How India compares on financial inclusion against other countries The central government’s diktat to open bank accounts for millions of new depositors and give overdrafts to them to push financial inclusion has drawn a lot of flak. But while we may cavil about the choice of method, there’s little doubt that India remains a vastly under-banked country. Also, what matters most for households is not opening deposit accounts, but access to credit. It’s in this regard that India’s track record is abysmal. Its household debt-to-GDP (gross domestic product) ratio, as the accompanying chart 1 from Citi Research shows, is a mere 8.9%, the lowest among its Asian peers. It could be argued, though, that India’s low level of per capita income is the reason for the low household debt. But then, as chart 2 shows, India’s household debt to household disposable income, too, is very low, at just 9%. Incidentally, the charts also show that debt levels in US households are now lower than for some Asian households. While households in some Asian countries have become over-leveraged, the data suggests that banks still have plenty of scope to increase personal lending in India.

Muntazir Alam

PGDM- 3rd sem