Explaining gender and regional barriers to financial inclusion in India: Evidence from Blinder–Oaxaca decomposition of account inactivity

Using nationally representative household data from India (N = 3,000), this study examines gender and regional disparities in financial inclusion, with particular attention to barriers to account ownership and usage. Principal Component Analysis (PCA) is employed to reduce multiple self-reported constraints into latent indices of financial inactivity and non-ownership. Ordinary Least Squares (OLS) regressions are then used to identify socio-demographic and digital-access determinants, while Blinder–Oaxaca decomposition techniques partition disparities into explained (endowment) and unexplained (coefficient) components. PCA identifies two major dimensions of exclusion: structural barriers associated with socio-economic characteristics and digital barriers related to technology access. OLS results indicate that higher education significantly reduces inactivity and non-ownership, whereas rural residence and limited internet access increase financial exclusion. Gender gaps are relatively modest but persistent, largely reflecting differences in education and digital connectivity. In contrast, rural–urban disparities are substantially larger and are primarily shaped by structural disadvantages. Decomposition findings show that unexplained components dominate rural–urban gaps, highlighting institutional and contextual barriers beyond observable characteristics. The study underscores the importance of digital infrastructure, financial literacy, and targeted rural interventions to promote equitable financial inclusion in India.