A Study On Multidimensional Financial Inclusion Index (FII) And Its Policy Implications

Abstract

The purpose of the study is to explore the level of financial inclusion in eastern Uttar Pradesh using two stage principal component approach (2S-PCA). PCA addresses issues of over fitting and under fitting observed in earlier studies. To fulfill the study primary data has been collected from the 15 districts of eastern Uttar Pradesh. For this purpose structured questionnaire has been framed. The study identified principal factors for banking penetration and estimated financial inclusion index (FII) based on respective weights of these factors obtained by second stage PCA. The results concluded that financial inclusion index of Varanasi is highest among these districts which is 64.72, followed by Gorakhpur (63.54), whereas the Jaunpur (42.86) and Faizabad (42.28) districts attained lowest values. The study established that districts with higher relative urban population performed better in FII ranking against districts having higher rural population. The financial inclusion improved in these districts, but digital literacy and espousal remains a challenge. The study suggested that use of secure information technology and digital platform can efficiently connect and include remote population into main frame. The study also suggests policy measures to promote financial inclusion. This research mainly contributes to existing literature by suggesting the policymakers in formulating suitable policies and directions to promote Financial Inclusion. It will augment the financial institutions and economy for better performance. It will empower traders, merchants and investors to take investment decisions due to smooth financial transaction system backed by multiple delivery channels.