India’s financial inclusion drive has succeeded in bringing millions of people into the formal financial system over the past decade. Bank account ownership has surged, digital payments have become mainstream and access to formal financial services has expanded rapidly. But the next phase of the journey will require a different yardstick. Simply counting bank accounts or digital transactions no longer tells the full story.

That is the central message of a report released by PwC India in partnership with Dvara Research Foundation, which argues that the focus must now shift from financial inclusion to financial health.

The report, Rethinking Financial Health for Meaningful Impact, is based on the Financial Health Survey (FHS), which covered 4,000 households across 18 districts in seven states. It examines whether access to formal finance is translating into greater financial resilience and improved living standards for households in India’s underserved ‘Bharat’ segment.

The findings suggest that while access has improved significantly, many households continue to struggle with irregular incomes, financial shocks and products that are not designed around their realities.

“India’s financial services sector has made remarkable strides in expanding access over the last decade. The next chapter, however, must be about outcomes,” said Vivek Belgavi, Partner and Leader, Financial Services Advisory, PwC India. Financial products, he said, need to be designed around actual household cash flows, while institutions should measure success through customer resilience and long-term outcomes rather than account openings alone.

The report defines financial health as the ability of households to meet day-to-day expenses, plan for future needs and cope with unexpected financial shocks. It adopts an input-output-outcome framework, measuring not just access to financial products, but also how households use them and whether those products ultimately improve financial security. The framework is in line with the Reserve Bank of India’s National Strategy for Financial Inclusion (2025-30), which also emphasises moving beyond access-based metrics.

One of the report’s most significant findings is that income volatility has emerged as the biggest obstacle to financial well-being. Many financial products continue to assume that customers earn a fixed monthly income. However, large sections of the Bharat population depend on seasonal work, agriculture, daily wages or self-employment, resulting in irregular cash flows. Products such as fixed EMIs, recurring deposits and annual insurance premiums often fail to accommodate these realities, making it difficult for households to stay engaged with the formal financial system.

The study also highlights the financial vulnerability of renters, particularly in eastern India. Around 65% of renters in the region said they would be unable to arrange ₹30,000 in an emergency, underlining how a single income shock can quickly push vulnerable households into financial distress.

The survey points to sharp regional differences in financial behaviour.

Southern India has emerged as the country’s strongest performer in digital financial services adoption. More than 70% of households use multiple digital financial services, supported by a well-developed combination of digital platforms and physical service networks. The region also relies heavily on community-based financial advice. While 44% of respondents said they depended on third-party advisors, another 40% relied on family, friends and social networks. Formal financial institutions accounted for only 13% of the advice households received.

In eastern India, the challenge is less about access and more about financial awareness. More than a third of households said they had never sought financial advice, while another 23% had tried but failed to obtain it. The survey also found that 78% of informal loans came from a single source, exposing borrowers to concentration risk and limiting their financial options.

Western India presents a different picture. Although acceptance of digital financial services exceeds 95%, customer engagement remains relatively weak. The report describes this as an “activation gap”, where access does not necessarily translate into sustained usage. Nearly 65% of formal credit users said they had faced loan rejection at some point, while newer customers recorded strong access levels but comparatively lower usage of formal financial products.

Northern India continues to face both infrastructure and trust deficits. Around 40% of surveyed households said they did not have access to a physical financial service point within walking distance. The region also recorded the lowest acceptance of digital financial services among all four regions, suggesting that both infrastructure gaps and trust continue to constrain formal financial adoption.

One of the report’s key conclusions is that digital finance alone is not enough. Households with access to both physical and digital channels consistently reported better financial outcomes than those relying only on digital services. While digital platforms make financial services more accessible, physical touchpoints remain important for building trust, resolving problems and encouraging sustained usage.

The study also challenges the conventional view that informal finance exists outside the formal financial ecosystem. It finds that many households use formal and informal sources of finance simultaneously, suggesting that informal borrowing continues to complement formal financial services rather than simply compete with them.

The report recommends that banks, non-banking finance companies, insurers and fintech firms redesign products around irregular income patterns instead of assuming fixed monthly earnings. It also calls for stronger assisted digital models, greater engagement with trusted community networks and a shift towards measuring customer resilience rather than transaction volumes.

As Misha Sharma, Lead at Dvara Research, noted, the rapid expansion of bank accounts and formal credit has not automatically translated into improved financial well-being. The next phase of India’s financial inclusion story, she argued, must focus on ensuring that financial products genuinely improve people’s lives.

The message from the report is straightforward. India has made impressive progress in expanding access to finance. The challenge now is to ensure that access leads to resilience, confidence and long-term financial security. For financial institutions and policymakers alike, the success of inclusion can no longer be measured by the number of accounts opened. It must be measured by the financial health of the people those accounts are meant to serve.