Index of Financial Inclusion – Mandira Sarma

The promotion of an inclusive financial system is considered a policy priority in many countries.  While the importance of financial inclusion is widely recognized, the literature lacks a comprehensive measure that can be used to measure the extent of financial inclusion across economies.  This paper attempts to fill this gap by proposing an index of financial inclusion (IFI).  The IFI is a multi-dimensional index that captures information on various dimensions of financial inclusion in one single digit lying between 0 and 1, where 0 denotes complete financial exclusion and 1 indicates complete financial inclusion in an economy.  The proposed index is easy to compute and is comparable across countries.  

This study has come out as ICRIER Working Paper No. 215.  The paper, being the first ever attempt to compute a multi-dimensional index of financial inclusion for a large set of countries, has received wide attention by policy circle, the media and the academic community.

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Capital Adequacy Regime in India - An Overview - Mandira Sarma and Yuko Nikaido

This study reviews the capital adequacy regime in India and India’s preparation towards the revised regime. Using secondary data on India’s banking sector, it finds that with respect to the present regime, the Basel I, Indian banking system is performing reasonably well, with an average capital to risk-weighted asset ratio (CRAR) of about 12 per cent, which is higher not only than the internationally accepted level of 8 per cent but also India’s own minimum regulatory requirement of 9 per cent.  Further, the CRAR of Indian banking system compares well with many emerging countries such as Korea, Malaysia and South Africa. As the revised capital adequacy norms, Basel II, are being implemented from March 2008, several issues emerge.  The study examined these issues from an Indian perspective.

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Vaidyanathan Committee Report on Short Term Rural Cooperative Credit Structure – A Review - Mandira Sarma and Rajiv Kumar

The Government of India, in 2006, initiated the implementation of a revival package of the rural short term cooperative credit structure in India.  The package is based on the recommendations of the task force on revival of RSTCCS, known also as the Vaidyanathan Committee.  In December 2006, the Asian Development Bank offered India a loan of US$ 1 billion for implementation of the revival package.  Apart from this, KfW, the German Bank for Bank Reconstruction and Development and the UK Government have also offered financial assistance.  This is the first instance where the rural cooperative sector in India will get funds from multilateral and foreign agencies. It is in this context the recommendations of the Vaidyanathan Committee are reviewed here as they form the basis of the revival package. The review points out gaps in the Vaidyanathan Committee Report.