Financial Inclusion FinalReport

“TO STUDY THE EFFECTIVNESS OF FINANCIAL

INCLUSION PLANS ON RURAL POPULATION IN

PUNE CITY”

Submitted by

Shilpa SalveShilpa Pare

Supriya ShindeAbhishek Tapadia

Sudit TawarePriyanka Udawant

Sinhgad Institute of ManagementVadgaon Budruk

Pune

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INTRODUCTION

INTRODUCTION

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Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society. Unrestrained access to public goods and services is the sine qua none of an open and efficient society. It is argued that as banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of public policy. The term "financial inclusion" has gained importance since the early 2000s, and is a result of findings about financial exclusion and its direct correlation to poverty. Financial inclusion is now a common objective for many central banks among the developing nations.

FINANCIAL INCLUSION IN INDIA:

The Reserve bank of India set up the Khan Commission in 2004 to look into financial inclusion and the recommendations of the commission were incorporated into the mid-term review of the policy (2005–06). In the report RBI exhorted the banks with a view of achieving greater financial inclusion to make available a basic "no-frills" banking account. In India, Financial Inclusion first featured in 2005, when it was introduced by K C Chakraborthy, the chairman of Indian Bank. Mangalam Village became the first village in India where all households were provided banking facilities. Norms were relaxed for people intending to open accounts with annual deposits of less than Rs. 50,000. General Credit Cards (GCC) were issued to the poor and the disadvantaged with a view to help them access easy credit. In January 2006, the Reserve Bank permitted commercial banks to make use of the services of non-governmental organizations (NGOs/SHGs), micro-finance institutions and other civil society organizations as intermediaries for providing financial and banking services. These intermediaries could be used as business facilitators (BF) or business correspondents (BC) by commercial banks. The bank asked the commercial banks in different regions to start a 100%

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financial inclusion campaign on a pilot basis. As a result of the campaign states or U.T.s like Pondicherry, Himachal Pradesh and Kerala announced 100% financial inclusion in all their districts. Reserve Bank of India’s vision for 2020 is to open nearly 600 million new customers' accounts and service them through a variety of channels by leveraging on IT. However, illiteracy and the low income savings and lack of bank branches in rural areas continue to be a road block to financial inclusion in many states and there is inadequate legal and financial structure.

Controversy:

Financial Inclusion in India is often closely connected to the aggressive microcredit policies that were introduced without the appropriate regulations over-site or consumer education policies. The result was consumers becoming quickly over indebted to the point of committing suicide and the lending institutions seeing repayment rates collapse, threatening the existence of the entire 4 billion a year Indian microcredit industry. This crisis has often been compared to the mortgage lending crisis in the US.

The challenge for those working in the financial inclusion field has been to separate micro-credit as only one aspect of the larger financial inclusion efforts, and use the Indian crisis as an example of the importance of having the appropriate regulatory and educational policy framework in place.

'Financial Inclusion’; Unorganised Sector; are the buzz word today.

o What is 'Financial Inclusion’?

"Financial inclusion is delivery of banking services at an

affordable cost ('no frills' accounts,) to the vast sections of

disadvantaged and low income group. Unrestrained access to

public goods and services is the sine qua non of an open and

efficient society. As banking services are in the nature of

public good, it is essential that availability of banking and

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payment services to the entire population without

discrimination is the prime objective of the public policy."

Areas of concern by banks

The banking industry has shown tremendous growth in volume

and complexity during the last few decades.

Despite making significant improvements in all the areas

relating to financial viability, profitability and competitiveness,

there are concerns that banks have not been able to reach and

bring vast segment of the population, especially the

underprivileged sections of the society, into the fold of basic

banking services.

Internationally also efforts are being made to study the causes of

financial exclusion and design strategies to ensure financial

inclusion of the poor and disadvantaged.

The reasons may vary from country to country and so also the

strategy but all out efforts are needed as financial inclusion can

truly lift the standard of life of the poor and the disadvantaged.

RBI's Policy on 'Financial Inclusion’:

When bankers do not give the desired attention to certain areas,

the regulators have to step in to remedy the situation. This is the

reason why the Reserve Bank of India places a lot of emphasis

on financial inclusion.

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With a view to enhancing the financial inclusion, as a proactive

measure, the RBI in its Annual Policy Statement of the year

2005-2006, while recognizing the concerns in regard to the

banking practices that tend to exclude rather than attract vast

sections of population, urged banks to review their existing

practices to align them with the objective of financial inclusion.

No-Frills' Account :

o In the Mid Term Review of the Policy (2005-06),

RBI exhorted the banks, with a view to achieving

greater financial inclusion, to make available a basic

banking 'no frills' account either with 'NIL' or very

minimum balances as well as charges that would

make such accounts accessible to vast sections of

the population. The nature and number of

transactions in such accounts would be restricted

and made known to customers in advance in a

transparent manner. All banks are urged to give

wide publicity to the facility of such 'no frills'

account, so as to ensure greater financial inclusion.

'Simplification of 'Know Your Customer (KYC)' Norms :

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o Banks are required to provide a choice of a 'no frills

account' where the minimum balance is nil or very

small but having restrictions on number of

withdrawals, etc., to facilitate easy access to bank

accounts.

o Further, in order to ensure that persons belonging to

low income group both in urban and rural areas do

not face difficulty in opening the bank accounts due

to the procedural hassles, the 'KYC' procedure for

opening accounts for those persons who intend to

keep balances not exceeding rupees fifty thousand

(Rs. 50,000/-) in all their accounts taken together

and the total credit in all the accounts taken together

is not expected to exceed rupees one lakh (Rs.

1,00,000/-) in a year has been simplified to enable

those belonging to low income groups without

documents of identity and proof of residence to

open banks accounts. In such cases banks can take

introduction from an account holder on whom full KYC

procedure has been completed and has had satisfactory

transactions with the bank for at least six months.

Photograph of the customer who proposes to open the

account and his address need to be certified by the

introducer.

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Ensuring reasonableness of bank charges :

As the Reserve Bank has been receiving several representations from public about unreasonable service charges being levied by banks, the existing institutional mechanism in this regard is not adequate. Accordingly, and in order to ensure fair practices in banking services, the RBI has issued instructions to banks making it obligatory for them to display and continue to keep updated, in their offices/branches as also in their website, the details of various services charges in a format prescribed by it. The Reserve Bank has also decided to place details relating to service charges of individual banks for the most common services in its website.

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LITERATURE REVIEW

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LITERATURE REVIEW

FINANCIAL INCLUSION –ROLE OF BANKING INDUSTRY JANUARY 2012 BALBIR SINGH

“Financial inclusion is process of ensuring access to financial services and timely adequate credit where needed by vulnerable group such as weaker section & low income groups at an affordable cost”

Financial inclusion is expanding access to financial services, such as payments services, savings product insurance products & inflation protected pension. By financial inclusion means delivery of banking services & credit at an affordable cost to the vast section of disadvantage & low income groups. The various financial services means include savings, loans ,insurance, payments, remittance facilities & financial system .An open & efficient society is always characterized by the unrestrained access to public goods & services .Recent data shows that countries with large proportion of population excluded from the formal financial system also shows higher poverty ratios & high inequality.

REASONS FOR FINANCIAL EXCLUSION :

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1) Remote, hilly & sparsely populated areas with poor infrastructure, physical access itself acts as a deterrent.

2) From the demand side, lack of awareness, low incomes / assets, social exclusion, illiteracy acts as barriers.

3) From the supply side, distance from branch, branch timings, cumbersome documentation & procedures, unsuitable products language, staff attitudes.

4) Higher transaction cost apart from procedural hassles.5) On the other hand, the ease of availability of informal credit

sources makes these popular even if costlier.6) The requirements of independent documentary proof of identity &

address can be a very important barrier in having a bank account especially for migrants & slum –dwellers.

Initiatives taken by RBI / Government for financial inclusion:Concept of no-frill accounts, Relaxation on know your customer norms for opening of no-frill accounts .Introduction of general credit cards, business correspondents (BCs) & Business facilitators(BFs) model, Use of technology & micro credit ,creation of funds for financial inclusion ,Branch authorization in Tier 3to Tier 6 centers, New branches in unbanked rural centers ,Banking services in unbanked villages with a population of more than 2000,plan of banks for financial inclusion ,consolidation of Regional Rural Banks (RRBs),Parameter for performance appraisal of bank staff. Financial inclusion – Excellent work done by Banks. An inclusive growth will act as a source of empowerment & allow people to participate more effectively in the economic & social process. Banks that have global ambitions must meet local aspirations. Financial access to our country that will result in increasing employment & business opportunities.

MICROFINANCE: TIME TO MOVE TOWARDS FINANCIAL INCLUSION

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JAN 27, 2012 BY TARA THIAGARAJA, CHAIRPERSON, MADURA, MICROFINANCE

The financial inclusion agenda so far has been largely focused on redistribution of wealth while what is required is inclusion in the creation of wealth. Financial inclusion so far has meant debt distribution and no-frill bank account .Microfinance has been one major channel of debt distribution to the poor, the Male gam committee report in 2010 indicate that 75% of the loans went towards consumption .Contrast with this distribution of bank debt in India where less than 20% were consumer loans .Developed economies are characterized by larger enterprise that take the advantage of division of labour specialization & economies of scale .The current model of microfinance lending focuses largely on two aspects : reducing the cost of lending & ensuring responsible repayment by using a group lending model with a peer pressure element.

Microfinance lending in India is directed almost entirely at women .This has its benefit in empowering in the management of household finances. Bank might set up or acquires as subsidiaries. Microenterprise risk & identification of micro entrepreneurs could be done with approaches that understand the psychometric & behavioral profiles of entrepreneurs, it is when the potential of entrepreneurship among the other 1.1 billion is unlocked that the rest of the country can be productivity engaged & therefore financially included.

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STATE ANK OF INDIA ACHIVES 100% FINANCIAL INCLUSION IN AP CIRCLE

JAN 2, 2012 BY RAKESH SHARMA CHIEF GENERAL MANAGER

Hyderabad, SBI has achieved 100% coverage of its allotted unbanked villages in Andhra Pradesh under the financial inclusion program (FIP) of the Reserve bank .6,661 unbanked villages with a population above 2,000 in Andhra Pradesh, SBI was allotted 1,369 villages to covered under the financial inclusion program by the RBI & bank has achieved 100% coverage . By opened 35 brick & mortar branches, appointed 1,157 banking correspondents, introduced 162 banks on bikes & 15 banks on wheels, making use of IT in these villages & they were able to open as many as 2.1lakh accounts in the targeted villages with an average balance of Rs 400 to Rs500 per account RBI has allowed the opening of zero balance no-frill accounts under the FIP to encourage maximum coverage .SBI now plans to cover villages with a population of less than 2000 in an integrated manner over the next two years ,furthering the financial inclusion program.

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FINANCIAL INCLUSION THROUGH WIRELESS TECHNOLOGY AUG 29, 2007 BYE JANMEJAYA SINHA

The Economic Times Banking Technology conclave 2007 was titled “Banking sector Next frontier serving the under banked profitably .Can technology, especially wireless enabled the un-served market?” According to Sinha, there are only 180 million Indians with the bank account ,in comparison with the 220 million people who have cell phone .We can’t think about banking through PCS like the rest

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of the world .We cannot follow the western model banking could be the solution for India .Mobile operators can remind customers to settle a bill or the fact that a mobile banking can be profitable as there is already a critical mass out of there as the telecom operators already have the reach support is needed from the banking sector .

PROMOTING FINANCIAL INCLUSION FOR EFFECTIVE AML/CFT

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JAN 18, 2012 BY ABDULLAHI Y. SHEHU

Financial inclusion is the delivery of financial services at affordable cost ,especially to the disadvantage & low income populations .Financial inclusion has gained some importance in the last few decades as a result of finding on the impact of “Financial exclusion “ on the development & especially its correlation to poverty .Access to financial services contributes to human & economic development , that financial inclusion & effective AML /CFT are complementary to ensure the safety integrity & soundless of the financial system & the protection of the depositors . It calls for the recognition of country specific characteristics of the derived segment of the society, the risk & national priorities in the application of AML /CFT measures as well as how financial inclusion has been applied with flexible AML /CFT principles .It concludes that inclusive finance does not necessarily mean the everyone who is eligible uses each of the services, but they should be able to choose to use such services if they wish.

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FINANCIAL INCLUSION BY S. KUPPAN

Financial inclusion is delivery of banking services at an affordable cost to the vast sections of the disadvantaged & low income groups’ .In India the basic concept of financial inclusion is having a saving or current account with any bank. In reality it includes loans, insurance service & much more.

Scope of financial inclusion:

(A) Through state-driven intervention by way of statutory elements.

(B) Through voluntary effort by the banking community itself for evolving various strategies to bring within the ambit of the banking sector the large strata of society.

Major three aspects of FI make people to access financial markets, access credit markets, and loan financial matters.

Financially excluded people are : marginal farmers landless labourers ,oral lessees ,self-employed & unorganized sector

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enterprises ,unban slum –dwellers ,migrants ,ethnic minorities & socially excluded groups , senior citizens ,women .The North East, Eastern & central regions contain most of the financially excluded population. *Factors affecting access to financial services: legal identity, limited literacy, level of income, terms &conditions, complicated procedures, psychological & cultural barriers, place of living, lack of awareness.

*Benefits of inclusive financial growth:

Growth with equity, financial transaction made easy. Get rid of poverty, safe saving alone with financial services,

inflating national income, becoming global player. Relationship between financial inclusion & development

indicators :- Savings & credit accounts : indicator of FI- Per capita income – indicator of economic development - Electricity consumption & road length indicators of

infrastructure development.o Steps towards financial inclusion:

A hugely expanded bank branch & cooperative network & new organizational forms like Regional Rural Bank (RRB).

A greater focus on credit rather than other financial services like savings & insurance ,although the bank & cooperatives did provide deposit facilities

Lending targets directed at a range of ‘priority sectors’ such as agricultural, weaker section of the population.

Interest rate ceilings. Significant government subsidies channelled through the

bank & cooperatives, as well as through related government programs.

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100% FINANCIAL INCLUSION – A CHALLENGING TASK AHEAD IN FUTURE ACTION BY DINESH KUMAR SINGH

Financial inclusion is the ability of banking services at an affordable cost to disadvantaged & low income groups at an affordable cost to disadvantaged & low income groups.

Extend of financial inclusion –Indiao In India, almost half the country is unbanked.

o Only 55% of the population have deposit accounts & 9% have

credit accounts with banks.o India has the highest number of the households excluded from

banking.o There was only one bank branch per 14000 people

o 6 lakh villages in India, rural branches of SCB are including

RRB’s number 33,495.o Only a little less than 20% of the population has any kind of life

insurance & 9.6% of the population has nonlife insurance coverage.

As poverty levels decline & households have greater level of dictionary income s, they will be have to easy access to formal financial system to get into the banking habit .Bank will need to innovate & desire newer method of including such customers onto their fold. There has been a burst entrepreneurship across the country, spanning rural, and semi urban & urban areas .This has to be nurtured financed. Financial inclusion will strengthen financial deepening & provide resources to the banks to expand credit delivery .Thus FI will lead financial development using models for FI create awareness & financial literacy, basic banking and Innovative strategies.

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FINANCIAL INCLUSION

25 JAN 2010 BY INDRANIL SEN GUPTA

Financial Inclusion does not mean financial supports .It means all the sectors of Indian economy coming together to bring radical changes growth in the un-trapped areas. Inclusive growth by its very definitions implies on equitable allocation of resources with benefits accruing to every section of society. It should be focused on the intended short & long term benefits & economic linkages at large & not just equitable mathematically on some regional &population criteria .One of the major component of achieving this growth is financial inclusion.

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In order to achieve financial inclusion there needs to be a collective & timely action by all players in financial sectors & players include:-

1) RBI2) NABARD (National Bank For Agriculture & rural

development)3) Regional Rural Banks4) Co-operatives5) Micro-finance institutions

But still we have left many parts untouched where financial inclusiveness can be brought & Indian economy can be strengthen further-

1) Indian Infrastructure needs to focus on renovation of Indian villages just like china did in its own villages. If Indian infrastructure development .FDI investments in these untapped areas will be a very attractive. If the renovation of infrastructure in Indian villages in being made then the type of growth & ROI that will be generated from here will last for at least next 2 decades & may be beyond that

2) Electricity is one of the rising hot sectors which will be of great help one it comes into play .power industry will get next decade of growth from this segment.

3) Apart from bank, insurance companies will find the next huge untapped growth .since the demand for insurance particularly for this segment is highly required .the problem of low wage income followed with insurance can be designed in such a way that a labour who is earning RS.3000 per month can afford the untapped growth of insurance in this segment is designing of products. If the insurance products are designed in such a way, which will come easy to accept for this segment of people.

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4) We all know that when finance becomes easy access demand start picking up for mass of people, FMCG product will find that Indian FMCG companies are focused forward this segment .But what we need to find is that expansion in this areas followed with product designing .cost competitiveness should be another aspect to be maintained in order to make the product presence in every home or village.

5) Private equity & venture capitalists need to identify all these areas to exploit the untapped growth of entrepreneurship of small & medium enterprise .Talent and the desire to do something in life is higher in this segment .If someone exploits them with proper education & technical knowledge we will find a large number of future of Indian economic growth.

6) Hospitality sector also find the growth in this sector but again we need design products & costs .High costs often makes the growth in this sector stagnant or to the expected ROI

7) Indian information technology sector also find a huge pool of ROI .when demand access of finance will require IT involvements .IT policies should be designed with the growth of the industry as Indian looks to move up the value chain from business processing to knowledge processing in this segment.

We cannot forget that as per Indian census 2001, state that 74% of Indian live in 6, 38,365 different villages’ .some villages has population less than 500 while 3976 villages have a population of more than 10,000 people.

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THE TWO PILLARS OF FINANCIAL INCLUSION (FORBES INDIA)

18 NOV 2010 BY C. RANGARAJAN

There are multiple institutions involved in financial inclusion .there are the rural branches of commercial banks, the rural branches of regional rural banks, the micro finance institution (MFIs) & some not for profit societies .but if the

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banking system can find the appropriate delivery system, then that would be the most ideal thing.There are some problems relating to the BC models .One thing is about who should bear the additional cost of introducing such a new tier of operation .having business correspondents implies extra costs .these costs may not be very high-they would be much lower than that what the banks will have to bear if they were doing the business directly – but nevertheless there is an additional cost .the committee on financial inclusion ,appointed by the Government has indicated at least 50% of the financial excluded. Household must be covered by 2012 through rural & semi urban branches. How will the BC model take off? Otherwise too it is possible because if you look at the number, it is double given that we have 40,000 rural & semi urban branches. But the two pillars of FI the SHG bank linkage & the BC model –can make huge differences.

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RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

RESEARCH METHODOLOGYINTRODUCTION:-

Before going to any kind of research, research methodology plays important role as the entire information generated and its effectiveness relies upon it. The purpose of any research is to discover answer to questions, the main aim of research is to find out the truth which is hidden and not discovered yet. It is an important source of providing guidelines for solving different business problems. The inputs in the report incorporate the qualitative information obtained from personal questionnaire and interactions with the customer. A successful and the most popular technology of data collection is through questionnaire. Thus a questionnaire was framed and responses were collected from the customers of financial inclusion plans and bank This research project focuses on both primary as well as secondary data. Primary data is be collected through personal

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meetings, Questionnaire and observation method. Secondary data is collected from various journals, books, websites, newspapers, magazines, internet and newsletters. This project is a descriptive research in nature. A convenience sampling is be used to select the respondent.STATEMENT OF THE PROBLEM:- Formulating a problem for research is the first step in the research process. This research is done for analyzing the effectiveness of financial plans of various banks.

OBJECTIVES OF THE STUDY:-

HYPOTHESIS:- Financial inclusion plans of banks are ineffective.

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1) Type of Research:

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RESEARCH DESIGN

SOURCES OF DATA COLLECTION

SELECTION OF SAMPLE SIZE

QUESTIONAIRE PREPARATION

DATA COLLECTION

DATA ANALYSIS

FINDINGS AND SUGGESTIONS

CONCLUSIONS

This proposed study is descriptive in nature .

2) Sampling Design :

Universe : Banks and customers of its financial inclusion plans

Sampling Frame : rural area customers

Sampling Technique : Convenience sampling

Sample size : Sample size of banks =7

Sample size of Customers= 152

3) Sources and Methods of data collection

Type of data will get collected – 1) Primary Data

2) Secondary Data

Method of data collection:

A) Primary Data

Survey Method

Instruments of Data collection:

Following methods are proposed for collection of primary data

1) Structured Questionnaire

2) Personal meetings,

3) Observation method

Structured Questionnaire method will be used to collect primary data. (banks and

customers of financial inclusion plans) are targeted for collection of primary data.

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B) Secondary data :

All relevant secondary data is collected from various sources like-

Internet

Books

National & International referred journals

Conference Proceedings

Magazines

Newspapers

Government Publications,

Websites

4) Methods of Analysis and Statistical Tools

Researcher proposes to use required & relevant statistical techniques like–

pie chart, histogram, Percentage analysis, etc.

Tools for Analysis:

“Statistics provide more inside into data and more insight leads to better decisions.”

The statistical tools used for the data interpretation and analysis for this study is as follow:

Percentage Analysis:

In this project, percentage analysis is used through single tabulation for the purpose of

analyzing the objective.

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Graphical analysis:

Graphs and diagrams have a great memorizing effect that, once they are seemed, they can

be recollected and remembered anytime. Comparison of data is very easy with Graphs and

diagrams. In this study using bearing and unavailable tabulation research used charts like Pie

and bar charts.

RESEARCH DESIGN

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Sample collection

A non probability sampling technique was employed in the study. Convenience sampling was

adopted for the study because it was cheaper and quicker method to obtain data. The target

population of this study was the customers of financial inclusion plans of banks particularly

in rural areas, and to the scale of this study, a total of 250 questionnaires were provided for the

actual fieldwork, however only 230 were distributed during the actual survey. Out of these

feedbacks, only 180 questionnaires were found to be usable for the further analysis of the data.

The sample size of the research is based on 180, which is considered satisfactory. In

determination of the sample size, geographical location was considered in order to have

knowledge about the awareness of financial inclusion plans of banks. The research was

carried out in mulshi, khadakwasla and vadgaon villages.

Data collection

The research used self-administered questionnaires as the central mechanism through which

primary data was collected. The questions contained in the questionnaire were mainly

dichotomous questions, likert scale and checklist questions with a few open ended questions.

A total of 15 questionnaires were distributed during the pilot test stage. It was done to reduce any

ambiguities related to the research instrument. It was found that, most of the respondents seemed

to understand what the research instrument elicited. Clear justification and presentation of the

research instruments contributed to the better understanding. Only editing and some minor

adjustments with regard to the format and setting of the questionnaire were done after the pilot

test to make it more communicable, attractive, and readable. The research applied personal

interviews in the form of intercepts in the collection of data. These interviews were

conducted in a structured form, and they were conducted with customers at designated points

like rural areas, particularly uneducated customers.

The demographic items are presented in Table 1. (Profile of Respondents)

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Demographics Items No. of Respondent Percent

Gender Male 225 74.5

Female 77 25.5

Total 302 100

Age group 18-25 204 67.5

26-35 71 23.5

36-50 24 7.9

50-above 3 1

Total 302 100

EducationCertificate

Qualification6 2

Under Graduate 21 7

Graduate 160 53

Post Graduate 110 36.4

Ph.D. 5 1.7

Total 302 100

The sample shows that the number of male (74.5%) respondents is higher than the number of

female (25.5%) respondents. The sample shows that the largest age group that responded was

from 18 to 25 years of age (67.5%), followed by age 26 to 35 (23.5%), then 36 to 50 (7.9%)

and 50-above (1%). In the education background more than 53% were graduate students and

more than 36.5% of the respondents were postgraduate students and 1.7% were PhD students.

Questionnaire Analysis

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We divided the questionnaire into three sections first one is Respondents Particulars,

second check the awareness and usage of financial inclusion plans and third is how the

customers perception towards banks and banking issues and subjective norms relate to the

financial inclusion plans.

In Respondents Particulars, we collected information of respondent such as Gender,

Age, Earning range, Earning pattern. We used this parameter to analysis if these factors affect

the usage of financial inclusion plans.

In second section, we designed the questions according to check the awareness and

usage of financial inclusion plans in people. Questions like

Do you save?

How much do you save?

Where do you keep your saving?

Do you have a bank account?

If yes how many?

If not, what are the reasons for not having?

In third section, we tried to determine the perception of customers towards banks and

banking issues, as well their perception towards financial inclusion plans and their

effectiveness. Questions like,

For what purpose you use your account?

What is your perception towards banks?

What is the purpose of borrowing?

What is the source of borrowing?

Do you know about banking credit?

Have you approached any bank for credit card?

Our second questionnaire was designed for banks, in order to get information about their

financial inclusion plans, and their perception towards customer’s attitude towards those

plans and profitability of those plans. They were asked questions like

What are their products for financial inclusion?

What is the response of the people towards their products?

What is the income slab of the customers who can apply for the products?

What are the targets given?

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Is actual target achieved?

What techniques they use for financial inclusion?

Does it hamper their profitability?

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DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

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I. Gender wise comparison of bank account:

Gender Frequency Percent

Male 116 76Female 36 24Total

152 100

Male Female Total0

50

100

150

200

250

300

PercentFrequency

Interpretation:

It is observed from the above diagram that out of the total 152 samples 116 (76%) were male and 36 (24%) were females.

Age wise comparison

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Age

Age Frequency Percent

18-20 43 28.28

29-48 81 53.28

49-68 22 14.47

69-88 6 3.94

Total 152 100

18-20

29-48

49-68

69-88

Total

0 20 40 60 80 100 120 140 160

PercentFrequency

Interpretation:

It is observed from the above diagram that out of the total 152; 43 (28.28%) people fall under the age group of 18-20 yrs, 81 (i.e. 53.28%) fall under the 29-48yrs age group, 22 people (i.e. 14.47%) fall under the age group of 49-68 and 6 people (i.e. 3.94%) people fall under the age group of 69-88.

Earning range:

Earning RangeRange Frequency Percent

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0-4000 34 22.36

4000-8000 44 28.94

8000-12000 34 22.36

12000-16000 21 13.81

16000 and above 19 12.5

Total 152 100

34

4434

21

19

Frequency

0-40004000-80008000-1200012000-1600016000 and above

Interpretation:

It is observed from the above diagram that out of the total 152 samples, maximum people fall under the income bracket of 4000-8000 (i.e. 28.94%), however only 12.5% people fall under the income bracket of 16000 and above.

Earning pattern:

Earning Pattern

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Earning Pattern Frequency Percent

Monthly Basis 87 57.23

Daily Basis 64 42.1

Not Earning 1 0.65

Total 152 100

Monthly Basis Daily Basis Not Earning Total0

20

40

60

80

100

120

140

160

FrequencyPercentValid Percent

Interpretation:

It is observed from the above diagram that out of the total 152; 87 people (i.e. 27.23%) earn on monthly basis and the other earn on daily basis.

Do you save?

Do you save

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Savings Frequency Percent

Yes 124 81.57

No 28 18.42

Total 152 100

Yes No Total0

20

40

60

80

100

120

140

160

FrequencyPercent

Interpretation:

It is observed from the above diagram that out of the total 152 samples, 124 people believe in saving money and the remaining don’t. Hence, maximum people save the money they earn.

How much do you save?

How much Saving

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0-5% 84 55.265-15% 26 17.1

15%and above 37 24.34No savings 5 3.28

Total 152 100

0-5% 5-15% 15%and above

No savings Total0

20

40

60

80

100

120

140

160

How much Saving FrequencyHow much Saving Percent

Interpretation:

It is observed from the above diagram that out of the total 152 samples maximum people save from 0 – 5%( i.e. 84 people)

Where do you keep your savings?

Where do you keep your savings

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Savings Bank Account 97 63.81Cash at Home 41 26.97

Investment Alternatives 10 6.578Not Applicable 4 2.63

Total 152 100

Frequency

Savings Bank AccountCash at HomeInvestment AlternativesNot Applicable

Interpretation:

It is observed from the above diagram that maximum people (i.e. 97) save money in savings account. They also save money at home (i.e. 41 samples). 6.578% people look out for investment options to save their money.

Do you have a bank account?

Do you have a bank account

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Bank account Frequency Percent

Yes 124 81.57

No 28 18.42

Total 152 100

Yes No Total0

50

100

150

200

250

300

PercentFrequency

Interpretation:

It is observed from the above diagram that out of the total 152 samples, 124 samples (i.e. 81.57%) have a bank account and the remaining done have a bank account.

If Yes-

if Yes

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If Yes Frequency Percent

1 Bank Account 66 43.422 - 4 Bank Accounts 41 26.97

Recurring Bank Accounts 2 1.31Savings Bank Account 20 13.15Fixed Deposit Account 23 15.13

Total 152 100

1 Bank Account

2 - 4 Bank Accounts

Recurring Bank Accounts

Savings Bank Account

Fixed Deposit Account

Total

0 20 40 60 80 100 120 140 160

PercentFrequency

Interpretation:

It is observed from the above diagram that maximum number of people have 1 bank account (i.e. 43.42%), 26.97% samples have 2 or more accounts. 13.15% people have savings bank account and 15.13 % people have fixed deposit.

Reasons for not having a bank account:

Reasons for not having a bank account

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Reasons Frequency Percent

Cannot afford service charges 4 2.63Not aware of the benefits 10 6.57

Tried but refused 8 5.26Tedious Procedure and paperwork 19 12.5

Lack of awareness 17 11.18Not applicable 94 61.84

Total 152 100

Frequency

Cannot afford service chargesNot aware of the benefitsTried but refusedTedious Procedure and paperworkLack of awarenessNot applicable

Interpretation:

It is observed from the above diagram that the most prevalent reason for not having a bank account is people find it tedious to complete the banking formalities (i.e. 12.5%). 11.18% of sample population is not aware of the banking facilities. 6.57% of sampling population is not aware of the benefits of a bank. 5.26% people wanted to open a bank account but were not allowed to open a account by the bank. 2.63% population cannot afford the service charges of the bank and hence do not have a bank account.

Problems while opening an account:

Problems while opening a account

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Problems Frequency Percent

Not finding an introductory to open the account 36 23.68

Not possessing documents regarding proof 33 21.71

Not Applicable 83 54.6

Total 152 100

Not finding an introductory to open the account

Not possesing documents regarding proof

Not Applicable

0 20 40 60 80 100 120 140 160

FrequencyPercent

Interpretation:

It is observed from the above diagram that people who try to open an account face problems while opening an account. 36 samples (i.e. 23.68%) had problems finding an intermediatary to open an account. 33 samples (i.e. 21.71%) could not open an account as they did not have the documents required by the banks.

How far is the bank?

How far is the bank

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Distance Frequency Percent

0-2 kms 75 49.34

2-5 kms 46 30.26

No problem 31 20.39

Total 152 100

49.34

30.26

20.39

100

0-2 kms2-5 kmsNo problemTotal

Interpretation:

It is observed from the above diagram that out of the total 152 samples, the banks are situated by 0—2 kms from their houses for 49.34% of sample population. 30.26% sample population has to travel 2-5 kms to avail the facilities of a bank and 20.39% have no problems reaching a bank close to them.

What services do you avail from the bank?

What services do you avail from bank

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Services Frequency Percent

1 service products 88 57.89

2 service/ products 17 11.184

3 services/ products 18 11.84


Total 152 100

1 servi

ce pro

ducts

2 servi

ce/ pro

ducts

3 servi

ces/ p

roducts

Not Applica

bleTo

tal0

50

100

150

200

250

300

88

17 18 29

152

What services do you avail from bank PercentWhat services do you avail from bank Frequency

Interpretation:

It is observed from the above diagram that out of the total 152 samples maximum people (i.e. 57.89%) have at least one service or product from the bank. 11.18% of sample population has 2 services or products, 11.84% of sample population has 3 services or products.

What is the purpose of use of account?

Purpose of use of account

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Purpose Frequency Percent

Withdrawal and Deposit 62 40.78

Accumulating funds/ earning interest 20 13.15

Making and receiving payments 31 20.39

To become eligible for other services 11 7.23


Total 152 100

62

2031

11

28

purpose of use of account Frequency

Withdrawal and DepositAccumulating funds/ earning in-terestMaking and receiving paymentsTo become elegible for other servicesNot Applicable

Interpretation:

It is observed from the above diagram that out of the total 152 samples 62 samples use their account for withdrawal and deposit purposes. 31 sample population use the bank account to make and receive payments. 28 sample population use the account to accumulate interest and 11 people use an account so that they can be eligible for bank offers.

Perception towards account:

Perception towards account

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Perception towards account Frequency Percent

Trust 50 32.89

Need 76 50

Time and cost constraint 26 17.1

Total 152 100

Trust Need Time and cost constraint

Total0

20

40

60

80

100

120

140

160

50

76

26

152

32.89

50

17.1

100

Perception towards account FrequencyPerception towards account Percent

Interpretation:

It is observed from the above diagram that 76 sample population (i.e. 50%) people us their account as they need it. 50 samples (i.e. 32.89%) trust a bank and its services. 26 samples (i.e. 17.1%) think of bank as time and cost constraint.

Purpose for borrowing?

Purpose for borrowing

50 | P a g e

Purpose Frequency Percent

Funding Business 44 28.94

Personal 60 39.47

Education and children 25 16.44

Residential purpose 22 14.47


Total 152 100

Funding Business

Personal

Education and children

Residential purpose

Not Applicable

Total

0 20 40 60 80 100 120 140 160

44

60

25

22

1

152

28.94

39.47

16.44

14.47

0.650000000000001

100

Purpose for borrowing PercentPurpose for borrowing Frequency

Interpretation:

It is observed from the above diagram that out of the total 152 maximum people (i.e. 39.47%) borrow for their personal reasons. 28.94% samples borrow to fund their businesses and 16.44% samples borrow for their children and education purposes. 14.47% samples borrow for residential purpose.

Source of borrowing:

Source of borrowing

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Source Frequency Percent

Money lenders 32 21.05

NGO's 6 3.94

Friends and Relatives 28 18.42

Bank 66 43.42

Self Help Groups 20 13.15

Total 152 100

21.05

3.94

18.4243.42

13.15

Money lendersNGO'sFriends and RelativesBankSelf Help Groups

Interpretation:

It is observed from the above diagram that out of the total 152 samples maximum people (i.e. 43.42%) turn to banks for borrowing money, 21.05% sample population turns to moneylenders, 18.42% borrow from friends and relatives, 13.15% people ask Self Help groups and 3.94% turn to NGO’s for borrowing cash.

Have you taken guidance for-

Have you taken advice about

52 | P a g e

Advice Frequency Percent

Financial Advice 79 51.97

Credit guidance 11 7.23

Financial Planning 13 8.55

yes 28 18.42

No 20 13.15


Total 152 100

Finan

cial A

dvice

Credit g

uidance

Finan

cial P

lanning ye

s No

Not Applica

ble0

20

40

60

80

100

120

140

79

11 1328 20

1

51.97

7.23 8.55

18.4213.15

0.65

Have you taken advice about PercentHave you taken advice about Frequency

Interpretation:

It is observed from the above diagram that out of the total 152 samples maximum people (i.e.51.87%) have asked for financial guidance, 7.23% samples have asked for credit guidance, 8.55% sample population has asked guidance for financial planning.

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FINDINGS

FINDINGS

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Findings shed light on the status of poverty in India, gender-ed exclusion in India, drop in growth of SHG-Linkage program, agricultural credit decline and no-frills account activity in India

The banks are shown a great initiative in accommodating the lower sector of population towards saving.

The number of males applying for accounts is higher than female, however female participation is rising.

The people trust banks for savings other than other investment options.

The earning pattern influences the saving behaviour of the people.

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SUGGESTIONS

SUGGESTIONS

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There should be equal preference given to male and female population towards financial inclusion.

The number of branches needs to increase so that the banks reach the maximum populations.

The bank correspondents need to cover maximum area.

The bank should focus on financial literacy to enhance the effectiveness of Financial Inclusion.

The paperwork should be reduced so that maximum people will approach banks.

Concentration should be given more to unemployed people so that it will serve the purpose.

Banks should convey message by user friendly approach so that people are confident to use the service.

The need to improve marketing strategy to create awareness of Financial benefits provided their Bank

57 | P a g e

Financial Inclusion FinalReport

Documents

Transcript of Financial Inclusion FinalReport