India should shift financial inclusion focus to financial health: PwC-Dvara | Finance News
India’s financial inclusion efforts need to shift their focus from expanding access to formal financial services to improving households’ financial health, as wider account ownership has not necessarily translated into greater financial resilience, according to a joint report by PwC India and Dvara Research.
The report said that while India has made significant progress in expanding access to formal financial services over the past decade, access alone has not ensured improved financial well-being.
According to the report, the gap between financial access and meaningful outcomes stems from high levels of dormant bank accounts and stress in the microfinance sector.
“India’s financial inclusion story over the last decade has been remarkable, with dramatic expansion in account ownership and sustained growth in credit. Yet, evidence increasingly points to a gap between access and impact, as witnessed in high rates of dormant accounts and the ongoing NPA crisis in the microfinance industry,” the report said.
It added that “product ownership alone has not reliably translated into suitable use or improved financial lives.”
Based on a survey of 4,000 households sharing a kitchen across 18 districts in seven states, the report found that although greater financial access generally leads to higher usage of financial products, it does not necessarily improve households’ ability to withstand financial shocks.
“Access drives usage but not resilience,” the report said, noting that some groups with relatively modest access to formal finance, including farmers in southern and eastern India, reported stronger financial resilience than customer segments with greater access.
The report identified income volatility as one of the biggest impediments to financial health. Households with stable incomes and predictable expenses displayed stronger savings habits, smoother loan repayments, and greater confidence in meeting future financial needs. In contrast, daily wage earners, farmers, and small business owners remained financially vulnerable despite having access to formal financial services.
It also argued that informal finance should be viewed as complementary to formal finance rather than as a competing system. Partnerships with self-help groups, community lenders, and local intermediaries, it said, could deepen financial inclusion and improve repayment outcomes.
Vivek Belgavi, partner and leader, Financial Services Advisory at PwC India, said the focus should shift from expanding reach to improving outcomes.
“True inclusion must not only be measured by reach but also by whether financial services enable people to manage their day-to-day as well as future financial needs and improve their overall financial well-being,” he said.
Misha Sharma, lead at Dvara Research Foundation, said the study seeks to “shift the narrative from financial inclusion to financial health as the operative goal for financial inclusion”.
The report recommended that financial institutions measure customer resilience and the quality of product usage alongside traditional metrics such as customer acquisition and portfolio growth. It also called for financial products better aligned with household cash-flow patterns through flexible repayment schedules, episodic savings products, and pay-per-use insurance.
