Income related inequality in financial inclusion and role of banks: Evidence on financial exclusion in India

Abstract

This paper analyzes income related inequality in financial inclusion in India using a representative household level survey data, linked to State-level factors. It shows that (a) the extent of financial exclusion is quite severe among households across all income groups, (b) income related inequality in financial inclusion varies widely across sub-national regions in India, but it is quite high in most of the cases, (c) income related inequality in financial inclusion cannot be considered as synonymous to income inequality. A notable result is that greater availability of banking services fosters financial inclusion, particularly among the poor. This paper also provides estimates of the effects of various socio, economic and demographic characteristics of households on propensity of a household to use formal financial services, and compare that for rural and urban sectors.