India’s digital public infrastructure has had a transformative effect on the country that goes far beyond inclusive finance, says a paper by the World Bank’s G20 Global Partnership for Financial Inclusion.

The paper, published on September 8, said the JAM trio (Jan Dhan, Aadhaar and Mobile) has increased the financial inclusion rate from 25 percent in 2008 to over 80 percent of adults in the last six years.

This document was prepared by the World Bank as an implementing partner of the Global Partnership for Financial Inclusion (GPFI) with input from the Ministry of Finance and the Reserve Bank of India.

The GPFI is a platform for all G20 countries, interested non-G20 countries and relevant stakeholders to continue work on financial inclusion, including the implementation of the Financial Inclusion Action Plan.

“While the role of DPIs in this leap is unquestionable, other ecosystem and policy variables underlying the availability of DPIs have been critical. These included interventions to create a more adequate legal and regulatory framework, national policies to expand account ownership and the use of Aadhaar for identity verification,” the paper said.

Since its launch, the number of jan dhan accounts has tripled from 147.2 million in March 2015 to 462 million by June 2022. Women own 56 percent or more than 260 million of these accounts, the newspaper reported.

Government-to-person payments have built one of the world’s largest G2P digital architectures leveraging digital public infrastructure.
“This approach supported transfers of approximately $361 billion directly to beneficiaries from 53 central government ministries through 312 key schemes,” the paper said.
In May 2023 alone, more than 9.41 billion transactions worth approximately Rs 14.89 trillion were completed. For the fiscal year 2022-2023, the total value of UPI transactions was nearly 50 percent of India’s nominal GDP, it said.

The UPI-PayNow interconnection between India and Singapore, which became operational in February, aligns with the G20 financial inclusion priorities and enables faster, cheaper and more transparent cross-border payments, he said.

India’s digital public infrastructure has also increased the efficiency of private organizations by reducing the complexity, cost and time required for business operations.

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“Even some NBFCs have been enabled an 8% higher exchange rate on lending to SMEs, a 65% saving in depreciation charges and a 66% reduction in fraud detection costs,” the paper added.

The World Bank paper also praised banks’ lower compliance costs for KYC.

“India Stack has digitized and simplified KYC processes, reducing costs; banks using e-KYC have reduced their compliance costs from $0.12 to $0.06. The reduction in costs has made lower-income customers more attractive to services and generated profits for the development of new products,” the newspaper said.

It went on to say that the country’s data empowerment and protection architecture gives individuals control over their data, allowing them to share it between providers.

“This encourages access to customized products and services without new entrants having to invest heavily in pre-existing customer relationships, which encourages innovation and competition,” the paper says.