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Budget 2023: How to improve financial inclusion and the digital ecosystem

Significant strides have been made in financial inclusion over the past nine years. It is expected that Budget 2023 will remove impediments to further expansion of the reach of banking services 

January 25, 2023 / 07:01 PM IST

In order to expand the usage of banking and financial services further, the government announced 75 digital banking units in the last Budget.
(Representative image)

In order to expand the usage of banking and financial services further, the government announced 75 digital banking units in the last Budget. (Representative image)

This government has been cued into financial inclusion, digitalisation and social welfare schemes from the very beginning of its term in office starting May 2014, with good results on the ground. Significant strides were made in improving access to banking as the Pradhan Mantri Jan-Dhan Yojna (PMJDY) accounts reached more than 400 million. This was complemented by the dramatic push in the adoption of retail digital payments, especially with the Unified Payments Interface (UPI) scaling record of over 74 billion transactions worth Rs 125.94 trillion in the calendar year 2022. The entire ecosystem has been transformed with the ongoing digitalisation, and the year ahead will see more changes as the account aggregator framework of the Open Network for Digital Commerce (ONDC) and the Open Credit Enablement Network (OCEN) kick in and initiatives from the National Payments Corporation of India (NPCI) enable payments on feature phones and offline mode to overcome connectivity challenges.

In order to expand the usage of banking and financial services further, the government announced 75 digital banking units in the last Budget. The service was dedicated to the nation on October 16, 2022. While this initiative will be taken forward this year too, there is a lot more that we are looking towards.

Digital Payments

First, digital payments lay a strong foundation for financial inclusion but have a long way to go to achieve greater penetration among the masses, especially in rural India. But on the retail digital payments front, the issue of subsidy and charges which remains to be resolved may constrain universal access and adoption.  On UPI specifically, while the Finance Ministry’s stand has been that UPI is a public good and must be free, the incentive given by the government is limited to RuPay debit cards and low-value BHIM-UPI person-to-merchant transactions. Earlier in January, the government had doubled budgetary support for the incentive scheme to Rs 2,600 crore from the outlay provided in 2021-22.