The banking and financial services sector in India has been undergoing a two-fold supply-side transformation: a thrust on opening of bank accounts alongside Aadhar and Mobile linkage, and the accelerated integration of digital solutions within the core banking processes. The policy initiatives around opening of bank accounts have remarkably reduced the number of those with no bank account ownership: from more than 557 million in 2011 to 233 million in 2015 . Further, between FY 2015-16 and FY 2016-17, the number of digital transactions witnessed a 65% growth, due in part to the impulse provided by demonetisation. As these numbers testify, both these supply-side forces have the potential to impact a large fraction of the population, including low income households, and shape the financial inclusion discourse itself. However, although account ownership is an important first step to establish contact with the formal banking system, a subsequent measure of the successful integration of low income households into formal banking activity is the quality of bank account usage, as indicated by frequency of use, average ticket-size of transactions and the kind of products opted for by households and individuals.
Our survey from May 2016 to November 2016 of 25,000 individuals across rural Uttar Pradesh (a state that registered the highest number of accounts opened under the Government of India’s PMJDY scheme) and Delhi / NCR showed that 58% of the adult rural sample and 67% of the adult urban sample had bank accounts. Of those who had a bank account, however, over a third had not operated their accounts in last three months 3 and a fifth in the last six months. These numbers are significant from a low income segment perspective, given that 50% of rural households and 75% of urban households in the study sample fell below the poverty line for rural and urban areas as defined by the Rangarajan Committee.