Financial Health in India: From Financial Inclusion to Financial Resilience

11 Jul 2026

GS Paper 3: Inclusive Growth and issues arising from it.

Context: In June 2026, the UN Secretary-General’s Special Advocate for Financial Health visited India to study the country’s progress in financial inclusion and financial resilience.

The assessment recognized India’s remarkable achievements in expanding access to financial services while emphasizing the need to move beyond financial inclusion towards financial health.
The central message was that merely owning a bank account is not sufficient; individuals must be able to save, invest, insure themselves, manage financial shocks, and achieve long-term financial security.

What is Financial Health?

Financial Health in India

Financial health refers to an individual’s ability to manage day-to-day finances, withstand unexpected financial shocks, achieve future financial goals, and feel confident about their financial future.
It is a qualitative measure of financial well-being rather than simply measuring access to financial services.
Financial health enables individuals to transition from financial survival to financial resilience and prosperity.

Financial Inclusion vs Financial Health

Financial Inclusion	Financial Health
Financial inclusion focuses on providing access to financial services such as bank accounts, insurance, pensions, and digital payments.	Financial health focuses on the effective and regular use of these financial services to improve long-term well-being.
The primary objective is to ensure access to formal financial institutions.	The primary objective is to build financial resilience, confidence, and long-term security.
Success is measured by the number of accounts opened.	Success is measured by the quality of financial outcomes experienced by individuals.
Example: Opening a Pradhan Mantri Jan Dhan Yojana (PMJDY) account.	Example: Using the Jan Dhan account to access insurance, pensions, savings, and credit.

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Difference through Amartya Sen’s Capability Approach

Amartya Sen’s Capability Approach emphasizes that possessing resources alone does not improve well-being.
Individuals must also possess the capability to utilize those resources effectively.
Similarly, opening a bank account does not automatically improve financial well-being unless individuals actively use financial products to enhance their lives.
Therefore, financial inclusion creates opportunities, whereas financial health enables people to convert those opportunities into meaningful outcomes.

Importance of Financial Health

Prevents Poverty: Protects households from falling into poverty after financial shocks.
Promotes Inclusive Growth: Encourages savings, investment, and responsible borrowing.
Improves Well-being: Reduces financial stress and enhances quality of life.
Strengthens the Economy: Supports macroeconomic stability and sustainable growth.

India’s Financial Transformation

Greater Financial Inclusion: Bank account ownership rose from 56% to nearly 89% (Global Findex).
JAM Trinity: Expanded access to banking, digital payments, and welfare benefits.
Digital Finance Leader: Enabled millions to join the formal financial system.

Contribution to Viksit Bharat 2047

Enables Inclusive Growth: Builds a financially empowered and resilient society.
From Welfare to Wealth: Promotes financial self-reliance and asset creation.
Supported Developed India: Financial health is a key pillar of Viksit Bharat 2047.

Case Studies from India

Delhi: Universal Pension for Informal Workers

The UN delegation observed that informal workers in Delhi were increasingly enrolling in pension schemes.
Access to retirement savings reduced dependence on family members during old age and promoted financial dignity.
This supports the broader objective of ensuring a life with dignity under Article 21 of the Constitution.

Mumbai: Workplace Financial Health

A fintech company collaborated with hospitals to provide responsible credit, affordable loans, and personalized financial guidance to nurses.
Employees also received financial health assessments, helping them improve money management and reduce financial stress.
The initiative demonstrated how employers and fintech firms can improve workforce productivity through better financial well-being.

Government Initiatives Supporting Financial Health

Financial Inclusion

Pradhan Mantri Jan Dhan Yojana (PMJDY): Expands access to formal banking and basic financial services.
JAM Trinity: Integrates Jan Dhan, Aadhaar, and Mobile to enable seamless digital financial services and welfare delivery.
Direct Benefit Transfer (DBT): Ensures transparent and efficient transfer of government benefits by reducing leakages.

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Social Security

Atal Pension Yojana (APY): Provides guaranteed pension security for workers in the unorganized sector.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY): Offers affordable life insurance coverage to low-income households.
Pradhan Mantri Suraksha Bima Yojana (PMSBY): Provides low-cost accident insurance to enhance financial protection.
National Pension System (NPS): Promotes long-term retirement savings through voluntary pension contributions.

Support for Informal Workers

e-Shram Portal: Creates a national database of unorganized workers to improve access to social security and welfare schemes.

Challenges

Large Informal Workforce: Nearly 90% of India’s workforce is employed in the informal sector, where access to stable income, pensions, and insurance remains limited.
Inactive Financial Accounts: Many bank accounts remain inactive despite successful financial inclusion.
Low Financial Literacy: Limited awareness prevents many households from effectively utilizing insurance, pensions, investments, and digital financial services.
Income Volatility: Informal workers often face irregular earnings, making regular savings and financial planning difficult.
Limited Social Security Coverage: Many vulnerable households remain outside the coverage of comprehensive financial protection mechanisms.

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Way Forward

Develop Jan Dhan 2.0: Transform PMJDY into an integrated financial resilience platform by linking DBT, PM-KISAN, e-Shram, APY, PMJJBY, PMSBY, and MGNREGA payments.
Strengthen Digital Public Infrastructure (DPI): Expand India’s DPI to provide secure, affordable, and inclusive access to financial services for all citizens.
Promote Data-Driven Policymaking: Use household financial health surveys and administrative data to design targeted, evidence-based financial policies.
Encourage Public-Private Partnerships (PPPs): Foster collaboration among government, fintech firms, employers, and financial institutions to improve financial literacy, affordable credit, insurance, and retirement planning.