While India has witnessed historic progress and growth in the past decade, large segments of society remain excluded from the country’s formal financial system, with limited access to financial services, coming at a large cost to them. Low-income Indian households in the informal or subsistence economy often have to borrow from friends, family or usurious moneylenders. Their savings are largely in the form of cash, jewellery, or livestock, which earn little return and are subject to theft or loss. They have little awareness and practically no access to insurance products that could protect their financial resources in unexpected circumstances such as illness, property damage or death of the primary breadwinner.

The country has long recognized the social and economic imperative for broader financial inclusion. Starting with priority lending sector requirements for commercial banks, policy makers, regulators and industry players over the years have taken a number of steps to increase access to financial services to the poorer segments of society. Despite all these efforts, however, India has a long way to go. Of the estimated 110 million low-income households in India, only 15 million currently have access to microcredit. The situation is even starker on other financial products. In health insurance, for example, only an estimated 2–3 per cent of low-income households have access to some form of community-based or micro-health insurance.

To overcome challenges of scale and cost structures in a vast country like India, this paper describes a broader approach that calls for greater involvement of private sector players, and complete participation and cooperation between the public, private and social sectors is required.