With 1.57 bn accounts, 80% Indians save outside banks: World Bank

India’s adoption of Jan Dhan scheme as well as biometric Aadhaar cards-based account opening has led to a massive shrinkage of the gender gap in financial inclusion, the World Bank said in a report released late Thursday night. The Global Findex database collects data from across the world on how adults save, borrow, transact, and interact in the financial system. 

The report highlighted key victories for India such as a total account ownership of 80 per cent of the population in 2017, compared to just 53 per cent in 2014. Now, 83 per cent males and 77 per cent females have formal bank accounts, as shown in Chart 3. 

The increase in the number of bank accounts bodes well for the financial system as the dependence on informal and unorganised players reduces for both savings as well as credit. 

This year’s report focused on digital payments in a huge manner and pointed out that more than 36 per cent of account holding citizens has made digital transactions in their lives. Not just that, adopting digital payments has led to huge efficiencies in the public systems, which save money for the exchequer, the report claimed. 

“In India, the leakage of funds for pension payments dropped by 47 per cent (2.8 percentage points) when the payments were made through biometric smart cards rather than being handed out in cash,” it stated. 

When it comes to penetration of banking, the World Bank report showed that the world is no longer remote and if mobile phones can reach people, so can bank accounts. For instance, two-thirds of the world’s unbanked population uses a mobile phone, while the corresponding figure for India is 50 per cent. 

Even as a lot of Indian citizens have a bank account now, they are hardly using them. For instance, only one in five citizens saves money at a financial institution, while those who borrow through a financial institution are just 7 per cent of the population. This is troubling because the percentage of people borrowing through financial institution has come down by 2 per cent in the last six years instead of going up as Chart 2 shows. 


This is also mirrored in the plastic card's statistics. While debit cards are reaching a critical mass with almost one-third penetration in the country, credit cards lag behind at just 3 per cent penetration, as shown in Chart 1. 


“In India and Kenya, by contrast, less than half of account owners have a debit card, and among those who do, only about a third used it to make a direct purchase,” the report stated.  Meanwhile, digital payments are yet to pick up in a big way even though things have advanced since the launch of the Unified Payments Interface and Aadhaar-based direct transfers. The report showed that only 2 per cent of people have mobile wallets in the country, 3 per cent paid bills online in the past year, and just 16 per cent received digital payments, as seen in Chart 4. 


“Making or receiving digital payments is one important use of an account. Saving is another. But few people reported using their account for saving but not also for making or receiving digital payments in the past year,” the report said. 

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