Why India’s Financial Inclusion Journey Needs to Focus on Equity and Access to Credit

A decade ago, financial inclusion in India was largely about opening bank accounts. Today, it is about empowering individuals, businesses and communities with seamless access to credit, digital payments and social security. The numbers tell a compelling story—over 520mn Jan Dhan accounts, 12bn Unified Payments Interface (UPI) transactions per month and growing credit support for micro, small and medium enterprises (MSMEs) and farmers.

But does access alone translate to real empowerment? Are financial services reaching those who need them the most, in ways that truly improve their lives? India’s financial inclusion journey has been remarkable, but the next phase demands a deeper focus—not just on providing access, but on ensuring meaningful financial participation, security and long-term economic resilience. As the country moves toward its vision of becoming a developed economy by 2047, the challenge is no longer about bringing people into the formal financial system—it is about ensuring they actively benefit from it.

From Availability to Usage

The expansion of financial services has been a key driver of inclusion. Digital banking and fintech innovations have simplified access to loans, payments and investments, leading to a rapid increase in financial transactions. At the same time, formal credit availability has increased, with total bank credit to the services sector reaching Rs 48.5 lakh crore in November 2024, growing at 13% year-on-year.

Despite these achievements, ensuring active and sustained engagement with financial services remains crucial. While millions have access to bank accounts and digital payment systems, challenges such as financial awareness, credit constraints for small businesses and security concerns in digital transactions require ongoing attention.

Strengthening Credit Access

The role of financial services in supporting agriculture and MSMEs—two critical pillars of India’s economy—continues to expand. Recent policy measures aim to enhance credit accessibility for these sectors, ensuring sustainable growth and financial stability.

In the agricultural sector, platforms like the Kisan Rin Portal (KRP) have streamlined farm credit disbursements, processing over Rs 1.08 lakh crore in claims and benefiting 5.9 crore farmers as of December 2024. Additionally, the introduction of e-NWR-based financing, allowing farmers to leverage warehouse receipts for credit, is a step toward improving liquidity and financial flexibility.

For MSMEs, a revamp of the Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) has been a crucial step. With a Rs 9,000 crore infusion into the corpus, the scheme is expected to facilitate an additional Rs 2 lakh crore in credit at reduced interest rates. The credit limit for guarantee coverage was raised from Rs 2 crore to Rs 5 crore, and annual guarantee fees were reduced by 50%, making formal credit more accessible and affordable for small businesses.

In financial year 2023 alone, 11.65 lakh guarantees amounting to Rs 1 lakh crore were issued under the scheme. The government has also introduced special provisions to make it easier for Individual Micro Enterprises (IMEs) to avail credit under the existing guarantee framework.

Additionally, digital lending platforms, such as the Unified Lending Interface (ULI), are streamlining loan approvals and reducing barriers to finance for MSMEs. These initiatives collectively aim to bridge the credit gap, promote business expansion and enhance financial inclusion for small enterprises.

Keeping in Mind Women and Social Security

Targeted financial inclusion programmes have contributed to greater participation of women entrepreneurs and Self-Help Groups (SHGs) in the financial system. Initiatives such as the government’s support for SHGs in purchasing drones for agricultural rentals, which could generate Rs 1 lakh in additional annual earnings per SHG, reflect efforts to create sustainable income opportunities.

Additionally, women entrepreneurs benefit from 90% loan guarantees under the Credit Guarantee Scheme, compared to 75% for others. However, continued efforts in enhancing financial literacy, improving access to collateral-free loans and strengthening digital financial awareness can further accelerate women’s participation in economic activities.

Financial inclusion efforts have significantly improved access to banking and credit, yet pension penetration remains an area of focus. As of September 2024, only 5.3% of India’s total population was covered under National Pension System (NPS) and Atal Pension Yojana (APY). The integration of UPI-enabled micro-pension payments offers an opportunity to enhance participation in retirement savings schemes. Additionally, financial literacy programmes aimed at encouraging individuals, particularly informal sector workers, to contribute to pension schemes can help strengthen financial security in the long term.

Leveraging Technology

Technology has been a key enabler of financial inclusion, with UPI driving digital payments, AI-powered credit assessment expanding access to loans and digital lending platforms streamlining credit processes. At the same time, ensuring that technology remains inclusive, transparent and accessible to all is essential.            

The introduction of the Framework for Responsible and Ethical AI in Financial Services (FREE-AI) by the RBI is a step toward ensuring fair and transparent use of AI in financial decision-making. As India continues to advance its fintech capabilities, maintaining a balance between innovation and equitable access will be important in the next phase of financial inclusion.

India’s financial inclusion journey has been transformative, with significant progress made in expanding banking access, enabling digital transactions, and improving credit availability. Moving forward, ensuring deepened engagement, enhanced affordability and sustained financial security will be key priorities.

Strengthening credit availability for MSMEs, expanding pension coverage and ensuring responsible fintech adoption will shape the next phase of financial inclusion. As India advances toward its economic goals, a holistic approach—leveraging technology, policy support and financial literacy initiatives—will ensure that financial inclusion continues to drive economic empowerment and long-term prosperity.

The author is partner, financial services—business consulting, Grant Thornton Bharat. Views are personal.