A Comparative Study of Financial Inclusion & Digital Financial Inclusion in India in the wake of Demonetization and COVID-19 Pandemic

Abstract

Purpose: The Economic Growth of a country depends largely upon its financial sector which in turn depends upon how well it has reached to their citizens. The country where all the people are included in its formal financial sector or are part of it, would be on the path of inclusive growth. The term financial inclusion is what that helps a country in not only reducing the level of poverty by timely providing adequate and affordable financial services to all, but would also help in achieving sustained inclusive growth. Thus, financial inclusion plays an important role in country’s financial well-being. This study provides an insight on the current status of financial inclusion initiatives with special reference to the landmark policy Pradhan Mantri Jan Dhan Yojana(PMJDY). The study also examined the digitalisation of financial inclusion plans where digital technology is being used to further strengthens the financial inclusion success. In addition, the study also provides a glimpse of digital transaction during pre and post demonetization time period and evaluated how COVID-19 pandemic has affected this digitalisation process over pre and post pandemic situation. The study is based on the secondary data collected from published reports of RBI, NPCI, Digidhan dashboard, ACI Worldwide, articles, websites and reports submitted by different committees on digital transaction over different time periods. The objective of the study is to assess the current status of financial inclusion initiatives in India with special reference to PMJDY and to evaluate the impact of Demonetization and COVID-19 pandemic on financial inclusion by mediating digital financial inclusion.

Methodology: The current study is descriptive and analytical in nature for which the data has been collected from various secondary sources which includes published annual reports of Reserve Bank of India(RBI), Pradhan Mantri Jan Dhan Yojana(PMJDY), National Payments Council of India(NPCI) for different time periods pertaining to demonetization as well as COVID-19 and digitalisation. The data has also been extracted from various websites, journals and articles in newspapers, committee reports of financial regulatory authorities submitted to the Government of India on digital transactions and financial inclusion in pre and post demonetization and COVID-19 pandemic era.

Findings: It has been concluded that Government is making concerted efforts for cent percent financial inclusion that has resulted in increased number of ICT based transactions over a period of last 5 years. The dominance or the degree of concentration in public sector banks has been documented in the present study with a negligible role of private sector banks. While assessing the impact of demonetization and COVID-19 pandemic on various digital payment platforms, Prepaid payment instruments (PPIs) and BHIM Aadhaar pay are the most positively affected channels in these two different situations respectively.

Findings: Empirical Research Paper