"Digital Banking And Rural Transformation: Assessing The Role Of Fintech In Strengthening Financial Inclusion"

Abstract

Financial inclusion has emerged as a cornerstone of India’s development policy, and digital technologies are playing a transformative role in bridging long-standing gaps in rural finance. This paper examines the impact of FinTech and digital banking on rural financial inclusion in India, with specific attention to the period up to 2022. Drawing upon secondary data from the Reserve Bank of India, NABARD, NPCI, and World Bank, the study highlights three key dimensions—account ownership, digital transactions, and rural digital access. The Pradhan Mantri Jan Dhan Yojana (PMJDY) has been particularly significant in expanding the base of account holders, as numbers grew from 7.5 crore in 2014 to 45.4 crore in 2022. Deposits under PMJDY simultaneously increased from ₹0.55 lakh crore to ₹1.68 lakh crore, while women’s participation rose from 43% to 55%, demonstrating progress in narrowing the gender gap. On the digital payments front, India’s Unified Payments Interface (UPI) witnessed an extraordinary rise in adoption. Transactions increased from 0.15 billion in 2017 to 8.5 billion in 2022, while the rural share of these transactions expanded from 5% to 22%, signifying deeper penetration into non-urban markets. Parallel to these developments, the number of rural internet users expanded from 6 crore in 2015 to 20.1 crore in 2021, supported by smartphone penetration that grew from 12% to 31% during the same period. These shifts underscore the enabling environment for digital finance in rural regions. Despite these advances, challenges persist. Limited digital literacy, uneven internet connectivity, low trust in FinTech applications, and cybersecurity risks remain major barriers. The paper argues that while digital banking and FinTech innovations have accelerated the inclusion process, their sustainability depends on robust digital infrastructure, financial education, and targeted interventions to ensure equitable access, particularly for rural women and marginalized communities.