Financial Inclusion

Financial inclusion policies are gaining momentum as governments around the world are pushing on all cylinders to get more of their population a formal bank account. However, what are the best choices given the policy alternates available? Dr. Udupa, along with his co-authors, evaluates how three types of costs of bank account – one-time account opening costs, annual maintenance costs, and minimum balance required to be held – affect banking choices of the poor. The popular Pradhan Mantri Jan Dhan Yojana can be thought of as reducing banking costs along all the three dimensions to varying degrees, while other governments have also experimented with one or more of these costs. Dr. Udupa’s paper estimates the benefits of reducing each cost individually and together to see what generates the best outcome from a policy maker’s perspective.