Account Inactivity in India—Is There a Problem?

The latest Findex data on account inactivity has pushed India to rethink its efforts to improve financial inclusion. Findex defines inactivity as "The percentage of respondents who report neither a deposit into nor a withdrawal from their account in the past year. This also includes making or receiving any digital payment." What does this number mean in the Indian context? About 273 million adult Indians did not use their bank accounts in the past year. 

While many experts presume it is because of the number of PMJDY accounts, the reasons could include many others. PMJDY may not be the reason for higher dormancy in India as the reported dormancy in PMJDY is 17 percent. In this note, the authors discuss potential reasons for account dormancy and advocate a shift in approach to financial inclusion.