INANCIAL INCLUSION

- A path towards India’s future economic growth

by
Dr. K. Ravichandran, Dr. Khalid Alkhathlan Assistant Professor,
King Saud University, Saudi Arabia
SYNOPSIS:
Though our country's economy is growing around 9 percent, still the growth is
not inclusive with the economic condition of the people in rural areas worsening
further. One of the typical reasons for poverty is being financially excluded. Though
there are few people who are enjoying all kinds of services from savings to net
banking, but still in our country around 40% of people lack access to even basic
financial services like savings, credit and insurance facilities. So an inclusive sector
should not only serve the bankable clients, but also integrate the "unbankable"
clients by making them "bankable". Many actions taken by the government like
Nationalizing of Banks, 40% of credit targets to priority sector, opening of RRBs and
LABs, etc for past three decades are one form of financial inclusion, but still around
80 % of rural households do not have access to credit from a formal source. So as a
last door step to Financial Inclusion, RBI came up with an initiative of launching
National pilot project on Financial Inclusion in Puducherry in 2005. The specialty of
this Financial Inclusion project is that accounts are opened by the bank officials at
the doorsteps of households without insisting on any minimum balance or deposits.
Let us analyze in depth that whether bringing people under banking category by this
financial inclusion project helps in achieving the ultimate goal of lifting the standard
of living of The Poor and reduce poverty in our country.

Introduction to Indian Economy

India is a country with diverse socio-economic condition along with

diverse agro climatic situation. The growth trend of the Indian economy over the last
few years appears to indicate the beginning of a new phase of higher growth.
Though few decades ago, our country' economy was agricultural dependent one,
now it more of service dependent and growth rate of agriculture is just above 2% and
it contributes less than 22% to our country's GDP with 60% of the population depend

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on agriculture. Further, this development or growth is not an even one, throughout
the country, while urban regions are growing at greater rate; rural areas are still
remaining stagnant. Further the Gini Index shows, the gap between the rich and the
poor households keeps on increasing, thereby condition of the poor worsening
further. As per the statistical data, around 26% of the population are below the
poverty line, but let us first try to understand what poverty is and how it is measured
in India and Internationally.

Statistics of Banks in Tamilnadu:

Total No. of
Banks in Tamilnadu Number Branches
Total Bank Offices 71 4880
State Bank Group 8 728
Nationalized Banks 19 2822
Other Scheduled Banks (Commercial) 27 1093
Regional Rural Banks 3 215
Foreign Banks 14 22
Source: RBI

What is Financial Inclusion?

Financial Inclusion is about delivery of banking services at an affordable cost

to vast sections of disadvantaged, first step in FI is to facilitate people in getting
basic facilities like food, shelter and clothing to the people and then comes the
provision of bank account, wherein they can save whatever little they can.
Financial Inclusion can be thought of in two ways. One is exclusion from the
payments system –i.e. not having access to a bank account. The second type of
exclusion is from formal credit markets, requiring the excluded to approach informal
and exploitative markets.

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 FINANCIAL SOURCES & SERVICES ACCESSIBLE TO A COMMON MAN

BANKS

State Bank & Public Sector Banks Private Sector RRB &
its associates Banks LAB

Co-operative
societies MFI

NBFC
Post
offices

Money
Govt. Lenders

Loans Parameters:
NGO
1. Interest rate
Credit/Debit 2. Repayment Schedule
Cards 3. Repayment mode SHG

Insurance
Policies

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Financial Exclusion:

Financial Exclusion signifies lack of access by certain segments of society to low-

cost, fair and safe financial product and services from main stream providers. It is
mainly denial or inaccessibility to some basic financial services due to various factors
like social & economic position, financial literacy, distance in traveling, hours of
operation, etc.
Though there are nearly 33000 bank branches situated in rural areas, extend
of financial exclusion is such that around 41% of the population is unbanked or
denied of financial services. In rural areas the coverage is 39 per cent against 60 per
cent in urban areas.
Measure of Financial Exclusion

Number of savings accounts to adult Number of Loan accounts to Adult

population population

. india

14

25
80 60 66 59 southern
52

13
37 western
34
central

9
8
eastern
S1 North-eastern
7

12
Northern
Northern

western
central
eastern

eastern

southern

india
North-

0 5 10 15 20 25 30

Series1

The extent of exclusion from credit markets can be observed from a different
view point. Out of 203 million households in the country, 147 million are in rural
areas – 89 million are farmer households. 51.4 per cent of farm households have no
access to formal or informal sources of credit while 73 per cent have no access to
formal sources of credit

Moneylender's share in debt of Rural

HH
50
40
40
29.6
30 25
1980
17.5
20 2002
10
0
Rural Urban

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Who are the excluded?

The financially excluded sections largely comprises of marginal farmers,

landless laborers, self employed and unorganized sector enterprises, urban slum
dwellers, migrants, ethnic minorities and socially excluded groups, senior citizens
and women. The majority of the group included those people living in rural areas
and inaccessible to financial services.

Reasons for financial exclusion:

There are a variety of reasons for Financial Inclusion. In remote, hilly and sparsely
populated areas with poor infrastructure, physical access itself acts as a deterrent.
From the demand side, lack of awareness, low incomes/assets, social exclusion,
illiteracy act as barriers. From the supply side, distance from branch, branch timings,
cumbersome documentation and procedures, unsuitable products, language, staff
attitudes are common reasons for exclusion. All these result in higher transaction
cost apart from procedural hassles. On the other hand, the ease of availability of
informal credit sources makes these popular even if costlier. The requirements of
independent documentary proof of identity and address can be a very important
barrier in having a bank account especially for migrants and slum dwellers.

Thus the above barriers should be overcome and reaching out to the people
lying at the bottom of the pyramid has become the order of the day. So the financial
sector is one that has the most important role to play in unleashing this potential and
thereby comes the role of Financial Inclusion.

FINANCIAL INCLUSION MODELS:

Bank – SHG Linkage Model:

This is one of the most popular and successful model being incorporated and
followed by all public and private sector banks now-a-days. The banks may perform
the role of formation of Shags in the case of the direct linkage model. The banks are
also responsible for granting credit to the SHG in a quantum proportional to their
savings. Banks derive the following benefits from the SHG implementation.

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There are three types of Models of Linkage
a. SHG formed and financed by banks
b. SHG formed by formal agencies other than banks, but directly financed by
banks
c. SHG financed by banks using NGOs and other agencies as financial
intermediaries.

Bank – MFI linkage Model:

MFIs are to be seen as the last mile—the connecting link to the rest of
the financial sector. They’ve developed technology that banks do not have. If banks
get into the business of organizing groups and all, they won’t be able to do it
effectively. So this is where the partnership model of Bank – MFI comes into picture.
One such recent model is ICICI Partnership Model.
ICICI Partnership Model:
A direct banking model was not an appropriate one for the very poor in India
and so a large bank like ICICI bank was able to raise equity capital (close to $2
billion), design financial products (mezzanine equity for example), raise resources,
financial engineering (for example securitization) and deploy technology.

Starting with the Partnership Model ICICI had gradually developed a

comprehensive plan for the provision of financial services within rural India with a
hybrid channel and product structure designed around one coordinating branch per
district, with franchisees, internet kiosks and micro finance institutions forming an
interdependent delivery chain to deliver credit, savings, insurance and risk
management products to the full range of rural customers.

The aim, over the next three to four years, is to go to 450 of the 640 districts
that make up rural India with this No White Spaces (NWS) approach under which no
individual would be more than 5 to 10 kilometers away from an ICICI Bank touch
point. This model allows them to offer a complete suite of products, with all of the
necessary documentation and technical support close at hand, to the micro finance
customer. It also allows people as a bank to participate not just in lending to
individuals but also in rural infrastructure finance and rural corporate finance—both
very necessary for the comprehensive growth and development of rural India.

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CITI BANK Tie up with SKS Microfinance pvt. Ltd – This is a 180 crore program
to extend micro credit in rural areas. This deal would add 2.5 lakh client to existing
6.5 lakh clients. The programme would deliver loans ranging from Rs 5,000 to
Rs.20000 in over 7,000 un-banked villages in the country where SKS was present
through its 49 branches. The interest rate will be 24% for AP region and 28% for rest
of areas

MF-NBFC Model:

MF-NBFC is new category of Non banking Finance Company in providing micro-

finance services to the rural, semi-urban and urban poor. MF-NBFC should be
defined as a company that provides thrift, credit, micro-insurance, remittances and
other financial services up to a specified amount to the poor in rural, urban and semi-
urban areas. MF-NBFCs are expected to be larger, with a stronger capital base and
more highly regulated than NGOs.

Post Office Model:

Bank - Post office Model:

Apart from savings deposit, money transfer, parcel sending, etc Post offices
are also engaged in new services like granting retail credits or selling insurance
products either directly or on behalf of commercial banks. Further Financial services
can also be offered with public-private partnerships with distribution taken care of
post offices. - POSTAL BANKS. Let use see many such models followed in various
other countries latter and before that let us find out how post offices can be an
effective intermediary for distributing financial services.

Review of Literature:

Studies & Conferences on Financial Inclusion:

I. A study from nesds.gov.UK: on financial inclusion

Financial inclusion is an important element in tackling poverty and ensuring social
justice. Getting basic banking right is the first essential step towards financial
inclusion. The banking industry’s lack of experience in dealing with this group of

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consumers has resulted in a mismatch between customers’ money management
needs and the basic bank accounts on offer. Our research shows that, despite over
six million basic accounts being opened, low-income and financially excluded
consumers continue to experience barriers to banking. Various financial education
initiatives and forthcoming work on the creation of a national generic financial advice
service, all aim to improve the skills, confidence and information that excluded
people need to make use of financial services. every basic bank account to be
hassle-free to open, and to offer a standard set of features and innovative additional
features to meet the needs of consumers.

II. UN conference on financial inclusion in Africa - Doha conference:

The Conference will address the challenges and constraints to building inclusive
financial sectors in Africa. In most developing countries, financial services are only
available to a minority of the population. Most people in these countries do not have
savings accounts, do not receive credit from formal financial institutions, and do not
have any type of insurance. In the Least Developed Countries more than 90 percent
of the population is excluded from the formal financial system. The Least Developed
Countries are those where the average income is generally less than $1 per day,
and most of the Least Developed Countries are in Africa. During the International
Year of Micro credit (2005), the United Nations called together a large number of
global decision makers and financial sector leaders to explore why the majority of the
world’s poor people and micro and small enterprises are denied access to basic
financial services. The result of this year-long consultation is Building Inclusive
Financial Sectors for Development, also known as “The Blue Book”. The Blue Book
was prepared as a tool and a guide for policy makers who seek to build inclusive
financial sectors in their countries
It follows a three-step process of Financial Sector Development approach
(i) Conducting a financial sector assessment in each country
(ii) Working through an open, participatory process with multiple stakeholders
to develop policy, strategy, and a national action plan for building an
inclusive financial sector
(iii) Assisting policy makers and a broad range of financial institutions,
development agencies, the private sector, and other financial market
participants to implement this action plan

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III. Dakar Conference in Africa

The Dakar Conference will have the following objectives: To disseminate and
discuss the recommendations of the Blue Book in the context of Africa;

• To share experiences in building inclusive financial sectors in Africa and

first lessons learned in these efforts;
• To discuss majors challenges, constraints and opportunities for expanding
access to financial services in Africa in the coming five years; and
• To give the opportunity to UN organizations, the Bretton Woods
Institutions and other development agencies, donors, and private sector
participants to discuss the best way to strengthen financial sectors and
increase aid effectiveness when building inclusive financial sectors in
Africa.

The Dakar Conference will have the following expected outcomes: Deeper
understanding of the experience, issues, and challenges when considering financial
inclusion in Africa.

Objectives of the study:

1) To find out the steps taken by the banks in the area of financial
inclusion.
2) To find out how are the schemes of RBI on financial inclusion is taken
into account.
3) To identify various steps and mechanisms to strengthen SHG lending.
4) To explore the possibilities of implementing Micro Insurance.
5) To find out other feasible models in financial Inclusion.

Research Methodology:

Type of Research – Exploratory Research & Descriptive research

Sampling area : Pondicherry & Cuddalore District
No. of sample: 6 Branch Managers & 15 bank coordinators in Both the district.

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 46 samples were collected from 5 villages
Sampling selection: convenient sampling
Type of Data – Primary Data
A separate structured questionnaire is administered for managers &
customers and the results are summarized.

Summary of Survey Results:

1. 6 bank branches have been surveyed. Out of 6, 4 branches in Pondicherry

and 2 in Cuddalore
2. The farthest distance of a village from a bank branch goes up to 20 Km under
service area scheme
3. Time take for the financial inclusion project varies from 3 months to 12 months
based on the target number of households
4. Average HH covered per month varies from 328 to 1100
5. Average accounts opened per HH varies from 1 to 4
6. Total number of employees working in the branch varies from 5 to 16
7. The category of Business facilitators used is mostly SHG. In some cases,
students and unemployed persons are used. In one case, it is outsourced to
private organization. The number of bank official accompanied with those
business facilitators for verification varies from 2 to 4 based on staff strength.
8. The overall cost spent per account varies from Rs.10 to Rs.30 and overall
cost goes up to Rs1.8 lakhs.
9. Most of the banks graded direct approach to customers and through SHG to
be more effective promotion tool compared to advertisement through
newspapers or pamphlets.
10. Three out of six banks has already converted to CBS (Core Banking Solution)
and rest of bank branches are in process of conversion to CBS from TBC.
They feel the new technology is tedious and cumbersome, which cause some
delay in creation of accounts, but over long term CBS is essential tool.
11. Also three out of 6 banks maintain a separate database to enter and monitor
the financial inclusion progress. One bank has prepared a detailed list of all
the family heads of households, village wise and they maintain a separate
database which can be used for any future purpose

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 12. Based on various banks opinion about reduction in money lenders, they
accept that this Financial Inclusion has definitely reduced money lenders, but
to what extent it depends on the bank branches and villages. On a overall
basis, it seems there is 60 % reduction in money lenders
13. On an average deposit mobilization of the banks varies from at least 5 lakhs
to 15 lakhs and it goes up to maximum of 30 lakhs.
14. Almost all the bank branches are ready to increase their credit limits ranging
from 1 to 4 crores
15. Only two out of 6 banks are providing counseling to people regarding loans
and managing debts, while rest of banks will be doing it in future.
16. For the facilities available in the bank branch, 7 of the necessary facilities are
take for the survey and based on the available of that facility now or in future,
banks have been graded points. The table in the annexure shows the grading
and effective provision of the facilities in the bank. The overall percentage
ranges from 60 to 85% and banks are continuously upgrading with facilities
for better customer service in future
17. Further various methodologies used by banks to attract customers, difficulties
banks have encountered during project implementation, benefits enjoyed by
the banks from this project, their future plans in reducing processing cost,
overall feed back about the project and the support they require to carryover
to next stage.

Suggestions to facilitate Financial Inclusion:

a. Ensure Banks to Grant Credit Facilities: As already RBI has taken the
initiative in granting small credit facilities in form of Over Drafts, GCC/KCC,
etc, they can ensure banks to grant such small credit facilities and the credit
amount can be increased based on successful repayment of credit obtained.
b. More use of Mobile banking to reduce opportunity cost in rural areas:
Banks will have to reach out through a variety of devices such as weekly
banking, mobile banking, satellite offices, rural ATMs. Since mobiles has
penetrated to greater extent they can used for sending information regarding
attractive schemes, account balances, loan and interest payable, etc for SB

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 account holder and even receipt of salaries, pensions and payments for
utilities, information regarding loans, insurance and MF products
c. More use of Business Facilitator & Correspondent Models: Since, many
bank branches are suffering from staff shortages, they should make use of
more people of SHG group or NGO or even Village heads and other retired
teachers & officials as business facilitators or even business correspondents
for surveying and account opening. Also they can also use local community
based organizations and post offices for availing the knowledge about the
customers in order to reduce the credit risk and transaction cost.
d. Inspection of Infrastructure of bank branches: During the field visit, few
customers have expressed their dissatisfaction with bank services in few
areas particularly about the floor space, delay in service and information
available in the bank branches. RBI can directly or indirectly carry out
inspection in certain rural branches to make sure they provide the basic
infrastructure facilities and information required by the customer. Since if this
is not ensured and if people are not happy with banking service, it will be a
setback to financial inclusion project.
e. Directing government benefits through service area Banks: Any
government or social security payments or payments under all the
government schemes should be strictly routed through the service area bank
account. This will make people in rural areas to compulsorily have an account
in their service area branch to avail the government benefits

Proposed Models in facilitating Financial Inclusion:

As we already seen about existing models like Bank-SHG linkage, Bank –MFI
linkage and Postal Bank Models. Let us see some more models and suggestions
that can lead to inclusive growth in future.

A. Rural Students Banking Model: As already RBI has taken initiative in

bringing majority of adult population into bankable category, it can also ask
the corresponding bank branches to have an tie-up with schools and colleges
within service area to provide No-frill account to all students of class above
tenth standard. This model is specifically for rural areas, as in urban areas

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 banks are even looking for KIDS banking in future. This step can make
students well familiar with banking operation and services. Though the cost in
maintaining these accounts for banks will be increased initially, in long term
this can be very profitable for banks by granting educational loans to
meritorious students and also any scholarship to students from government
can be directed to the service area bank.
B. Financial Education - Framing Book Model: As we already talk more on
importance of financial education and literacy and people, we can also devise
a frame work model on what should be exactly thought to the people in rural
areas, since too much of things, will also confuse them. This model can be in
form of a book, which can be something like "Significance of possessing a
Bank Account". The book should be covered from customer point of view
giving the importance of having a bank account and detailed instructions in
use of some basic banking services like Pass books, Cheques, DD, etc. It can
give details of various credit facilities available, various government schemes,
significance of SHG and some more financial products and services like ATM,
Credit cards, Insurance policies, Money Transfer, Mobile Banking, etc. The
book should be in vernacular language and should be in such a simple format
which can easily understood and get familiar within two weeks. The books
should be provided for sale in all bank branches, government offices, shops at
minimum cost. If this model is properly executed, it can definitely add some
value in the education people on financial services.
C. Extended Bank - Joint MFI Model: Based on the success of the Bank -
SHG Model, the next successful model being now followed by many banks is
Banks - MFI linkage Model. Here the MFI borrow money from banks at PLR
and lend it at an interest rate, slightly higher based on their administration
cost. Though, very few MFIs are charging high interest rates, MFIs are at
present turned to be most successive institutes for providing small credits
facilities and many private banks too are adopting to it.
So in this circumstance, realizing the importance of MFI in promoting
rural credits more, even a group of public sector branches can promote or
start their own MFI on regional basis. This new MFI can be started with help
of the local people and administrated by a common team comprising of official
from all bank branches in that area. This MFI can take care of small credits

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 facilities like Over Drafts ranging from Rs.500 to Rs.5000, General Credit
Cards up to Rs.25000 and other small loans. All the credit can be directed
through SHG members so that risk involved is also less. Further all the
expenses in starting and organizing the MFI can be shared by all the
branches and also investment in form of credits to be granted and profits too
are shared equally among the bank branches.
One of the advantages of this Joint MFI is since they function as a
separate wing; they can function efficiently and concentrate more on small
credit facilities. Further the survey and opening of accounts can also be
carried out by this MFI for certain branches suffering from staff shortages.
One of major advantage for the customers is availing of very small credit
facilities at normal interest rate.

D. RBI-Education Institution Linkage Model: This is another major linkage not

for granting credits but for educating people on banking operations and
services in the country. This model can be carried in two stages, In the first
stage, RBI can have tie up with some of major educational institutions in India
and conducting training and workshops on RBI & its operations, banking
operations and services, rural credit and government schemes, etc. This first
step is to create more of financial literacy among students on all aspects. In
the second stage, RBI can ask the educational institution to adopt any of
nearby village in their area and involve the trained college students in creating
some camps and educating those people on banking operations, various
services, up gradations in banking technology, etc. As a part of the camp,
even survey on details of households, their financial literacy level and credit
facilities availed and counseling required, etc can be collected by the
students. Further as a reward, RBI can offer certificates to students involved
in such financial awareness campaign after successful completion of stage 2.
This linkage if properly framed and utilized can be a win-win situation for both
student and society.

E. Re-financing model - small credit facilities:

Though the initiative from RBI has brought many people under banking
population, but still small credit facilities of Rs.500 to Rs.5000 in form of Over

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 Drafts have not been granted by any other banks apart from Indian Bank. Few
reasons put forth by the banks are:
a. They feel most of credits will be turned to NPA
b. The bank staffs feel they cannot be accountable for Over Drafts
c. Shortage of staffs make follow-up of small credit facilities to be difficult
d. Time and cost involved will also be high.
So in order to encourage banks in granting such credit facilities, RBI in
co-ordination with NABARD can set up a fund and can refinance 5 to 10% of
the credits granted by banks under this Financial Inclusion Scheme. This type
of incentive to bank can increase the number of Over Drafts and GCCs
granted to the rural poor.
F. Encouraging formation of more SHGs: As well known at present Self Help
Groups are effective mode by which both banks and rural people are
benefited. It will be important to encourage people who are not in groups to
form SHGs. Further banks apart from granting credits, can also offer special
incentives to attract more people to form SHG. Once a village covers a
majority of population under SHGs then that will also ensure the concept of
door step financing, where people can easily accessible to credits at
affordable cost through banks. Also through some specialist trainees, banks
can train SHGs in financial and technological aspect. All these training will
requires combined effort from banks, MFIs, NGO and government to
encourage them in forming groups & doing a business for their development.
Society as Influencer:
Though we have already seen in detail about three major influencers -
Technology, Education and Counseling in order to achieve inclusive growth, the
fourth and the most effective influencer is the society. Though government, RBI and
other commercials banks, financial institutions, NGOs are taking many steps in
achieving inclusive growth and to uplift The Poor; it is also responsibility of each and
every individual in this society in leading our country towards inclusive growth. Even
private organizations can seek the guidance of RBI and can conduct some
awareness camps on financial services as a part of their social service program. But
for all this to happen government should effectively communicate to people through

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media stressing the importance of financial inclusion and making the willing ones to
participate in it.

FINANCIAL INCLUSION – PATH TOWARDS FUTURE

Progress in Financial Inclusion:

The above diagram clearly portrays the successful rate of this initiative from
RBI on Opening a no frills account with a small overdraft or GCC. It shows the
Number of No-frill accounts opened in India for past one year, comes around to 6
million which is 5% of our country’s population. With such an increase every year
and constant effort from the banks, in next 5 years around 90% of India's population
can be brought under bankable category. So as already said a bank account is an
essential pre-requisite for participating fully in economic and social life. Thus this
initiative from RBI is only the first step in building the relationship which would
require sustained efforts to ensure that the banking relationship with the customer is
fashioned to meet his needs.

Thus the real inclusive growth not only requires to bring people into
banking population but to make sure the benefits of the financial services
reaches to those people, so that the main objective of improving their standard
of living can be achieved. So ensuring that is a more challenging task and it is
influenced by three major Factors – Financial education, Technlogy, Counseling.
Let us see about these three influencers in detail:

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 Objective towards inclusive growth - Informal to Formal

Formal Sources Formal Sources

(Banks, MFI, Post (Banks, MFI, Post
offices, etc) offices, etc)
Govt Govt

SHG

Informal
Informal

1 Lenders
2 money
lenders

Formal Sources (Banks, Govt. Formal Sources

MFI, Post offices, etc) (Banks, MFI, Post
offices, etc)
Govt.

SHG Society SHG

Counseling
Technology

Education

4 Informal
3 Informal
money
lenders

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CONCLUSION:

Thus the project explains in detail about the importance of Financial

Inclusion and reasons and consequences of being financial excluded. Further
it list the various benefits enjoyed by the bank and customers through
Financial Inclusion. Thus the financial inclusion is a strategy towards inclusive
growth in future provided it is supported by various influencers like
Technology, Financial Education, Counseling and the Society. So once this
scheme is properly implemented and executed in every village in support from
the government and society, then this can really lift the standard of living of
majority of the poor which can really make our country proud. Finally as our
Reserve Bank of India Governor, Dr Y. V. Reddy, rightly said "Financial
inclusion is not a matter of philosophy but can lead to a win-win
situation for the banks and the customers... Treat financial inclusion as
an investment for business. It's the mass movies that make money"

References:

¾ Publications and RBI Circulars on Financial Inclusion

¾ Documents of Progress of NPPFI in Pondicherry and Cuddalore at Rural
Planning and Credit Department (RPCD), Chennai
¾ Report on Trend and Progress of Banking in India 2005-06
¾ Report of NPPFI - Pondicherry by India Bank
¾ Articles from Center for Micro Finance - IFMR, Chennai
¾ Articles on Financial Inclusion in UK and SouthAfrica
¾ Network Magazine - May 2003
¾ Professional Banker - April 2007
¾ Banking Frontier - May 2007
¾ Report on Financial Sector Planning for North - Eastern Region

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Websites:

™ www.rbi.org.in
™ www.infochangeindia.org
™ www.iibf.org.in
™ www.ifmr.ac.in/cmf
™ www.hm-treasury.gov.uk
™ www.creditguru.com
™ www.ivolunteer.org.in
™ www.microfinanceindia.org
™ www.nabard.org.in
™ www.idrbt.ac.in
™ www.indianngos.com
™ www.pib.nic.in
™ www.census.tn.nic.in
™ www.creditcounselingnow.com
™ www.freelists.org
™ www.microcredit.com

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 ANNEXURE

Land distribution
Annual Income distribution

13%

11% zero
13%
15% <25000
50% <2.5 acres
25000 to 50000
2.5 to 5 acres
>50000
74% 24% >5 acres

Number of accounts opened/HH Satisfaction Level of

11% 15% customers during survey

20%
one 24%
15% 100% satisfied
tw o
three
80% satisfied
four
13% > four 60% satisfied
46%
56%

Reason for not possessing account

initially Lack of financial
Knowledge
9%
Difficulty in accessing
30% bank
Poor fin. Condition
33%

Does not had any need

15%
13%
Rs500 deposit needed

Distribution of Credit facilities People's opinion in opening account

without any of provisions
9%
OD - 500
36%
OD >500
33%
50% GCC/KCC 58%

7% Other Loans
7%
preferred Not prefered No opinion

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 Repayment of debts obtained People offered counselling on
banking services and loan schemes
26%

36% 32%
Very successful
Offered Not Offered
Moderate
poor
32% 74%

Number of Visit to Bank Branch per

month

15%
26%
Not even once
once
26%
two - three times
33% four & above

Benificial Level of Customer in How far people are protected from

accessing to Banking Services usurious rate of Money lenders
22%
24% well protected
26%
100% Benifited
Reduced to some
80% Benifited extent
17% 61%
Partially Benifited Still seeking their help

50%

Familiarity & Accessibility level of financial

services

100% Just Familiar

Familiar and not

50% well accessed

Well accessed
0% Savings Chq Loan Insurance

Financial services

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Questionnaire for Branch

Post Financial Inclusion Analysis of NPPFI

The objective of this Questionnaire is to analyze
a. the Success rate of Banks in implementing the NPPFI
b. Reach and accessibility of bank services to people in rural areas
c. Barriers to Financial inclusion and set standards to overcome it in future.

Name of the Bank: Location of Branch:

Type: Rural / Semi-urban / Urban

I. Kindly provide with suitable answers for below given questions:

1. When have you started implementing this NPPFI Project?

2. a. List the villages that have been allotted to you under service area scheme?

b. What is the distance of the farthest village allotted from your bank branch?

3. Provide the statistical details for the following:

S.No Particulars Details

a. Target number of House holds
b. % of Households covered
c. Time taken to cover above % of Households
d. Targeted number of accounts Men Women

e. Number of accounts opened Men Women

f. Number of account holders already Men Women

possessing a SB account with your bank
g. Number of people unwilling to open an Men Women
account
h. No. of employees Officers Clerical staffs Sub-staffs
working in branch

4. a. How many officials from your branch went for survey to open accounts?

a. What is the average time spent per household?

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5. Can you brief on the approach you followed with the households to open an
account with your bank and how for you have been successful with it?

6. Whether you adopted simplified KYC norms? If yes, provide the details

7. Whether you have used any business facilitators in this financial inclusion
scheme? (Yes/No). If Yes, Kindly select the type of business facilitators and
the purpose they have been used for?

Category 9 or X Purpose 9 or X
NGO Promotional activities
Students Survey
Unemployed Collecting deposits
SHG Counseling
Any others, specify Any others, Specify

b. Also mention the total cost spent on those business facilitators?

8. Kindly grade the sources used in promoting Financial Inclusion on scale of 1

to 10 based on effective reach to the people:
S.No Sources used for promotion Have done Grade
(Y/N) (1 to 10)
a Advertisement through Newspapers
b Advertisement through Media (local radio
and TV channels)
c Advertisement by pamphlets and banners
d Directly approaching customers
e Campaigns for financial awareness
f Any others(specify):

9. Have you provided the account holders with the provisions initiated by RBI,
like OD, GCC/KCC and other loan facilities? (Yes/No) If Yes, Kindly provide
the details:
a. OD & GCC/KCC:
S.No Details Over Draft GCC/KCC
1. Number of account holders
2. Total Amount sanctioned
3. Highest & Lowest OD limit
4. Interest rate
5. Any Collateral Obtained (Y/N)

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 b. Other loans:
S.No Details Individual SHG
1. Number of account holders
2. Total Amount sanctioned
3. Maximum credit provided
4. Interest rate

c. If you have not provided any of the above credit facilities to the account
holders under Financial Inclusion scheme, can you specify the reasons?

10. Mention the Technology used in your branch:

a. TBC (Total Bank Computerization) b. CBS (Core bank solution)
c. Any Others (Mention) ___________________________________

11. What are the difficulties faced by you in terms of technology while opening
No-frill accounts?

12. Have you created any database to monitor the Financial Inclusion project?
(Yes/No)

13. To what extent do you think, FI has helped to reduce informal money
lenders?(Rating 1 - 5)

14. What is the deposit mobilization of the bank through NPPFI project?
How much percentage it has contributed to overall deposits?

15. a. Are you increasing the credit limits or credit facilities for account holders
who are successfully repaying their loans and interest? (Yes/No)

b. What will be the expected increase in credits potential in future?

16. Are you providing any counseling to people on managing debts or borrowing
loans at your branch? (Yes/No)

17. Mention some of the benefits incurred by the bank after successful
implementation of this NPPFI project?

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18. Mention Yes or No to the below given facilities, which is either at present
available at your branch or you will be providing it in the future:
S.No Facilities Provided Present Future
(Y/N) (Y/N)
a. Issuing Demand Drafts
b. Sending monthly statements to a/c holders &
information regarding any loan schemes
c. Use of mobile banking
d. Low cost ATM & any smart card facilities
e. Counseling facility on loans and business
f. Insurance schemes to customers
g. Foreign Exchange and Money transfer
h. Any others, specify:

19. What methods you are adopting to attract more deposits from customers?

20. What are the difficulties you have faced that delayed your progress during the
entire period of pilot project implementation? How you had overcome it?

21. What are your future plans to minimize your processing and transaction cost?

22. What is your feedback about the Financial Inclusion project and also mention
any other support you would be requiring from SLBC, RBI and government to
help you in successfully monitoring FI and continuing to next stage?

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 Questionnaire for customers

Post Financial Inclusion Analysis of NPPFI

The objective of this Questionnaire is to measure the
a. Impact of financial inclusion on customers in terms of their financial conditions
b. Improvement in financial awareness among customers
c. Benefits and increase in financial accessibility for customers

Village: Ward No.:

Type: Rural / Semi-urban / Urban

Name of the account holder: Age:

Gender (Male/Female): Category: (OBC/SC/ST/Others):

Occupation: Farmer/Agri labour/ Self emp/Student/Housewife/Others____________

Annual Income: a. less than 25000 b. 25000 to 50000 c. greater than 50000

Land Holding: a. less than 2.5 acres b. 2.5 to 5 acres c. greater than 5 acres

Total members in the family:

Details of other family members possessing bank account:

Relationship with Sex Occupation Annual Income

account holder (m/f)

Please, Kindly answer the below given questions:

1. Can you mention the name of the bank that visited your household for
opening an account?

2. a. How many persons came to your house for the survey?

b. When did they come for the survey? (Early Morning, Late Evening, other)

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3. a. Are they accompanied by any other village person or NGO? (Yes/No)

b. Whether they explained to you in depth about the advantages of holding an

account with bank and about other provisions like minimum balance and
credit facilities? (Yes/No)

4. What are the documents you have been asked for opening an account?
a. Electoral card b. Ration card
c. Any Others (Specify) __________________________

5. a. How much time they spent with you for opening the account?
b. Whether your photographs have been taken free of cost? (Yes/No)
c. Whether the pass book is delivered at your home in time? (Yes/No)

6. Why you initially did not possess a bank account?

a. Lack of financial knowledge
b. Difficulty in accessing banking services (due to distance, etc)
c. Poor Financial condition
d. Does not had any need
e. Any others (specify)_________________________________

7. During the visit, whether you had been promised by bank official based on
your eligibility to provide you with provisions like GCC, OD and other loan
facilities (Yes/No)?

8. a. If you have obtained any of above facilities, Kindly provide the details:

Details: Over Draft GCC / KCC Other Loans

Amount sanctioned
Interest rate
Repayment period
Any Collateral or
Mortgage (Yes/No)

If you have not availed above facilities, Can you Mention the reasons:

b. Also can you brief about, how many times you visited the bank branch to
obtain the above facilities? And how you have been treated by bank officials?

9. Would you prefer to open an account with bank without any of above
provisions (like loans, GCC, OD, etc)? (Yes/No)

10. How far you are able to successfully repay your debts? Rating (1-5)

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11. Have you been offered with any counseling on loans or managing debts by
banks or any other NGOs? (Yes/No). If No, would you prefer to have such
counseling in future?

12. Are you visiting you bank branch regularly, now-a-days? If so, can you
mention the purpose? (deposits / loans / repayment /others )

13. Can you mention approximate monthly savings, which you are depositing in
your bank?

14. a. Whether your bank branch provides you instructions regarding loan
schemes and other details in vernacular language (Tamil)? (Yes/No)

b. Also whether other instructions in pass books, bank forms and other
receipts too have been provided in vernacular language (Tamil)? (Yes/No)

15. Please mention the familiarity or accessibility level of below given financial
services before and after opening a bank account

1 - Not familiar 2 - Just familiar 3 - Well familiar and accessed

S.No Financial service and Before After
Awareness opening opening
an a/c an a/c
a. Deposits and savings
b. Pass books and cheques
c. loans and interest rate
d. Insurance schemes
e. ATM & Credit cards

16. To what extent you find yourself protected from usurious rate of money
lenders by possessing an account with your bank? (Rating 1 - 5)

17. Have you been assisted by banks under any poverty alleviation programme or
rural employment schemes? (Yes/No)
If yes, mention the name of the schemes?

18. In general, what is your opinion on possessing an account with bank and how
for you have been benefited by this and other credit facilities? (Rating 1 - 5)

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19. Please kindly rate the below expectations in scale of 1 - 5:
S.No Expectation from customers Rating
(1- 5)
a. Have you been satisfied with the services provided by
the bank, till now
b. Would you like to have an access to ATM in your area
c. Would you like to know more on financial services
provided by banks?
d. Would you prefer to have a debt counseling centers
from banks to manage your financial condition

20. Please kindly, mention any other difficulties faced or support you would be
requiring from your local area bank or from government?

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Electronic copy available at: https://ssrn.com/abstract=1353125