India Must Move Beyond Financial Inclusion to Financial Maturity, Says FMI Study

PRNewswire
New Delhi [India], April 24: The Indian Institute of Management Udaipur (IIMU), through the JM Financial Centre for Financial Research, in collaboration with People Research on India's Consumer Economy (PRICE), today released the Financial Maturity Index (FMI): A Survey of Two States, presenting one of the most comprehensive empirical assessments of household financial capability in India. New evidence highlights gaps in financial capability, resilience, and decision-making across households.
Based on extensive fieldwork across Gujarat and Rajasthan, the study introduces a multidimensional framework that moves beyond traditional measures of financial inclusion to examine how households actually understand, manage, and act on financial decisions.
The study finds that while India has achieved substantial progress in expanding access to financial services, financial maturity remains uneven and constrained across multiple dimensions. A central insight is that financial participation does not necessarily translate into informed financial behaviour. Households continue to engage with financial systems despite significant gaps in understanding key concepts such as compounding, inflation, and risk-return trade-offs. This often leads to suboptimal decisions, including over-borrowing, misaligned investment choices, and reliance on informal advice.
Financial resilience remains limited, with a majority of households lacking adequate emergency buffers and relying on informal coping mechanisms during shocks. Even among insured households, limited understanding of policy terms reduces the effectiveness of insurance as a risk management tool. Household financial behaviour continues to exhibit a strong short-term orientation, with limited retirement planning and low participation in diversified financial instruments. While digital financial adoption has expanded significantly, its use remains largely transactional, with limited integration into broader financial planning and asset-building activities.
The study also identifies a dual pattern in investment behaviour. A large majority of households remain highly conservative, relying on traditional instruments such as bank deposits, gold, and real estate, while a small segment participates actively in equity markets, often with a short-term orientation. In addition, financial decision-making remains largely informal and infrequent, with limited reliance on professional advice and minimal periodic review of financial goals.
The Financial Maturity Index is constructed using primary survey data and advanced statistical techniques, including Principal Component Analysis, to generate a composite measure of financial capability across ten dimensions. The framework captures not only knowledge and access, but also behaviour, resilience, decision-making processes, and social context, providing a robust basis for policy and institutional intervention.
Addressing the gathering, Prof. Ashok Banerjee, Director, IIM Udaipur, noted that India's financial sector has reached an inflection point and that the next phase must focus on strengthening the quality of financial engagement. Presenting the study, Dr. Rajesh Shukla, Managing Director and Co-Founder, PRICE, emphasized the technical rigour of the Index, noting that it is built on rigorous primary research and statistically grounded methodology, enabling a shift toward more targeted and evidence-based policy design.
Delivering the keynote address, Dr. Ram Singh, Member, Monetary Policy Committee (RBI), observed that while financial inclusion has achieved near-saturation, financial awareness remains a binding constraint, with important implications for the effectiveness of monetary policy and its transmission to households. He highlighted that income and information independently shape financial behaviour and that gaps in understanding key concepts continue to limit informed decision-making.
In his address, Dr. Laveesh Bhandari, President and Senior Fellow, Centre for Social and Economic Progress, emphasized that financial behaviour is shaped not only by knowledge but also by social context, trust, and lived experience. He highlighted the importance of aligning financial products and policy frameworks with how households actually manage liquidity, risk, and financial obligations, and noted the continued relevance of informal and community-based financial systems.
The report concludes that financial maturity is the next critical frontier for India's financial sector. While inclusion has expanded access, improving outcomes will require a stronger focus on capability, behaviour, and institutional alignment.

About the Institutions
Indian Institute of Management Udaipur (IIMU)
The Indian Institute of Management Udaipur is a premier management institution established by the Government of India, known for its strong emphasis on research excellence, global academic engagement, and policy relevance. Through centres such as the JM Financial Centre for Financial Research, IIMU contributes to evidence-based policymaking in financial markets, inclusion, and economic development.
People Research on India's Consumer Economy (PRICE)
PRICE is a leading not-for-profit research organisation specialising in large-scale household surveys and analysis of India's consumer economy. Its work provides critical insights into income distribution, consumption behaviour, financial practices, and socio-economic transformation, and is widely used by policymakers, regulators, and industry leaders.
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