Financial Inclusion Drive of J&K Bank:

A Study on customer satisfaction towards No-Frills Account

Undertaken At

Under the supervision of: Presented By:

Mr. M H Makhdoomi Suhail Qasim Mir

Director RSETI,Anantnag 12-MBA-69

Company Profile:

Founded on October 1,1938 and it commenced business from July 4,1939

Was started with a share capital of Rs 6 lac

A billion dollar company

685 Branches and 613 ATMs across the country

Governed by the Companies Act and Banking Regulation Act of India

Regulated by RBI and SEBI.

It finds a listing on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) as well.

Extent of Financial Exclusion-Global

2.5 billion adults, just over half of world’s

adult population, do not use formal

financial services to save or borrow.

2.2 billion of these unserved adults live in

Africa, Asia, Latin America, and the Middle East.

Of the 1.2 billion adults who use formal financial

services in Africa, Asia, and the Middle East, at least

two-thirds, a little more than 800 million

live on less than $5 per day.

Not an Indian specific problem but a global one

Extent of Financial Exclusion-India

In India, almost half the country is unbanked.

India has the highest number of households (145 million) excluded from Banking.

There is only one bank branch per 14,000 people.

Just 18 per cent have debit cards and less than 2 per cent have credit cards.

Exclusion is staggering whichever parameter one chooses to look at !

What is Financial Inclusion?

Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players.

In advanced economies, Financial Inclusion is more about the knowledge of fair and transparent financial products and a focus on financial literacy.

In emerging economies, it is a question of both access to financial products and knowledge about their fairness and transparency.

What has been done so far…

(RBI Initiatives….)

Opening of No-Frills accountsRelaxation on know-your-customer (KYC) normsEngaging business correspondents (BCs)Financial Literacy and Credit Counseling Centers

(FLCCCs) Use of technologySimplified branch authorization Opening of branches in unbanked rural centers

Achievements so far….

Banking connectivity has been extended to 2,11,234 villages up to December 31, 2012 from 67,694 villages in March 2010. 5694 rural branches have been opened.

Numbers of Business Correspondents have increased from 34,532 to 1,52,328.

1714.27 lakh Basic Savings Bank Deposit Accounts, 317.33 lakh Kisan Credit Cards and 31.14 lakh General Credit Cards remain outstanding as on December 31, 2012.

658 Financial Literacy Centers (FLCs) functioning as at the end of December 2012

1.5 million people educated during the period April to December 2012

The State of Jammu and Kashmir lags behind other states in its vital Financial Inclusion Indicators; Credit-Deposit Ratio at a meagre 35.71 against the benchmark 60, and Financial Exclusion to the extent of 68% which is highest in the Northern Region.

Research Objectives:To check how effectively the financial inclusion drive

is being carried out at the Bank

To check the level of awareness with the SB Ujjala No-Frills Account”

J&k Bank Initiatives…

Khidmat Centers:

Common Service Centers or Khidmat Centers offer the following services:

One can get his documents Photostatted, Digital photograph, Copy of land record, Copy of registration, Date of birth certificate, Death of certificate, Lodge FIR, Ration card, Deposit small sum of money, Withdraw small of money, Loan application form, Saving account opening forms and Most important many information about banks schemes and products. It is very

beneficial for the customers.

‘Swabhimaan Campaign’ for coverage of villages with

population > 2000

Under Financial Inclusion Plan (FIP) of J&K State (under ‘Swabhimaan’ campaign of GOI), 795 identified unbanked villages (having population over 2000) were allocated among 5 major banks for providing banking services(ICT) to these villages.

The target of providing (ICT)-based banking services in 795 identified unbanked villages (having population over 2,000) was almost accomplished, leaving only nine villages uncovered due to lack of connectivity and other infrastructural deficiencies at these places.

Provision of banking services to villages with population below

2000In the phase-II of Financial Inclusion Plan (FIP) in terms of Reserve Bank of India guidelines ; a total of 5582 villages (having population less than 2000) were identified.

Of the total 5582 villages(having population less than 2000), 1093 villages were allotted to J&k Bank, out of which in 981 villages,business Correspondents (BCs) have been rolled out for extending ICT enabled financial services through the operation of smart cards

Branch Expansion Plan of J&K Bank:

Pursuant to the GoI, MoF directive all banks operating in J&K State had submitted to GoI, MoF their Branch Expansion Plans for J&K State envisaging a total of 209 new branches to be opened in the State.

Name of The Bank No of Branches

under BEP

Progress achieved

upto the end of

March 2013

Backlog/No. of

branches yet to be

opened

J&K Bank 114 99 15

Financial Literacy Centers (FLCs):

Financial Literacy Centers (FLCs) will impart financial literacy in the form of simple messages like:

Why Save?

Why save early in your Life?

Why save with banks?

Why borrow from Banks?

Why borrow as far as possible for

income generating activities?

Why repay in time?

Why insure yourself?

And why save for your retirement? etc.

Setting up of Rural Self-Employment Training Institutes

(RSETIs):

RSETIs are Rural Self Employment Training Institutes, an initiative of Ministry of Rural Development (MoRD) to impart training and skill up gradation of rural youth geared towards entrepreneurship development.

The responsibility of setting up RSETIs in all the districts of J&K State was assigned by J&K SLBC to J&K Bank in 12 districts and to SBI in 10 districts in accordance with the lead bank responsibilities assigned to them by RBI in the State.

As on 31.3.2013 J&K Bank has operationalized RSETIs in all the 12 districts allocated to it by the J&K SLBC, viz. Districts Srinagar, Ganderbal, Budgam, Baramulla, Bandipora, Kupwara, Anantnag, Kulgam, Pulwama, Shopian, Rajouri and Poonch

FIP of J&K Bank, Achievements so far..

1,928 identified unbanked villages have been provided with Business Correspondents (BCs),

a) 420 self-set target villages. b) 527 above-2,000 population villagesc) 981 below-2,000 population villages

629 Village Level Entrepreneurs (VLEs) of CSCs have been engaged as BCs and are linked to 351 base branches/business units for providing ICT-enabled financial services

9.09 lac accounts have been opened in 1,928 villages, comprising 4.61 lac no-frills/saving bank deposits accounts and 4.48 lac other accounts.

Achievements Continued…

Household coverage has reached 54.60% in 1,928 rolled out villages.

1.53 lac Smart Cards have been delivered to concerned business units

15 model villages selected by RBI for 100% financial inclusion in the state have been allocated to J&K Bank, which are operational and transactions are taking place through the operation of smart cards. 4,819 smart cards have been issued in 15 RBI-selected villages.

357 outdoor financial literacy camps have been conducted in the lead districts and 41,779 persons have attended the camps.

SB Ujjala-No Frills Account

Characteristics :

Minimum initial deposit is 50/-

The maximum balance in a SB Ujjala account shall be 50,000/-.

The maximum credits allowed in a SB Ujjala account should not exceed 1,00,000/- in a year.

4 withdrawals permissible per month.

Cheque book facility available to account holder/s maintaining average quarterly balance of 1000/- and above for past 6 months

Interest Rate 4%

Research/Survey

Topic Of The Research: Financial inclusion drive of J&K Bank: A study on customer satisfaction towards No-Frills Account

Nature Of Work: Field based

Research Type: Descriptive research

Data Type:Primary Through -Questionnaire

Secondary Through- Company's website, Reports of company, Articles, Research Papers

Sampling: Non-random using convenient and judgment sampling

Sample Size: 115

DATA ANALYSIS AND INTERPRETATION

Respondents Having Bank Account

Interpretation:

Out of the total 115 respondents asked, 88 have account and 27 don’t have any

75%

25%

Yes

No

Distribution of Accounts to various banks

Interpretation:

Out of 88 respondents having a bank account, 74 have it in J&K Bank, 10 have it in SBI and 4 have it in other banks. This infers that J&K Bank is almost in monopoly in the state

64%9%

24%

3%

j & k bank account holders

SBI

No account

Other Banks

Level of awareness with the financial inclusion plan (FIP) of

J & K bank

Interpretation:

Out of 115 respondents asked, 14 persons have high, 33 have medium, 9 have low and 59 have very low level of awareness with the financial inclusion plan of the j & k bank.

12%

29%

8%

51%High

Medium

Low

Very low

Level Of Awareness About The Concerned Village Being Under The FIP

Interpretation:

Out of 115 respondents asked 41 persons knew that their village was under the financial inclusion plan while as 74 didn’t know about this.

36%

64%yes

no

Do you know that you can open an account with zero balance at J&K Bank?

Interpretation:

Out of 115 persons asked 57 said that they knew about the zero balance (No Frills) account while 58 said that they didn’t Knowledge regarding No-Frills account among people is more than the knowledge about FI drive of the bank. This is because J&K Bank had opened many zero balance accounts for students.

50%50%

Yes

No

Reason for opening No Frills Account

Interpretation:

Out of 29 persons having No-Frills account,17 opened it to receive scholarship payment,2 for managing day to day expenses,3 for earning interest on savings,5 for small savings and 2 to get access to loans

Most of the respondents opened it to get funds from somewhere e.g., wages under NAREGA, old age pension, financial assistance for construction of room under Indira Awaas Yojana

59%

7%

10%

17%7%

To receive scholarship payment

For managing day to day(small)expenses

Earn interest on saving

For small savings

To get access to loans

Reason for Liking the No-Frills Account

Interpretation:

Out of 29 respondents who like no-frills account, 20 like it because it has least formalities and 9 like it for being free of cost.

69%

31%

Least formalities

Free of cost

Did you face any difficulty in opening the No-Frills Account?

Interpretation:

2 out of total 29 respondents with No-Frills Account faced difficulty in openingNo-Frills account, while 27 didn’t

93%

7%

No

Yes

How often do you use your No-Frills Account?

Interpretation:

Out of the 29 respondents having No-Frills Account 12 use it when scholarship amounts are credited,10 have used it just once after opening,7 use it once in a month while 2 use it 2-4 times a month

23%

6%

0%39%

32%

Once in a month

2-4 times a month

weekly

When scholarship amount is credited

Only once after opening

Did you ever take any loan from your No-Frills Account?

Interpretation:

Out of 29 respondents having No-Frills Account, 3 had taken loan while 26 had not

10%

90%

Yes

No

Knowledge Regarding Basic Features of No-Frills Account

Interpretation:

15 had knowledge about maximum deposits limit

14 knew about max credit limit

21 had knowledge about the interest rate and

9 knew about max withdrawals per month

0

20

40

Max Deposits

Max Credit Interest rate

Max withdrawls per month

15 1421

9

What is your satisfaction level towards No Frills Account?

Interpretation:

Of the total 29 respondents with No-Frills Account,3 rated their satisfaction level as “Excellent”,14 rated as “Very Good”,10 rated as “Good” and 2 persons rated their satisfaction level as “Fair”

10%

48%

35%

7%

0%0%

Excellent

Very Good

Good

Fair

Bad

Very Bad

Findings:

J & K bank is almost in monopoly in the state with almost 80% of the market share

Only 36% of population has information about their village being under the financial inclusion

Almost 50% of the population knew that they can open an account with zero balance at J&K Bank

Majority of the population (59%) opened No-Frills Account to receive funds from somewhere

J&K Bank has implemented Saving-Ujjala account very effectively at operational level as 93% respondents did not face any difficulty in opening these accounts.

Frequency of usage of the account is not very high

90% of people never took any loan from No-Frills Account

The level of awareness regarding basic features of No-Frills Account is not upto the mark.

Suggestions and Recommendations:

The Bank should study the causes of financial exclusion and design strategies to ensure inclusion of the poor and disadvantaged

Although, the bank claims to have attained 83% financial inclusion in the study area, the survey conducted during the course of the study revealed that only 50-55% inclusion has been attained.

Disparity in savings and expenditure pattern. The design of no frills SB-Ujjala account should conform well to the saving and expenditure pattern of the people

In a few villages, the focus of the bank was confined to ensuring a bare minimum access to bank accounts without frills. There is no follow up

In case of emergency, people find it convenient to approach non-institutional sources for their credit needs. Need specific loans / credit schemes can attract the people towards the banking sphere.

J & k Bank should also demand from the Govt. interest subsidy as other nationalized banks are availing to compete with other banks.

Policy makers at different levels, - at headquarter level, zonal heads and other staff at zonal office level & even staff at operational level should know that how important the subject is for the progress and growth of bank and the country.

Technology can be a very valuable tool