Counting bank accounts isn’t real financial inclusion, economic freedom is: CEA | Today News

New Delhi: Economic growth is the most sustainable form of financial inclusion as it creates jobs, boosts incomes, and develops markets, India's chief economic advisor V. Anantha Nageswaran said on Tuesday.

Speaking at the global inclusive finance summit in the national capital, Nageswaran urged banks to treat borrowers emerging from government credit support schemes as regular customers. He also asked investors in inclusive finance institutions to accept lower returns in exchange for social impact. Inclusive finance refers to microfinance or lending to low-income individuals to help them start or expand small businesses.

Nageswaran argued that inclusive finance should not stop at merely access to credit, but facilitate the recipient’s upward mobility.

“We count the number of bank accounts, the number of loans disbursed and the number of mobile wallets activated. But inclusion, properly understood, is not an estimation, it is a journey. The real question is not whether people have entered the financial system, but whether finance is helping them move towards economic independence,” Nageswaran said.

He emphasized that inclusive finance ought to raise incomes, expand opportunities and reduce vulnerability. The ultimate objective is "purpose", not just participation, he said.

Citing the PM SVANidhi scheme for street vendors, Nageswaran said that after the covid-19 pandemic, the scheme restored liquidity, allowing vendors to not just recover but also expand, invest, and strengthen their livelihoods.

The poorest vendors used credit to invest in basic assets, transitioning from survival trading to more productive operations and escaping low-return activities. Under the scheme, loans aggregating to ₹16,115 crore have been issued, as per official data.

This demonstrates how inclusive finance can help people invest, grow, and escape low-productivity equilibrium, rather than merely smoothing consumption, Nageswaran added.

His suggestions about making sure financial inclusion enables the productive growth and independence of beneficiaries is significant, as improving 'last mile' access and quality inclusion through digital infrastructure is a government priority which was also highlighted during India’s G20 presidency in 2022-23.

Nageswaran, however, pointed out that financial inclusion that leads to indiscriminate lending destroys its purpose, resulting in stress and over-indebtedness rather than empowerment.

He said that inclusive finance institutions are intermediaries for the economically vulnerable and the entrepreneurial, and that true impact investing means explicitly pricing in social returns and accepting lower financial returns in exchange.

“That is not a weakness, that is the very definition of responsibility in this sector,” Nageswaran said.

“Inclusive finance institutions are not ordinary commercial lenders. They are intermediaries between capital markets and some of the most economically vulnerable yet entrepreneurial people in society that creates a moral and economic obligation,” he said.

He also said that mainstream banks must actively absorb the new proven borrowers such as the PM SVANidhi beneficiaries into their core portfolios, offering regular loans, insurance, and working capital lines, not just as scheme beneficiaries.

The scheme acts as a bridge between formal sector and informal sector by creating transaction records for millions of people who were previously invisible to the formal banking system. “That bridge must be used,” Nageswaran said.