The Reserve Bank of India (RBI) has announced an initiative termed the National Strategy for Financial Inclusion (NSFI) slated for the period 2019-2024. This forward-thinking strategy is intended to bolster the digital financial services landscape across all Tier II to Tier VI centres in an effort to build the necessary infrastructure required for the transition into a less-cash society by March 2022.
Digital financial services are instrumental in driving economic growth and reducing poverty worldwide, hence the importance of the NSFI. It comes as a strategic step taken by RBI towards building a financially aware and empowered India.
Classification of Centres Based on Population
According to the 2011 Census,
| Tier | Population |
|---|---|
| I | 100,000 and above |
| II | 50,000 to 99,999 |
| III | 20,000 to 49,999 |
| IV | 10,000 to 19,999 |
| V | 5,000 to 9,999 |
| VI | Less than 5000 |
Vision and Objectives of the NSFI
The core objective of the NSFI is to facilitate access to financial services and educate users about the availability of various financial products and their features. The plan involves ensuring that by March 2020, every eligible adult enrolled under the Prime Minister Jan Dhan Yojana would have access to an insurance scheme and a pension scheme.
Furthermore, RBI aims to shift attitudes to promote the translation of knowledge into behaviour, enabling consumers to understand their responsibilities and rights as clients of financial services.
By March 2020, the RBI aimed to extend banking access to every village within a 5-km radius or hamlets with 500 households in hilly areas. The strategy also included ensuring that by March 2024, every adult could reach a financial service provider through a mobile device.
Identified Stakeholders
The NSFI identifies a list of stakeholders including financial consumers, financial market players such as banks and non-banking financial companies (NBFC), educational institutions, NGOs, financial sector regulators, both Central and State governments, and multilateral international players like OECD, G-20, etc.
Significance of the NSFI
The NSFI is significant because it necessitates steps to strengthen the digital financial services’ ecosystem. This includes raising awareness of digital modes of transactions, expanding acceptance infrastructure, and creating a safe environment that respects principles of consent and privacy.
In order to ensure its successful implementation, there is a need to build a sector-specific action plan to monitor targets and review progress. This needs to be accompanied by a robust regulatory and legal framework designed to protect customer interests, promote fair practices, and curb market manipulations.
Currently, financial inclusion policies target specific sectors like small and medium businesses, agriculture or certain regions like the aspirational districts. The NSFI envisions making the Public Credit Registry (PCR) fully operational by March 2022, allowing authorised financial entities to leverage it for assessing credit proposals from all citizens.
