Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Understanding the Disparity in Financial Inclusion across Indian States: A Comprehensive Index for the Period 1984 – 2016 – isec

Understanding the Disparity in Financial Inclusion across Indian States: A Comprehensive Index for the Period 1984 – 2016

Abstract

In this paper we have developed a new comprehensive index to study financial inclusion. We have expanded the range of financial institutions that are now being used for developing the financial inclusion index, by also subsuming the role of cooperatives, which are an integral part of the Indian financial structure. This is especially important for India as it is largely rural in nature and historically the cooperative system has played an important role in improving financial access. By doing so we are able to assess the relevance of the cooperative system in the current financial system. As of now the RBI follows commercial bank-led approach towards financial inclusion: we suggest that the Government should encourage existing financial agencies such as cooperative banks in order to improve financial inclusion in the excluded areas, especially in the rural sector.

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