly by the RBI. Financial inclusion is a key driver of sustained and balanced economic growth which helps reduce income inequality and poverty.

"While we have made tremendous strides in this area over the years, the pandemic has created new challenges and complexities. The financial system will have a crucial role to fulfill the aspirations and needs of our economy on the mend. It is therefore befitting that a summit to deliberate on financial inclusion is being organised at this juncture and I commend the organizers for the same," the governor said.

Digital Financial Services

Taking this forward, the National Strategy for Financial Inclusion 2019-2024 (NSFI) and National Strategy for Financial Education 2020-20252 (NSFE) provide a road map for a coordinated approach towards financial inclusion, financial literacy and consumer protection.

The spread and reach of financial inclusion, the Governor said, has indeed been exponential in recent years.

The evolution and adoption of technology has led to massive improvement in deepening of digital financial services. The Jan Dhan, Aadhaar and Mobile (JAM) eco system has brought about a major shift in the universe of financial inclusion. Further, several initiatives have been taken for the creation of enabling digital infrastructure at the ground level so as to universalise digital payments in a convenient, safe, secure and affordable manner. Given the latent potential of harnessing value at the bottom of the pyramid, we have seen a plethora of players emerging in

the field, ranging from traditional banks, niche financial entities such as payments banks, small finance banks, micro finance institutions (MFIs) and promising fintech companies, he said.

The digital ID (Aadhaar) along with the proliferation of mobile phones with world class payment systems has addressed the first two challenges of access and usage to a large extent. The third challenge i.e. quality requires both demand and supply side interventions. Opening of Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts has enabled millions of Indians to have access to financial services, with a basic bouquet of financial products.

This has addressed the supply side issue to a considerable extent. The demand side interventions focused on creating awareness amongst the public. Financial literacy, customer protection and grievance redressal have become areas of focus for furthering sustainable financial inclusion. Setting up of National Centre for Financial Education (NCFE) by the Regulators and implementation of the Centre for Financial Literacy (CFL) project of RBI are two recent initiatives towards improving financial literacy.

As at May-end, 91 per cent of PPIs was in the form of Wallets and the rest in the form of Cards. instruments have become immensely popular for making small value payments.

The movement towards digital payments has also been facilitated by the introduction of fast payment systems, such as Immediate Payment Service (IMPS) and Unified Payment Interface (UPI), which provide immediate credit to beneficiaries and are available round the clock. The extent of digital penetration can be gauged from the fact that, each day on an average during June 2021, the payment systems in India processed more than 15 crore transactions amounting to nearly Rs 4.5 lakh crore per day. The UPI platform facilitating payment transactions through smartphones has revolutionised the payment landscape in India. UPI has witnessed over 280 crore transactions in June.

Globally, there has been lot of interest in UPI. Similarly, the Aadhaar enabled Payments System (AePS) facilitates fund transfers/payments and cash withdrawals through micro-ATMs and BCs using Aadhaar authentication. During the pandemic, cash transactions at BC outlets through micro-ATMs have witnessed significant surge with more than 94 crore transactions accounting for Rs 2.25 lakh crore during 2020-21.

One of the important components of the JAM trinity, Aadhaar, the world's largest initiative to provide biometric identity has facilitated financial inclusion through innovative digital platforms.

Aadhaar Payments Bridge (APB) System and PMJDY together have been instrumental in enabling an effective usage of available banking facilities, which came to the fore during the pandemic, with cash benefits under Pradhan Mantri Garib Kalyan Yojana being disbursed to these accounts.

As on date there are about 42.59 crore PMJDY account holders with more than 55 per cent account holders being women. The impact of the digital payment in DBT can be discerned from the fact that Rs 5.53 lakh crore was transferred digitally across 319 government schemes spread over 54 ministries during 2020-21.

Similarly, the Reserve Bank's pilot project in association with banks of making at least one district in each State/UT 100 per cent digitally enabled, which was rolled out in 2019, covering 42 districts, will facilitate greater access and usage of digital payments by the common man, he said.

As on March, banks have achieved a digital coverage of 95.9 per cent of individuals while the achievement for businesses stood at 89.8 per cent.

The SLBCs have been advised to give renewed focus and emphasis to ensure sustenance of the digital progress in these identified districts. Further, in order to promote 'universal access to financial services' under the NSFI, access to some form of banking outlet has been provided to 99.9 per cent of the targeted villages within a 5 km radius/hamlets with 500 households in hilly areas.

Digitally enabled/ covered individuals and businesses have been arrived at by considering eligible operative savings accounts and eligible operative current/ business accounts covered with at least one of the digital payment modes (ATM/ Debit cards, Net banking, Mobile banking, AEPS, UPI/ USSD, POS, QR).

In order to make the post-pandemic recovery more inclusive and sustainable, financial inclusion would continue to be our policy priority.

Considering the complementary role played by microfinance in bridging the gaps at the last mile, a consultative document for harmonising the regulatory frameworks for various regulated lenders in the microfinance space has been issued recently. The primary objective is to address the

concerns relating to over-indebtedness of microfinance borrowers; enable market mechanism to rationalise the interest rates; and empower the borrowers to make an informed decision by enhancing transparency of loan pricing, he said.