A Dissertation Report on

FACTORS AFFECTING FINANCIAL

INCLUSION: A STUDY IN ROURKELA
Submitted in partial fulfilment of the requirements for the degree of
Master of Business Administration (MBA)

SUBMITTED BY
SHRABANEE DAS
313SM1001

UNDER THE GUIDANCE OF

Dr. DINABANDHU BAG

SCHOOL OF MANAGEMENT, NIT ROURKELA

SCHOOL OF MANAGEMENT
NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA
APRIL, 2015

1
 DECLARATION

“I, SHRABANEE DAS, hereby declare that this project report entitled
“FACTORS AFFECTING FINANCIAL INCLUSION:A STUDY IN
ROURKELA”, submitted by me, under the guidance of Dr. DINABANDHU
BAG is my own and has not been submitted to any other University or Institute
or published earlier”.

Place: Rourkela Shrabanee das

Date: 22/04/2015 313SM1001

2
 ACKNOWLEDGEMENT
“It is not possible to prepare a project report without the assistance &
encouragement of other people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt
obligation towards all the personages who have helped me in this endeavour.
Without their active guidance, help, cooperation & encouragement, I would not
have made headway in the project.
I am extremely thankful and pay my gratitude to my faculty guide
Dr. Dinabandhu Bag for his valuable guidance and support on completion of
this project.
I extend my gratitude to National Institute of Technology, Rourkela for giving
me this opportunity.
I am also very much thankful to research scholars for sharing their valuable
knowledge with me.
I also acknowledge with a deep sense of reverence, my gratitude towards my
parents and member of my family, who has always supported me morally as
well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly
helped me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You
Shrabanee das

3
EXECUTIVE SUMMARY:
Financial services are a ubiquitous need, but the urban rich have easy and universal access
with wider options, compared to the low-income group who are forced to accept informal,
expensive and riskier means to fulfil their financial needs. While the need for a mix of
financial products including credit, savings, insurance, remittance, social & welfare receipts,
pension and so on, is well established, the demand for specific services can vary widely.

Key influencers of demand and willingness to pay are demographics, literacy levels, social-
dynamics, local enablers and inhibitors, availability of informal and alternate channels
(together with their cost and convenience), adaptability to change, comfort with technology,
and other exogenous and endogenous factors. At the same time, the demand and the supply of
financial services for the poor is imbalanced, with supply being acutely constrained by lack
of viability and sustainability of current business models. Evolving and newly emerging
business models, rapid technological innovations and state initiatives have greatly facilitated
supply conditions to improve and for the providers to consider building market-led self-
sustaining alternatives to extend banking and other financial services to the excluded. The
policy environment has evolved and (using a mix of loose and tight regulations and taking a
controlling, direction setting or mentoring approach) provided suitable incentives and
disincentives to promote financial inclusion. It enabled banks to extend outreach through
third party agents and agent network managers. Financial inclusion confronts enormous
barriers to adoption, some of which can be better dealt with by leveraging the wealth of
knowledge and experience from diverse initiatives. The key guiding principles are to stay
focussed on:

–The consumer needs and expectations around - accessibility, proximity, simplicity, product
relevance, ability to transact in low values, promise of adequate returns, pricing according to
willingness to pay, establishing trust, ensuring portability, interoperability and safety.
–The agent needs around viable returns, liquidity management, operational handholding,
marketing, speed of response, security and keeping them motivated through a diverse range
of incentives.

4
 TABLE OF CONTENTS
CHAPTER NO TITLE PAGE.NO
CHAPTER 1 INTRODUCTION 9
1.1 RATIONALE OF THE STUDY 13
1.2 INDUSTRY PROFILE 14
1.3 INDUSTRY SIZE 17
1.4 GOVERNMENT SUPPORT AND POLICIES 21
CHAPTER 2 PRODUCT PROFILE 31
CHAPTER 3 REVIEW OF LITERATURE 34
CHAPTER 4 OBJECTIVES AND SCOPE 39
4.1 OBJECTIVES 40
4.2 SCOPE 40
4.3 HYPOTHESES 40
CHAPTER 5 RESEARCH METHODOLOGY 41
5.1 OBJECTIVES 42
5.2 TYPE OF RESEARCH 42
5.3 SAMPLING 42
5.3.1 SAMPLE UNIVERSE 42
5.3.2 SAMPLE SIZE 42
5.3.3 SAMPLE UNIT 42
5.3.4 SAMPLING METHOD 42
5.4 DATA COLLECTION TOOLS / TECHNIQUES 42
5.5 ANALYSIS TECHNIQUES 43
5.6 LIMITATIONS 43
CHAPTER 6 DATA ANALYSIS AND INTERPRETATION 44
6.1 DESCRIPTIVE STATISTICS 45
6.2 RELIABILITY 53
6.3 INTERPRETATION FOR SOCIAL FACTOR 53
6.4 INTERPRETATION FOR ECONOMIC FACTOR 56
CHAPTER 7 FINDINGS AND RECOMMENDATION 58
7.1 FINDINGS 59
7.2 RECOMMENDATIONS 59
CHAPTER 8 CONCLUSION 62

5
REFERENCES 64
ANNEXURE 66

6
LIST OF TABLES

TABLE NO TITLE OF TABLE PAGE NO

1. CATEGORY OF RESPONDENTS 45
2. PERCEPTION ABOUT BANK 46
3. REASON FOR ACCOUNT OPENING 47
4. REASON FOR NOT OPENING BANK ACCOUNT 48
5. TYPE OF HOUSEHOLD 49
6. SIZE OF HOUSEHOLD 50
7. LOAN PERIOD 51
8. LOAN CLEARED DATA 52
9. RELIABILITY 53
10. MODEL SUMMARY FOR SOCIAL FACTORS 53
11. ANOVA FOR SOCIAL FACTORS 54
12. COEFFICIENTS FOR SOCIAL FACTORS 55
13. ANOVA FOR ECONOMIC FACTORS 56
13. MODEL SUMMARY FOR ECONOMIC FACTORS 56
14. COEFFICIENTS FOR ECONOMIC FACTORS 57

7
 LIST OF GRAPHS

SL NO TITLE OF FIGURE PAGE NO

1. RESPONDENTS CATEGORY 45
2. PERCEPTION ABOUT BANK 46
3. REASON FOR ACCOUNT OPENING 47
4. REASON FOR NOT OPENING BANK ACCOUNT 48
5. TYPE OF HOUSEHOLD 49
6. SIZE OF HOUSEHOLD 50
7. LOAN PERIOD 51
8. LOAN CLEARED DATA 52

8
INTRODUCTION

9
Finance is very essential for every economic activity. Without adequate finance no activity
can be undertaken. Finance is also required by every section of the society. But from the
beginning of the civilization, only the financial needs of the upper section of the society were
catered. Access to finance by the poor and weaker groups is very difficult. This is due to the
various reasons such as lack of banking facilities for this section, unawareness about the
schemes available for them, lack of a regular or substantial income etc. Moreover, banks also
give more importance to meet their financial targets. So they focus on larger accounts. It is
not profitable for banks to provide small loans and make a profit. Hence, the need for
financial inclusion is felt by the Government of India, the policy makers and Reserve Bank of
India.

India has, for a long time, recognized the social and economic imperatives for broader
financial inclusion and has made an enormous contribution to economic development by
finding innovative ways to empower the poor. Starting with the nationalization of banks,
priority sector lending requirements for banks, lead bank scheme, establishment of regional
rural banks (RRBs), service area approach, self-help group-bank linkage programme, etc.,
multiple steps have been taken by the Reserve Bank of India (RBI) over the years to increase
access to the poorer segments of society. Despite all these efforts, a significant proportion of
the households, especially in rural areas, still remained outside the coverage of the formal
banking system. It is estimated that about 40% of Indians lack access even to the simplest
kind of formal financial services.

In India, the term financial inclusion first featured in 2005, when RBI, in its annual policy
statement of 2005-06, while recognizing the concerns in regard to the banking practices that
tend to exclude rather than attract vast sections of the population, urged banks to review their
existing practices to align them with the objective of financial inclusion."About 2.9 billion
people around the world do not have access to formal sources of banking and financial
services. In India alone 560 million people are excluded from formal source of finance, a
figure in tight correlation with 41.6 percent (457 million) of the population that still lives
below the poverty line (US$1.25/day). While India has enjoyed growing domestic demand
and globally recognized prowess in the areas of information technology, automotive, life
sciences, telecommunications and even space exploration, its continued success and growth
as an economic power (in common with other emerging economies) can only be assured if
concrete steps are taken to ensure that the social and economic development is inclusive.

10
Financial inclusion denotes delivery of financial services at an affordable cost to the vast
sections of the disadvantaged and low-income groups. The various financial services include
credit, savings, insurance and payments and remittance facilities. The objective of financial
inclusion is to extend the scope of activities of the organized financial system to include
within its ambit people with low incomes. Through graduated credit, the attempt must be to
lift the poor from one level to another so that they come out of poverty. Financial inclusion
mainly focuses on the poor who do not have formal financial institutional support and getting
them out of the clutches of local money lenders.

The World Bank report states, “Financial inclusion, or broad access to financial services, is
defined as an absence of price or non price barriers in the use of financial services.”

An inclusive financial system is desirable for many reasons. First, it facilitates efficient
allocation of productive resources. Second, access to appropriate financial services can
significantly improve the day-to-day management of finances. And third, an all-inclusive
financial system can help reduce the growth of informal sources of credit (such as
moneylenders) which often tend to be exploitative. Thus, an all-inclusive financial system
enhances efficiency and welfare by providing avenues for secure and safe saving practices
and by facilitating a whole range of efficient financial services. Branches were opened in
large numbers across the country and even in the areas which were hitherto being neglected.
Even after all these measures a sizeable portion of the population of the country could not be
brought under the fold of the banking system. In fact, there is a severe gap in financial access
which needs special attention. Studies have proved that the lack of inclusion or rather
exclusion from the banking system results in a loss of 1 per cent to the GDP. Thus, financial
inclusion is not just a social-political imperative but also an economic one. Realizing the
gravity of the problem, the Reserve Bank in its Mid Term Review of Monetary Policy (2005-
06), urged the banks to make financial inclusion as one of their prime objectives.

An inclusive financial system facilitates efficient allocation of productive resources and thus
can potentially reduce the cost of capital. Also financial inclusion protects unbanked people
from informal sources of credit, who charge higher interest rates and often resort to
unethical/harsh recovery practices. Access to a bank account provides avenues for secure and
safe saving practices. A bank account can also provide a passport to wide ranging financial
services such as overdraft facilities, debit card and credit cards. A number of financial

11
services, such as insurance and pension, necessarily require access to a bank account. Thus,
an inclusive financial system enhances efficiency and welfare of a society.
There are supply side and demand side factors driving Inclusive Growth. Banks largely are
expected to mitigate the supply side processes that prevent poor and disadvantaged social
groups from gaining access to the financial system. Despite the risk, financing of first time
entrepreneurs is a must for financial inclusion and growth. Apart from the supply side factors,
demand side factors, such as lower income and /or asset holdings also have a significant
bearing on financial inclusion. Owing to difficulties in accessing formal sources of credit,
poor individuals and small and macro enterprises usually rely on their personal savings or
internal sources to invest in health, education, housing, and entrepreneurial activities to make
use of growth opportunities.
The supply-side mechanism deals with making the financial instrument available to the every
section through ‘no-frill accounts’, the banking correspondents, micro-finances and others.
The demand-side mechanism mainly deals with empowerment of the people and sectors
thereby making them capable for demanding the services of financial inclusion. The
introduction of SHGs (Self Help Groups), financial literacy campaign and others are the
demand-side mechanism of financial inclusion.
RBI defines Financial Inclusion as “a 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 regulated mainstream institutional players”. Therefore, the
objective of Financial Inclusion (FI) is to extend financial services to the large hitherto
unreserved population of the country to unlock its growth potential. In addition, it strives to
achieve more inclusive growth by making financing available to the poor in particular. Thus,
keeping in view of the interests of the poor people, the Government of India (GoI) has taken a
number of measures so that the underprivileged sections of the society can reap the benefits
of the financial services.
Access to formal banking system is affected by several barriers such as culture, financial
literacy, gender, income and assets, proof of identity, remoteness of residence, and so on.
Over a period of time several measures are being taken by the banks in India to improve
access to affordable financial services through financial education, leveraging technology,
and generating awareness. There are number of factors affecting access to financial services
by weaker section of society in India. Rural people facing the problems like low income, less
security of assets, less literacy, social exclusion, etc. Banks facing the problems to reach of

12
rural people includes lack of legal documents for opening bank accounts, banking products
which are not attracting to rural mass of respective region, high cost of transaction, bank
official’s attitude and language of respective region of rural area. Hence, there is a need for
financial inclusion to build uniform economic development, both spatially and temporally,
and ushering in greater economic and social equity.

Financial Inclusion denotes supplying financial services to most disadvantaged and needy in
society. According to United Nations (2006), financial inclusion involves two primary scopes
i.e. formal financial services and multiple financial services providers must be accessible to
customers. People outside the mainstream financial services suffer financial disadvantages
including: higher-interest credit; lack of insurance; no account into which income can be
paid; and higher-cost utilities. There are various socio-cultural, economic issues that hinder
the process of financial inclusion. For instance on ‘demand side’, it includes lack of
awareness and illiteracy and on ‘supply side’ type of products, infrastructure etc. Financial
inclusion provides formal identity, access to payments system and deposit insurance, and
many other financial services.
Presently, the economy is in a phase of rapidly rising income, for both rural and urban,
arising from the expansion of existing economic activities as well as the creation of new
activities including corporate profitability, which has exhibited sustainable trends, and
increasing consumer incomes thereby riding on the growth momentum. All of these
developments signify that demand for financial services, for savings as well as production
purposes, will generate, which will bring new entrants in the spree of financial and banking
industry. Financial inclusion as a topic has attracted global attention in the recent past. For
our own country where almost 70 percent of the population lived in the rural areas, financial
inclusion assumes paramount importance indeed and is an utmost necessity for a country
where a large number of the world’s highest poverty - stricken population resides.
There are a number of factors from demand and supply side affecting access to financial
services by weaker section of society in India. Hence, there must be a need for financial
inclusion to build uniform economic development and ushering in greater economic and
social equity.
1.1 RATIONALE OF THE STUDY

With this background the report aims to study the different factors responsible towards access
to financial inclusion mainly in the rural areas of Rourkela. The study utilizes the primary

13
data in an attempt to access the behaviour and factors of financial inclusion in Rourkela.
Financial inclusion is meant to include all the sections of the society, who are mainly out of
the reach of the financial institutions. Since it is difficult to cover all the sections of the
society in our study, we concentrate mainly on the rural sector because of its enormity on the
one hand and significance on the other.

1.2 INDUSTRY PROFILE

In India, financial inclusion first featured in 2005, when it was introduced by K.C.
Chakraborthy, the chairman of Indian Bank. Mangalam became the first village in India
where all households were provided banking facilities.
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 or business correspondents by
commercial banks. The Reserve bank asked the commercial banks in different regions to start
a 100% financial inclusion campaign on a pilot basis. As a result of the campaign, states or
union territories like Pondicherry, Himachal Pradesh and Kerala announced 100% financial
inclusion in all their districts.
Reserve Bank of India has planned Aadhaar-linked bank accounts for all adults of India by
January 2016 to meet its commitment on financial inclusion. It will greatly transform India
by preventing the poor people falling into debt-traps of unlawful money-lenders, cashless
transactions, elimination of poverty and corruption. 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 roadblock to financial inclusion in many states
and there is inadequate legal and financial structure.
The RBI recently came up with a State-wise Index of Financial Inclusion. In an Index of
Financial Inclusion, India has been ranked 50 out of 100 countries. At present, only 34% of
the India’s population has access to basic banking services.
The latest National Sample Survey Organization survey reports that there are over 80 million
poor people living in the cities and towns of India and they lack access to the most basic
banking services.
The Eleventh Five Year Plan (2007-12) envisions inclusive growth as a key objective. The
inclusive growth implies an equitable allocation of resources with benefits accruing to every

14
section of society. It is aimed at poverty reduction, human development, health and provides
opportunity to work and be creative. Achieving inclusive growth in India is the biggest
challenge as it is very difficult to bring 600 million people living in rural India into the
mainstream. One of the best ways to achieve inclusive growth is through financial inclusion.
MAJOR MILESTONES IN FINANCIAL INCLUSION IN INDIA
1969 Nationalization of Banks
1971 Establishment of Priority sector Lending Banks
1975 Establishment of Regional Rural Banks
1982 Establishment of NABARD
1992 Launching of the Self Help Group Bank Linkage Programme
1998 NABARD sets a goal for linkage one million SHG by 2008
2000 Establishment of SIDBI foundation for microcredit
2005 One million SHF linkage target achieved three years ahead of date 2006 committee on
financial inclusion
2007 Proposed bill on Micro Finance Regulation introduced in Parliament
2008 Committee submitted its final report on Financial Inclusion to Union Finance Minister
in January
PHASES OF FINANCIAL INCLUSION IN INDIA

15
Source: IMACS Research

DIMENSIONS OF FINANCIAL INCLUSION

The level of financial inclusion in India can be measured based on three tangible and critical
dimensions. These dimensions can be broadly discussed under the following heads:

I. BRANCH PENETRATION
Penetration of a bank branch is measured as number of bank branches per one lakh
population. This refers to the penetration of commercial bank branches and ATMs for the
provision of maximum formal financial services to the rural population.
II. CREDIT PENETRATION

16
Credit Penetration takes the average of the three measures: number of loan accounts per one
lakh population, number of small borrower loan accounts per one lakh population and
number of agriculture advances per one lakh population.
III. DEPOSIT PENETRATION
Deposit penetration can be measured as the number of saving deposit accounts per one lakh
population. With the help of this measure, the extent of the usage of formal credit system can
be analysed.
Among the three dimensions of financial inclusion, credit penetration is the key problem in
the country as the all India average ranks the lowest for credit penetration compared to the
other two dimensions. Such low penetration of credit is the result of lack of access to credit
among the rural households. Therefore, the problem of low penetration needs to be
understood more deeply. An attempt has been made to study the problem by examining the
progress of financial inclusion over the years and efforts made by the government for
reducing the low penetration of credit.
FACTORS AFFECTING ACCESS TO FINANCIAL SERVICES

Some of the major factors affecting access to financial services are:-

Psychological and cultural barriers-Many people willingly excluded themselves due to
psychological barriers and they think that they are excluded from accessing financial
services. A very general psychological barrier can be easily noticed when older people find it
difficult to use ATMs which is the most convenient form of banking today.
Legal identity-Lack of legal identity like voter Id, driving license, birth certificates,
employment identity card etc. is also a major factor affecting access to financial services.
Level of income -Low income people generally have the attitude of thinking that banks are
only for the rich people.
Various terms and conditions- Since banks are profit making organizations they discourage
the non-profitable customers (poor) by the minimum balance requirements. While getting
loans or at the time of opening accounts, banks place many conditions, so the uneducated and
poor people find it very difficult to access financial services.
Structural procedural formalities- It is very difficult for people to read terms and
conditions and account-filling forms due to lack of basic education.
Limited literacy- Lack of financial literacy and basic education prevent people to have
access to financial services. Financial literacy involves encouraging people to use various
financial products through various economic agents like NGOs (Non-Profit Organizations),

17
MFIs and Business Correspondents etc. People do not know the importance of various
financial products like insurance, finance bank accounts, cheque facility etc.
Place of living- Commercial banks operate only in profitable areas. Banks set their branches
and offices only in the commercial areas. Therefore, people living in under-developed areas
find it very difficult to go for any bank transaction in other areas again and again. Hence, they
do not go for any banking services.
Social security payments- In those countries, where the social security payment system is
not linked to the banking system, banking exclusion has been higher.
Types of occupation-Many banks have not developed the capacity to evaluate loan
application of small borrowers and unorganized enterprises and hence tend to deny such loan
requests.
Attractiveness of the product- Both the financial services/products (savings accounts, credit
products, payment services and insurance) and how their availability is marketed are crucial
in financial inclusion.
1.3 INDUSTRY SIZE
No of Accounts opened under PMJDY as on 28.02.2015 (Summary)

No of
accounts
with zero
balance

Rural Urban No Of No Of Rupay Balance In

Accounts Debit Card Accounts
(In Lacs)

Public 580055 49292126 107297643 10009214 993720.98 66368364

Sector 17 8
Bank
Rural 202266 3577226 23803891 16678823 196174.44 16308625
Regional 65
Bank
Private 341704 2285316 5702361 5117247 79492.07 3239985
Banks 5
Grand Total 816492 55154668 13680389 12188821 1269387.50 85916974
27 5 8

18
(A) PUBLIC SECTOR BANKS

Name of Rural Urban No Of No Of Balance In No Of

Bank Accounts Rupay Accounts Accounts
Debit ( In Lacs) With Zero
Card Balance

Allahabad 182140 752956 2574362 2519455 8621.66 1799346

Bank 6
Andhra 113948 665156 1804640 1793785 8238.72 1199404
Bank 4
Bank of 304699 4268916 7315909 7116143 80349.00 3621179
Baroda 3
Bank Of 267874 3760662 6439405 6257117 35299.00 4084222
India 3
Bank of 120876 562254 1771019 1722210 16783.15 1138917
Maharashtra 5
Bhartiya 0 60253 60253 60245 660.08 20237
Mahila Bank
Canara Bank 417416 1983105 6157272 6157272 72626.25 2402367
7
Central bank 426049 1234325 5494821 4833685 25421.74 3742885
of India 6
Corporation 994043 1013229 2007272 1900002 33423.81 679605
Bank
Dena Bank 167023 823690 2493922 2415684 16806.00 1601299
2
IDBI 472918 424207 897125 868064 3272.07 653395
Indian bank 159757 923637 2521216 2456693 14313.97 1488096
9
Indian 986836 1924528 2911364 2808353 18933.49 1471836
Overseas
Bank

19
Oriental 131877 929560 2248332 2206617 107142.67 768906
Bank of 2
Commerce
Punjab & 796811 423769 1220580 1171618 46001.35 577266
Sind Bank
Punjab 646670 1526204 7992907 7306410 77711.95 5936104
National 3
Bank
State Bank 104407 1279250 2323326 2000226 53144.48 1212258
of Bikaner 6
and Jaipur
State Bank 892246 1630953 2523199 2493181 12411.13 1756176
of
Hyderabad
State Bank 121461 1758822 29734409 26589267 104534.00 22025341
of India 82 7
State Bank 591256 201428 792684 747066 3303.18 498317
of Mysore
State Bank 389806 726676 1116482 1070678 23251.00 777561
of Patiala
State Bank 36269 297384 333653 279108 10429.00 158609
of
Travancore
Syndicate 222915 1138552 3367709 3178904 38459.45 2064376
Bank 7
Uco Bank 203602 2130771 4166793 3749493 50290.18 2035002
2
Union Bank 327876 1030088 4308852 4166263 27880.00 2764768
Of India 4
United Bank 201916 1505566 3524728 3029923 99264.79 1196402
Of India 2
Vijaya Bank 708629 486780 1195409 1194686 5148.86 694490
Sub Total 580055 4929212 10729764 100092148 993720.98 66368364
17 6 3

(B) REGIONAL RURAL BANKS

20
Name of Rural Urban No Of No Of Balance In No Of
Bank Accounts Rupay Accounts Accounts
Debit (In Lacs) With Zero
Card Balance

Allahabad 532404 113275 645679 628674 1964.12 501615

Bank
Andhra 127069 9513 136582 132870 635.14 84736
Bank
Bank of 1592163 486720 2078883 1926972 15406.00 1561837
Baroda

Bank Of 1422531 425220 1847751 1795823 2094.00 1426851

India
Bank of 381865 68491 450356 450356 3354.00 393616
Maharashtra
Canara Bank 460089 315804 775893 775626 13698.73 269867
Central bank 2437485 445001 2882486 2625434 31605.51 2172685
of India
Dena Bank 174647 9609 184256 170961 2318.00 134253

Indian bank 297203 39235 336438 150348 1648.29 231213

Indian 554924 9135 564059 119913 4780.49 266294
Overseas
Bank
Source: PMJDY report

1.4 GOVERNMENT SUPPORT AND POLICIES

In India, various measures taken by banks, GOI and RBI for financial inclusion plan. Figure
highlights currently adopted financial inclusion approaches.

21
Source: Rangarajan committee(2008)

PRODUCT BASED APPROACH:

Reserve bank of India has been proactive, liberal and supportive while making policies so as
to enable financial institutions to come up with innovative products for enabling a common
man to get the benefit of the financial inclusion plan. Some products developed for fulfilment
of this approach have been mentioned below.
i. No- Frills Account (NFAs):- This concept was introduced by RBI in November 2005 to
provide access to basic baking services by financially excluded peoples. Under this approach
banks open accounts with zero balance or very minimum balance requirement for the under-
privileged. In 2012, the banks under RBI guidelines came-up with a better version of the no-
frill accounts where they would open Basic Savings Bank Deposit Accounts (BSBDAs) for
all individuals with the facility of debit card, cheque book, internet banking, overdraft limits
at minimal charges. However, the number of transactions could be restricted so as to prevent
misuse of such accounts.
ii. Kisan Credit cards (KCCs):- Under this scheme banks issue smart cards to the farmers for
providing timely and adequate credit support from single window banking system for their
farming needs. During 2012-13 (up to December 2012), public and private sector banks
issued 1.2 million smart cards as KCCs.
iii. General Purpose Credit Cards (GCC) :- In 2005 Reserve bank of India, issue guidelines to
banks that to provide General Purpose Credit Card (GCC) which facilitate credit up to
Rs.25000/- without any collateral requirement for rural and semi urban people based on

22
assessment of household cash flows. Now as per the revised guidelines in Dec.
2013 under
this approach bank also fulfil Non- farm entrepreneurial credit requirement of individuals
(e.g. Artisan Credit card, Laghu Udyami Card, Swarojgar Credit Card, Weaver’s Card etc)
There will be no ceiling on the loan amount as long as the loan is for the purpose of non-farm
entrepreneurial activity and is otherwise eligible for classification as priority sector. Security
norms will be applicable as per Reserve Bank guidelines on collateral free lending for micro
and small units issued from time to time.
iv. Saving account with Overdraft facility: - Banks have been advised to provide overdraft
(OD) facility in saving account and also Small Overdrafts in No-frills accounts. The setting
up of the limit for the same would be done by banks considering the transaction in the
account. This would help the customer to get easy access to the credit at lower rates.
BANK LED APPROACH:
i. Self Help Group - Bank Led Initiative (SLBP):- The SLBP or Self Help Group – Bank
Linkage Program has been the major institutional based innovation in India for enabling
access and covering the gap of reaching financially excluded population of the country in the
last two decades. In this model, the banks involve themselves with a group of local people
with the idea of enabling them to pool up their savings. The same is deposited with the bank
against which the bank also provides a certain amount of credit facility. The group takes a
decision whether to lend to any member of the group. The bank provides the framework,
accounting services and support to the group to manage their deposits and lending. Thus the
model has an approach of savings first, lending later. The banks do not have a risk in such
lending as the borrower’s reputation and peer pressure in the group would reduce the risk of
bad loans considerably. However, the model has some issues that affect the program:
a. Inadequate outreach in many regions.
b. Delays in opening of SHG accounts and disbursement of loans.
c. Impounding of savings by banks as collateral.
d. Non-approval of repeat loans by banks even when the first loan was repaid.
e. Multiple memberships.
f. Borrowings by SHG members within and outside SHGs.
g. Adverse consequences of unhealthy competition between NGO promoted SHGs.
h. Government promoted/subsidy oriented SHGs and limited banker interface.
i. Monitoring of the SHGs.

23
While the basics of the SHGs being savings led credit product remain true even today, recent
developments have given rise to the need for relook in the approach and design of this fairly
successful model leading to SHG - 2.
The basic features of SHG - 2 are
a. Voluntary savings apart from compulsory savings.
b. Allowing the sanction of a cash credit / overdraft system of lending for SHGs for a longer
operational tenure.
c. Graduating selected members of the group that have entrepreneurship potential into a joint
liability groups for borrowing larger amounts.
ii. Business Facilitators (BFs)/Business Correspondents (BCs):- The BC/BF model is a model
which based on information and communication technology (ICT). In this model the
intermediaries or BC/BFs are technologically empowered by the banks to provide the last
mile delivery of financial products and services. Initially created by the banks themselves and
later with improvisations and RBI policy support, the model on the back of innovative
technologies is bridging the connectivity gap between the service seekers, i.e., under-served
public, and the service providers, i.e., the banks. However, a number of issues both for the
partner banks and also for the regulators have surfaced since the start of this model. Some of
them being:
a. Profitability of the BFs/BCs.
b. Banks and their BFs/BCs are exposed to huge risk of cash management.
c. The training and hand-holding of the BFs/BCs to enhance the trust level of the end
customers.
d. Adoption of technology.
e. Compatibility and integration of technology used by the banks and their BFs/BCs.
Based on above facts, the banks have started coming up with the concept of ultra small
branches to provide support and supervise work of certain number of BFs/BCs. Also banks
could have in-house model where BF/BC outfits could be a subsidiary with its own structure
but under closer supervisory control.

REGULATORY APPROACH:
i. Simplified KYC Norms: - Under current KYC norms, a customer has to provide number of
documents for opening an account as per RBI guidelines. However, the people living in rural
areas face problem in fulfilling these norms. To enable banks to tap in this huge opportunity

24
of rural banking in unbanked areas and to meet the objective of financial inclusion, RBI has
relaxed a number of norms for accounts opened by people who plan to keep balances not
exceeding Rs.50, 000 and whose total credit in all the accounts taken together is not expected
to exceed Rs.100, 000 in a year. Small accounts can now be opened on the basis of an
introduction from another account holder who has satisfied all the KYC norms.
ii. Simplified bank saving account opening: - The account opening form has been simplified
to ease the opening of account by the poorer sections, street hawkers and other migratory
labours of the society.
iii. Bank branch authorization: - RBI has permitted banks to open branches without taking
authorization, thus deviating from its normal norms, in tier 3 to 6 city, towns, or villages.
This would enable the government, regulator and the banks to speed up the drive for financial
inclusion and this make available the financial services to the unbanked population of the
country.
TECHNOLOGY BASED APPROACH:
i. Mobile Banking :- One of the most remarkable developments in terms of innovation in
order to harness the full power of technology, the banks have tied up with mobile operators to
provide financial services like bill and utility payment, fund transfer, ticket booking,
shopping etc. Some examples of this model are m- Pesa by Vodafone and Airtel Money.
ii. Kiosk / ATM based banking: - In some states, the state government has taken initiatives
for providing kiosk based model for access to financial services. Also banks have used the
technology to enable their ATMs to virtually act like a 24x7 branches.
iii. Branchless Banking: - Some of the leading banks have come up with this concept where
there would be an online system with chat facility assisting the person to make use of various
electronic machines for depositing and withdrawing cash and cheques. However this
initiative is in a very initial stage and has a limitation in terms of initial Cost for banks and
literacy / knowledge for the rural population and hence this concept is currently limited to
urban and semi-urban areas.
iv. Aadhaar Enabled payment services: - In this system, any Indian citizen having an Aadhaar
number updates his account with the same. All accounts having aadhaar number updated are
to be reported to RBI, which in turn reports it to various government departments. While
making payments to people for working under initiatives like MGNREGA or various subsidy
schemes, the departments use this information for directly crediting the money to the
beneficiary’s account. This not only reduces the delay in the benefits being received by the

25
end user, but also reduces the chances of corruption in the distribution of the benefits under
schemes. Also the unique biometric identification data stored in the Aadhaar database is
expected to empower a bank customer to use Aadhaar as his/her identity to access various
financial services. A pilot scheme in four districts of Jharkhand state is currently being
carried out under which MGNREGA wages to labourers are credited to their Aadhaar
enabled bank accounts.
KNOWLEDGE BASED APPROACH:
Financial education, financial inclusion and financial stability are three elements of an
integral strategy to empower people to make effective use of the financial services network.
While financial inclusion works from supply side, financial education feeds the demand side
by promoting awareness among the people regarding the needs and benefits of financial
services offered by banks and other institutions. These two strategies together promote
greater financial stability.
Financial Stability Development Council (FSDC) has explicit mandate to focus on financial
inclusion and financial literacy simultaneously.
RBI had issued guidelines on the financial literacy Centres (FLC) on in June 2012 for setting
up FLCs. It was advised that the rural branches of scheduled commercial banks should
increase efforts through conduct of outdoor Financial Literacy Camps at least once a month.
Accordingly, 718 FLCs had been set up as at end of March 2013. A total of 2.2 million
people had been educated through awareness camps / choupals, seminars and lectures during
April 2012 to March 2013.
GOVERNMENTS INITIATIVES:
The government has taken various initiatives indirectly through the regulators, government
promoted schemes through its various ministries. Some such initiatives have been listed
below.
i. Introduction of SHG-2:- The original SHG as initialized by NABARD had certain
limitations. This led to NABARD preparing a strategy to revitalize the SHG movement
leading with the induction of SHG-2 model.
ii. Women SHGs Development Fund: - The Union Budget 2011-2012 proposed a “Women’s
SHG’s Development Fund” with a corpus of Rs. 500 crore. The GoI created this fund to
empower women and promote their SHGs. The responsibility of managing the fund is of
NABARD. It managed the same through two of its major microfinance funds, namely
Financial Inclusion Fund (FIF) and the Financial Inclusion Technology Fund (FITF).

26
iii. Swarnjayanti Gram Swarozgar Yojana (SGSY):- It is a centrally sponsored scheme that
follows the mechanism of forming SHGs of rural poor households, providing capacity
building training and linking groups to banks. SGSY is primarily designed to promote self-
employment oriented income generating activities for the Below Poverty Level (BPL)
households in rural areas.
iv. National Rural Livelihood Mission (NRLM):- Established in June 2010 by the Ministry of
Rural Development (MoRD), GoI. It is based on the success of Indira Kranti Patham (IKP), a
poverty alleviation program being implemented in Andhra Pradesh. The key strategies of
NRLM are to:
a. Implement the program with greater emphasis on federations of SHGs.
b. Provide flexibilities to states for designing specific action plans for poverty alleviation.
c. Introduce interest subsidy for encouraging repayments of loans and provide multiple doses
of credit.
d. Improve training and capacity building efforts by setting up skill training institutes in each
district.
e. Facilitate market linkages.
f. Improve monitoring and evaluation process.
v. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS):- This
scheme aims to enhance the livelihood of the rural people by guaranteeing at least one
hundred days of wage employment in a financial year to a rural household whose adult
members volunteer to do unskilled manual work. As the payments are made through the
bank/post office accounts, in 2010-11, nearly 10 crore bank/post office accounts have been
opened.
vi. Aadhaar- Unique Identification Authority of India (UIDAI):- The GoI has embarked an
initiative to provide an individual identification number to every citizen of India and in 2009;
it established the UIDAI to issue these cards on behalf of the GoI. This number provided by
UIDAI will serve as a proof of identity and address, anywhere in India. The Aadhaar number
will also enable people to have access to services such as banking, mobile phone connections
and other government and non-government services in due course. In addition, the UIDAI
has introduced a system in which the unbanked population will be able to open an account
during enrolment with Aadhaar without going to a bank. The individual will be able to access
such bank accounts through a micro-ATM network with large geographic reach.

27
PRADHAN MANTRI JAN DHAN YOJANA is a scheme for comprehensive financial
inclusion launched by the Prime Minister of India,
India Narendra Modi on 28 August 2014. He
had announced this scheme on his first Independence Day speech
speech on 15 August 2014. Run
by Department of Financial Services,
Services Ministry of Finance, on the inauguration day, 1.5 Crore
(15 million) bank accounts were opened under this scheme. By 28 January 2015,
12.58 crore accounts were opened, with around 10590 crore (US$1.7 billion) were
deposited under the scheme, which also has an option for opening new bank accounts with
zero balance. The scheme has been started with a target to provide 'universal access to
banking facilities' starting with "Basic Banking Accounts"
Accounts" with overdraft facility of
Rs.5000 after six months and RuPay.
RuPay Debit card with inbuilt accident insurance cover of Rs.
1 lakh and RuPay Kisan Card. In next phase, micro insurance & pension etc. will also be
added. Under the scheme:

1. Account holders will be provided zero-balance

zero balance bank account with RuPay debit card, in
addition to accidental insurance cover of Rs 1 lakh(to be given by 'HDFC Ergo').

2. Those who open accounts by January 26, 2015 over and above the 1 lakh
accident, they
fe insurance cover of
30,000(to be given by LIC).
will be given life

3. After Six months of opening of the bank account, holders can avail 5,000
overdraft from
the bank.

4. With the introduction of new technology introduced by National Payments Corporation of

India (NPCI),
), a person can transfer funds, check balance through a normal phone which was
earlier limited only to smart phones so far.

5. Mobile banking for the poor would be available through National Unified USSD Platform
(NUUP) for which all banks and mobile companies
compa have come together.

Due to the preparations done in the run

run-up,
up, as mentioned above, on the inauguration day, 1.5
Crore (15 million) bank accounts were opened. The Prime Minister said on this occasion
occasion-
"Let us celebrate today as the day of financial freedom."
freedom." By September 2014, 3.02 crore
accounts were opened under the scheme, amongst Public sector banks, SBI had opened 30
lakh (3 million) accounts, followed by Punjab National Bank with 20.24 lakh (2 million)
accounts, Canara Bank 16.21 lakh (1.62 million) accounts, Central Bank of India 15.98 lakh
(1.59 million) accounts and Bank of Baroda with 14.22 lakh (1.42 million) accounts. It was
reported that total of 7 Crore (70 million) bank accounts have been opened with deposits
totalling more than 5000 crore Rupees (approx 1 billion USD) as of November 6, 2014. As

28
the government met the target, Union Finance Minister Arun Jaitley has revised the target for
opening of bank accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the
ambitious financial inclusion scheme launched by the government, from 7.5 crore to 10 crore
by January 26, 2015. On 20th January 2015, the scheme entered into Guinness book of world
records setting new record for 'The most bank accounts opened in one week'.
Objective of "Pradhan Mantri Jan-Dhan Yojana (PMJDY)" is ensuring access to various
financial services like availability of basic savings bank account, access to need based credit,
remittances facility, insurance and pension to the excluded sections i.e. weaker sections &
low income groups. This deep penetration at affordable cost is possible only with effective
use of technology. PMJDY is a National Mission on Financial Inclusion encompassing an
integrated approach to bring about comprehensive financial inclusion of all the households in
the country. The plan envisages universal access to banking facilities with at least one basic
banking account for every household, financial literacy, access to credit, insurance and
pension facility. In addition, the beneficiaries would get RuPay Debit card having inbuilt
accident insurance cover of
1 lakh. The plan also envisages channelling all Government
benefits (from Centre State / Local Body) to the beneficiaries’ accounts and pushing the
Direct Benefits Transfer (DBT) scheme of the Union Government. The technological issues
like poor connectivity, on-line transactions will be addressed. Mobile transactions through
telecom operators and their established centres as Cash Out Points are also planned to be used
for Financial Inclusion under the Scheme. Also an effort is being made to reach out to the
youth of this country to participate in this Mission Mode Programme.

Multiple initiatives have been undertaken by both GOI and the RBI to tackle the problem of
giving the unbanked people an access to financial services. Many of these initiatives were
entirely new schemes with little thought about synergy with other schemes existing in the
system. The existing extensive network of post offices can be targeted by utilizing it as an
alternative banking solution for the unbanked people. In this context, current banking
facilities available for people at post offices have been explored and also their capabilities
have been observed for the cause of financial inclusion at minimum cost and maximum
synergies. In India, there are nearly 1, 54,856 post offices as on March 31, 2013, with nearly
ninety percent in rural areas. State-wise distribution of post offices reveals that a large
network in Bihar, Orissa, Madhya Pradesh and Uttar Pradesh can be useful to extend
financial inclusion.

29
 Number of Post Offices Rural Urban
(Rural and Urban) Year
2008-09 1,39,144 15,871
2009-10 1,39,182 15,797
2010-11 1,39,040 15,826
2011-12 1,39,086 15,736
2012-13 1,39,164 15,692
Source: India Post (2013)
State Bank of India Financial Inclusion: Highlights FY 2013-14
 The Bank has set up 45,487 BC Customer Service Points (CSPs) through alliances both at
National and Regional level.
 The Bank is offering various technological enabled products through Business
Correspondent (BC) channel, such as, Savings Bank, flexi RD, STDR, Remittance & SB-
OD facilities.
 The Bank has achieved 100% coverage in 31,729 villages during FY14. The cumulative
coverage has gone up to 52,260 villages.
 11,423 BC outlets have been set up in Urban/Metro centres which cater to the requirements
of migrant labourers, vendors, etc. During FY14, 226 lac remittance transactions for Rs.
9,983 crore were registered through BC channel.
 During FY 14, Bank has opened 1.50 crore Small accounts with simplified KYC.
 The transactions volume through BC Channel has grown to Rs. 22,525 cr. during FY 14 as
against Rs. 13,033 crore during FY13.
 With a view to facilitate transactions through alternate channels, the Bank has issued 24 lac
FI Rupay ATM Debit Cards to FI customers.
 Linking of villages to branches through CSPs in a Hub and Spoke model has been launched
and 69,749 villages have been linked so far. A facility of depositing loan repayments at
31,919 BC outlets has also been enabled.
 Under Direct Benefit Transfer (DBT) Scheme, the Bank has handled 27.41 lac transactions
amounting to Rs. 505 crore as Sponsoring Bank in addition to 7.1 lac transactions amounting
to Rs. 98.61 crore as Receiving Bank. Overall 1.36 crore accounts linked with Aadhaar
across the country.
 SBI is the sole Sponsoring Bank for DBT for LPG transactions which are processed
centrally for all the three Oil Marketing Companies. Over 8.98 crore transactions amounting
Rs 5,393 crore processed.
 4.46 lac SHGs credit linked with credit deployment of Rs. 5,134 crore. Our market share in
SHGs is 22%.

30
PRODUCT PROFILE

31
Financial products and services provided to the people through financial inclusion are:

Source: Rangarajan committee(2008)

Service facility

Overdraft facility

Payment and remittance services

Low cost financial services

Cheque facility

All kinds of commercial loan

Electronic fund transfer

Credit and Debit Cards access

Access to financial markets

Financial advice

Insurance (Medical insurance)

Micro credit during emergency

Entrepreneurial credit

32
 In order to ensure that all the financial needs of the customers are met, banks are
advised banks to offer a minimum of four basic products, viz.
 A savings cum overdraft account.
 A pure savings account, ideally a recurring or variable recurring deposit.
 A remittance product to facilitate EBT and other remittances.
 Entrepreneurial credit products like a General Purpose Credit Card (GCC) or a Kisan
Credit Card (KCC).

33
REVIEW OF LITERATURE

34
The literature on financial inclusion is new but growing. The factors affecting financial
inclusion depend precisely on the way financial inclusion is defined. Financial inclusion (or,
alternatively, financial exclusion) has been defined in the literature in the context of a larger
issue of social inclusion (or exclusion) in a society. Financial exclusion may be caused by (1)
“geographic limitations
due to under-provision of banking services in remote and scarcely
populated areas, (2) “socioeconomic limitations
when financial services appear inaccessible
to specific income, social or ethnic groups, or (3) “limitations of opportunity”.

According to V.Leeladhar (2005), financial inclusion usually refers to the delivery

banking services at an affordable cost to the vast sections of the disadvantaged and low
income groups. Dr K.C. Chakrobarty (2011), gives another wide definition, which defines
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 in particular at
an affordable cost in a fair and transparent manner. Financial inclusion has been defined by
the Rangarajan Committee Report (2008), as “the process of ensuring access to financial
services and timely and adequate credit where needed by vulnerable groups such as weaker
sections and low income groups at an affordable cost.” Das Prasun Kumar (2010), said that
the objective of financial inclusion is to extend the scope of activities of the organized
financial system to include within its ambit people with low income and the unreachable
through the formal financial system to make them partner of economic growth of the country.

Unnikrishnan and Jagannathan (2012), mentioned the necessity of financial

inclusion for socio-economic empowerment. The paper identified the factors helping in
financial inclusion, analyzed the hindrance to efficient financial inclusion and the due steps to
be taken to over par the barriers and enable inclusive growth. The paper had a concluding
section which mentioned the factors that empower the masses financially and states more
emphasis on social inclusion in comparison to financial inclusion by rein forcing the
importance of self-sustenance at the bottom of the pyramid. V.Ganeshkumar (2013), noted
that branch density in a state measures the opportunity for financial inclusion in India.
Literacy is a prerequisite for creating investment awareness, and hence intuitively it seems to
be a key tool for financial inclusion. Pal and Pal (2012), analyzed that income related
inequality in financial inclusion in India by using a representative household level survey
data, linked to State-level factors. The results of the research depict that the extent of
financial exclusion is quite severe among households across all income groups, This paper
also provides estimates of the effects of various socio, economic and demographic

35
characteristics of households on propensity of a household to use formal financial services,
and made a comparison of rural and urban sectors.

Martínez,C.H,Hidalgo,X.,P,Tuesta,D (2013), found that socioeconomic factors

from individual point of view influence the decision of whether or not to use formal saving or
credit financial services. The insufficiency or variability of income and self-exclusion are the
most important barriers to financial inclusion in Mexico. Rojas- Shabna Mol TP (2014),
found that lower financial literacy, lack of awareness and cost of transaction are important
barriers to financial inclusion. Devlin (2005) found that those of a more secure status
economically are less likely to be financially excluded. Cultural and psychological barriers
prevent people to have access to financial services. Financial exclusion by Stephen P.
Sinclair (2001), means the inability to access necessary financial services in an appropriate
form. Exclusion can come about as a result of problems with access, conditions, prices,
marketing or self-exclusion in response to negative experiences or perceptions. As stated by
Claessens (2005), financial exclusion often reflects a wider social exclusion, which involves
factors such as education level, type of employment, and training. According to the World
Bank (2008), cited in Honohan and King, (2009), the causes of financial exclusion were
broken down into: insufficient income; discrimination; contractual/information framework;
and price and product features. In their research, they looked to see the reasons that none
financial user gives for not using financial products. Further, countries with low levels of
income inequality tend to have relatively high level of financial inclusion Buckland et al,
(2005). Kempson and Whyley, (1998), Another factor that can be associated with financial
inclusion is employment. Goodwin et al, (2000), Higher the income level, both at the
individual level and for a country, higher is the financial inclusion. Mandira Sarma,Jesim
Pais (2008) ,They find out that level of human development and that of financial inclusion
are strongly positively correlated, income as measured by per capita GDP is an important
factor in explaining the level of financial inclusion in a country. Economic status of the
household is found to be positively and significantly correlated with the degree of financial
inclusion.

Laha, A, Dr, Kuri, P, K., Dr (2011), There is a significant relationship between

socio-economic factors and financial inclusion. Clamara,N,Peña,X,Tuesta,D.,(2014).
Carbo et al (2010), those families with lower incomes are most likely to be financially
excluded. Kumar,N.,(2012), found that level of economic condition is a vital determinant of
financial inclusion efforts. It implies that region's structural and environmental setup has a

36
role in determining the deposit penetration. Radha Krishan Sharma, Vishal Jain and Swati
Gupta (2014), Study concluded that quality and accessibility to financial services and
awareness about financial products are key factors that influence demand of financial
services. According to Dangi, N, Kumar, P., (2013), Lack of financial literacy and basic
education prevent people to have access to financial services. Gupta, P., Singh, B., (2013),
found relationship between role of literacy level and financial inclusion. Lack of financial
literacy and basic education prevent people to have access to financial services.

GAP ANALYSIS
Title Author Major Findings Gap Analysis

An Analytical Dr. Anupama There is a lot of gap How this gap can be
Study: Relevance of Sharma, Ms. Sumita between the formal reduced is not being
Financial Inclusion Kukreja financial institutions proposed in this paper.
For Developing and the rural people.
Nations
(march 2013)
Factors that Matter Noelia Clamara, The results show that How the inclusive
for Financial Ximena Peña the traditionally more strategies can be
Inclusion: Evidence And vulnerable groups implemented from both
from Peru David Tuesta (women, individuals public and private
(February 2014) living in rural areas institutions is missing in
and young people) are this paper.
those with the greatest
difficulties in
accessing the formal
financial system.
Financial Inclusion NITIN KUMAR The income level has Why there is a negative
and its a positive impact on correlation between the
determinants: both credit and population density and
Evidence from state deposit deposit penetration.
level Penetrations.
empirical analysis in

37
India
(2008)

Financial Inclusion Devendra Prasad The study tells the The paper does not give
in Indian Pandey and Amit importance of any idea about the
Scenario(2009) Kumar Katiyar inclusive growth of determinants which
Indian economy plays an important role
through financial in financial inclusion.
Inclusion.
The paper highlights There are certain
Financial inclusion: Shabna Mol TP about the conceptual problems like lower
concepts and aspects of financial financial literacy, lack of
overview in Indian inclusion, point out awareness; the cost of
context. the reasons for transaction is not at all
(June 2014) financial exclusion. cost-effective.

38
OBJECTIVES AND SCOPE

39
4.1 OBJECTIVES OF THE PROJECT

 To study about the various factors that affects financial inclusion.

 To study the major initiatives and policy measures taken by RBI and GoI for financial
inclusion.

4.2 SCOPE OF THE PROJECT

 The study is undertaken in various places of Rourkela.

 The scope of data collection contains people from different groups, which includes
population from different strata of society (rural, semi-urban and urban) residing in
Rourkela city.
 The major variables considered during the study are Socio- Demographic (Social class,
gender and age groups) and Financial Services ( Total number of bank accounts ,growth
in number of bank accounts, total deposits etc).

4.3 HYPOTHESES
The hypotheses tested are:
 H1: There exists a positive relationship between social factors and financial inclusion.
 H2: There exists a positive relationship between economic factors and financial inclusion.

40
RESEARCH METHODOLOGY

41
5.1 OBJECTIVE
 To study about the various factors which affects financial inclusion.

 To study the major initiatives and policy measures taken by RBI and GoI for financial
inclusion.

5.2 TYPE OF RESEARCH

A research design is the specification of methods and procedures for acquiring the needed
information. Design adopted here is descriptive. It basically seeks to extract information
about financial inclusion from various households.
5.3 SAMPLING
An integral component of research design is the sampling plan. Especially it addresses three
questions: who to survey (sample unit) how many to survey (sample size) and how to select
them (sampling procedure). Making the census study of the entire universe will be impossible
on the account of limitations of time and money. Hence sampling procedures represent data
of the entire population.
5.3.1 SAMPLE UNIVERSE
The sample universe is Rourkela.
5.3.2 SAMPLE SIZE
The size of sample is 200 respondents.
5.3.3 SAMPLE UNIT
Various households like:
 Agricultural Farmers
 Artisans
 Labourers
 Self Employed
5.3.4 SAMPLING METHOD
Random sampling was used here because the study is not restricted to one industry. Different
households work in almost all the industries.
5.4 DATA COLLECTION TECHNIQUES/ TOOLS
Questionnaire and Personal interview were used as a tool for the collection of data, mainly
because it gives the chance for timely feedback from respondents.

42
5.5 ANALYSIS TECHNIQUES – STATISTICAL TOOLS AND
TECHNIQUES USED.
 Descriptive statistics- Bar graphs interpretation by analysing the questionnaire.
 Statistics- Linear Regression models using IBM SPSS Statistics 20
5.6 LIMITATIONS
 The study is limited only to Rourkela and cannot be used to make an inference for the
whole state of Odisha.
 The constraint is the time duration.
 Although the assumptions are quite reasonable, it deserves further examination. In
addition, this study was not designed to be a representative survey, and its findings cannot
be generalized urban and rural households but a sample size of 200 is a big constraint in
defining the various factors which affects and impacts financial inclusion of a larger
population in Rourkela.

43
DATA ANALYSIS AND INTERPRETATION

44
DESCRIPTIVE STATISTICS:

CATEGORY Frequency Percent

1(APL) 3 1.5
2(BPL) 74 36.8
Valid
4(OTHERS) 123 61.2
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table1: Category of Respondents

Graph 1: Respondents Category

Analysis:

From the above graph it is observed that 74 and 123 of the total respondents belong to BPL
and others or none category respectively.

Inference:

From the analysis 36.8 percent and 61.2 percent of the total respondents belong to BPL and
others (or, none) category respectively.
45
Perception about bank Frequency Percent

1(low rate of interest on

8 4.0
deposits)
2(high rate on lending) 131 65.2
3(Do not give loans) 32 15.9

Valid 4(do not give full cash) 18 9.0

5(difficult to approach loan) 4 2.0
6(ask for security deposit) 3 1.5
7(others) 4 2.0
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 2: Perception about bank

Graph 2: Perception about bank

Analysis:

From the table it can be seen that 8 perceive bank to give low interest on deposits,131 think
that they charge high rate on lending,32 do not give loans,18 perceive banks do not give full
cash, the remaining perceive it’s difficult to approach for loan and ask for security deposit.

Inference:
Fromm the analysis it can be observed that the maximum of the respondents with 65.2%
perceive bank as a devil in charging high rates on lending. While the next majority with
15.9% think that banks do not give loans at all and the rest perceive banks do not give loans
at all, difficult to approach from loans and ask for security deposit respectively.

46
Reason for account opening Frequency Percent
0(No acct.) 138 68.7
2(Govt. Benefits) 15 7.5
Valid 4(Salary acct.) 45 22.4
5(Loan from Bank) 2 1.0
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 3: Reason for account opening

Graph 3: Reason for account opening

Analysis:

From the table it can be seen that 138 do not have any account. In the contrary 15, 45 and 2
are the numbers who have account opened for Govt. Benefits, salary account and loan from
bank respectively.

Inference:

From the analysis it is observed that 7.5 percent have opened bank account to avail
government benefits, 22.4 percent have opened their bank account to keep the money as a
saving and just 1 percent have opened account to avail the loan services from bank.

47
Reasons for Not opening Bank account Frequency Percent
0(Have Account) 62 30.8
1(believe in cash) 23 11.4
2(No or little money) 77 38.3
4(Bank charge a lot) 5 2.5
Valid
5(Deny from staffs) 6.0
12
6(lengthy procedure) 21 10.4
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 4: Reason for not opening bank account

Graph 4: Reason for not opening bank account

Analysis:
From the table it can be observed that 62 have a bank account, 23 believe in cash, 77 have no
or little money, 5 think bank charge a lot, 12 said they were denied by staffs and 6 think
lengthy procedure the reason behind not opening bank account.

Inference:
From the analysis it can be seen that 30.8% have bank account, 11.4% do not opened the
account as they believe in cash only.38.3% of respondents do not have or have little money to
operate a bank account.2.5% believe that bank charge a lot for maintaining or opening a bank
account.6% got denial from Bank staff and the rest 10.4% think that they do not have a bank
account due to its length and hassle procedure.

48
TYPE OF HOUSEHOLD Frequency Percent

1(Rented) 46 22.9
2(Self-owned) 131 65.2
Valid
3(Parental property) 23 11.4
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 5: Type of Household

Graph 5: Type of Household

Analysis:
From the Table it can be seen that 46,131 and 23 out of 200 respondents have type of
Household as Rented, self-owned and Parental property respectively.
Inference:
From The analysis it can be observed that 22.9% of the total respondents live in a house by
giving rent. While 65.2% have their own house and the rest 11.4% live in house built by their
forefathers or have parental property.

49
 SIZE OF HOUSEHOLD

Size of Household Frequency Percent

1(1 room) 86 42.8
2(2 room) 56 27.9
Valid
3(3 or more room) 58 28.9
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 6: Size of Household

Graph 6: Size of household

Analysis:
From the table it can be observed that 86, 56 and 58 respondents have 1 room, 2 rooms and 3
or more rooms respectively.
Inference:
From the analysis it can be observed that 42.8% of the households have one room followed
by 28.9% having three or more rooms while 27.9% have two rooms respectively.

50
 LOAN PERIOD

Loan Timeline Frequency Percent

0(No Loan) 108 53.7
1(Six months) 76 37.8
Valid
2(One Year) 16 8.0
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 7: Loan period

Graph 7: Loan Period

Analysis:

From the Table it can be seen that 108 of the respondents have not taken any loan,76 of them
have taken loan for a period of 6 months and the remaining 16 have taken loan for a period
of one year.

Inference:

From the analysis it is found that a huge 53.7% have not taken loan, while 37.8% have taken
loan for a period of 6 months and the remaining 8% have taken loan for a period of one year.

51
 LOAN CLEARED

Loan Cleared Frequency Percent

1(Not taken Loan) 108 53.7
2(Not repaid Yet) 47 23.4
Valid 4(Cleared from relatives) 23 11.4
5(Others) 22 10.9
Total 200 99.5
Missing System 1 .5
Total 201 100.0

Table 8: Loan cleared data

Graph 8: Loan Cleared data

Analysis:
From the table it can be seen that 108 have not taken loan,47 of them have not repaid yet,23
have either partially or fully cleared loan of there relatives and 22 have either cleared loan
from bank or relatives.
Inference:
From the analysis it can be found that 53.7% have not taken any loan,23.4% have not yet
repaid the loan,11.4% have repaid or cleared there loan taken from relatives and the rest
10.9% have either fully or partially cleared loan from banks or relatives or other source

52
RELIABILITY:

It has been found that Cronbach's alpha is 0.708, which indicates good internal consistency
among factors. This means that 70.8% of the variability in composite score is considered to
be internally reliable variance.

Cronbach's Alpha N of Items

.708 27

INTERPRETATION OF THE MODEL FOR SOCIALFACTORS:

REGRESSION:
Linear regression analysis was conducted to determine the impact of Social and Economic
factors on financial inclusion.
b
Model Summary
Model R R Square Adjusted R Std. Error of Change Durbin-
Square the Estimate Statistics Watson
Sig. F Change
a
1 .785 .616 .599 .560 .000 2.297
a. Predictors: (Constant), PERCEPTION ABOUT BANK, SIZE OF
HOUSEHOLD, No of family members, TYPE OF HOUSEHOLD,
APL/BPL/OTHER /NONE, REASONS FOR NOT OPENING BANK A/C,
SIZE OF FARM HOUSE/FARM PLOT/GARAGE/RETAIL SHOP/WORK
SHED, REASON FOR A/C OPENING
b. Dependent Variable: TYPE OF ACCOUNT
The value of the Durbin-Watson statistic ranges from 0 to 4.
As a general rule of thumb, the residuals are not correlated if the Durbin-Watson statistic is
approximately 2, and an acceptable range is 1.50 - 2.50.
The Durbin-Watson statistic for this problem is 2.297 which fall within the acceptable range.
The proportion of variance in the dependent variable (TYPE OF ACCOUNT) explained by
the independent variables (PERCEPTION ABOUT BANK, SIZE OF HOUSEHOLD, No of
family members, TYPE OF HOUSEHOLD, APL/BPL/OTHER /NONE, REASONS FOR
NOT OPENING BANK A/C, SIZE OF FARM HOUSE/FARM PLOT/GARAGE/RETAIL
SHOP/WORK SHED, REASON FOR A/C OPENING) (R²) was 61.6%.

53
The Multiple R for the relationship between the set of independent variables and the
dependent variable is 0.785, which would be characterized as strong using the rule of thumb
than a correlation less than or equal to 0.20 is characterized as very weak; greater than 0.20
and less than or equal to 0.40 is weak; greater than 0.40 and less than or equal to 0.60 is
moderate; greater than 0.60 and less than or equal to 0.80 is strong; and greater than 0.80 is
very strong.

a
ANOVA
Model Sum of df Mean F Sig.
Squares Square
b
Regression 92.464 8 11.558 36.823 .000
1 Residual 57.754 184 .314
Total 150.218 192

The probability of the F statistic (36.823) for the overall regression relationship is <0.001,
less than the level of significance of 0.05. We support the research hypothesis that there is a
statistically significant relationship between the set of independent variables (social factors)
and the dependent variable (financial inclusion).
The tolerance values for all of the independent variables are larger than 0.10.
Multicollinearity is not a problem in this regression analysis.
Therefore the estimated model is as below:
Type of Account= -1.324 + 0.126 (No. of family members) + .231
(APL/BPL/OTHER/NONE) + .298 (Type of Household) +.664 (size of household) + .772
(size of farmhouse/retail/garage/workshop) +.223 (reason for A/c opening) + .209 (Reason
for not opening bank A/c) + .229 (perception about bank)

54
 Coefficients
Model Unstandardized Coefficients t Sig. Collinearity Statistics
B Std. Error Tolerance VIF
(Constant) -1.324 .400 -3.308 .001

No of family members .126 .060 2.090 .038 .822 1.217

APL/BPL/OTHER /NONE .231 .051 4.532 .000 .861 1.161

TYPE OF HOUSEHOLD .298 .076 -3.937 .000 .866 1.155

SIZE OF HOUSEHOLD .664 .148 4.484 .000 .840 1.190

1
SIZE OF FARM
HOUSE/FARM
.772 .131 -5.893 .000 .875 1.142
PLOT/GARAGE/RETAIL
SHOP/WORK SHED

REASON FOR A/C

.223 .064 3.481 .001 .978 1.022
OPENING

REASONS FOR NOT

.209 .035 -5.892 .000 .943 1.060
OPENING BANK A/C

PERCEPTION ABOUT
.229 .044 5.158 .000 .985 1.015
BANK

A. Dependent Variable: Type of Account

55
For the independent variable PERCEPTION ABOUT BANK, the probability of the t
statistic (5.158) for the b coefficient is <0.001 which is less than the level of significance of
0.05. We conclude that there is a statistically significant relationship between
PERCEPTION ABOUT BANK and TYPE OF ACCOUNT.

INTERPRETATION OF THE MODEL FOR ECONOMIC FACTOR:

ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression 31.437 4 7.859 120.092 .000b
1 Residual 12.304 188 .065
Total 43.741 192
a. Dependent Variable: TOTAL NO OF ACCOUNTS
b. Predictors: (Constant), LOAN CLEARED, VALUE OF ITEMS IN
OFFICE/RETAIL SHOP/GARAGE/WORK SHOP, LOAN PERIOD, VALUE
OF HOUSEHOLD ITEMS

The probability of the F statistic (120.092) for the overall regression relationship is <0.001,
less than the level of significance of 0.05. We support the research hypothesis that there is a
statistically significant relationship between the set of independent variables (Economic
factors) and the dependent variable (financial inclusion).

Model Summaryb
Model R R Square Adjusted R Std. Error of the Change Durbin-Watson
Square Estimate Statistics
Sig. F Change
a
1 .848 .719 .713 .256 .000 2.031
a. Predictors: (Constant), LOAN CLEARED, VALUE OF ITEMS IN OFFICE/RETAIL
SHOP/GARAGE/WORK SHOP, LOAN PERIOD, VALUE OF HOUSEHOLD ITEMS
b. Dependent Variable: TOTAL NO OF ACCOUNTS
The value of the Durbin-Watson statistic ranges from 0 to 4.
As a general rule of thumb, the residuals are not correlated if the Durbin-Watson statistic is
approximately 2, and an acceptable range is 1.50 - 2.50.
The Durbin-Watson statistic for this problem is 2.031 which fall within the acceptable range.

56
The proportion of variance in the dependent variable (TOTAL NO OF ACCOUNTS)
explained by the independent variables(LOAN CLEARED, VALUE OF ITEMS IN
OFFICE/RETAIL SHOP/GARAGE/WORK SHOP, LOAN PERIOD, VALUE OF
HOUSEHOLD ITEMS) (R²) was 71.9%.
The Multiple R for the relationship between the set of independent variables and the
dependent variable is 0.848, which would be characterized as very strong as explained above
in the interpretation of social factors.

Coefficientsa
Model Unstandardized Coefficients t Sig. Collinearity Statistics
B Std. Error Tolerance VIF
(Constant) -.167 .039 4.246 .000
VALUE OF HOUSEHOLD
.258 .000 7.991 .000 .898 1.113
ITEMS
VALUE OF ITEMS IN
1 OFFICE/RETAIL
.243 .000 -2.050 .000 .925 1.081
SHOP/GARAGE/WORK
SHOP
LOAN PERIOD .397 .071 5.564 .000 .863 1.158
LOAN CLEARED .185 .024 7.827 .000 .978 1.022
a. Dependent Variable: TOTAL NO OF ACCOUNTS

The tolerance values for all of the independent variables are larger than 0.10.
Multicollinearity is not a problem in this regression analysis.
Therefore the estimated model is as below:

TOTAL NO OF ACCOUNTS = -.167 + .258 (VALUE OF HOUSEHOLD ITEMS) + .243

(VALUE OF ITEMS IN OFFICE/RETAIL SHOP/GARAGE/WORKSHOP) + .397 (LOAN
PERIOD) + .185 (LOAN CLEARED)

For the independent variable LOAN PERIOD, the probability of the t statistic (5.564) for the
b coefficient is <0.001 which is less than the level of significance of 0.05. We conclude that
there is a statistically significant relationship between LOAN PERIOD and TOTAL NO.
OF ACCOUNTS.

57
FINDINGS AND RECOMMENDATIONS

58
7.1 FINDINGS
The empirical Analysis shows that both economic and social factors play an important role in
the financial inclusion. Both the factors have a positive influence in the financial inclusion in
Rourkela. The analysis finds that Households belonging to BPL category are mostly excluded
from the financial services. Also it was found that perception about bank was found to be
really alarming from demand side. There was a negative perception about the bank that they
charge high rate of interest in lending. This is the social factors which impacts or we can say
act as a major roadblock from getting included in availing the financial services. From the
economic factor the primary reason behind taking loan is for Business related activity. The
findings also suggest that majority of the respondents have opened their bank account for
savings purpose and for availing Government benefits.
7.2 RECOMMENDATIONS
The Indian households can be broadly divided in to two main groups, rural and urban. To
have effective financial inclusion, the banks have to always keep in mind these target-groups
and bring them to banking fold in such a way that it is a win- win situation for both.
Commercial banks can step in to augment financial inclusion in two ways: (i) Providing
banking and other related services and (ii) Providing non-banking services and support. To
ensure banking services are attractive to those with low incomes, banking products must have
features that meet the needs of this group of consumers.
Reserve Bank of India and Government of India is navigating the path to financial inclusion
by means of policies and supervision. To remove all obstacles and hurdles in the way of
financial inclusion RBI and GoI has taken a lot of initiatives and policy measures These
initiatives and policy measures are:-

No-frills Accounts-People in the financially excluded zone find it quite difficult to meet the
requirements of normal savings accounts. Recognizing this problem, RBI, in the year 2005,
took an initiative and has made it compulsory for the banks to provide no-frills savings
accounts without a minimum balance requirement.

Overdraft facilities in saving Account-Banks are providing overdraft (OD) facility in

saving account and also Small Overdrafts in No-frills accounts. Banks have been advised and
directed to provide small OD in such accounts.

59
Overcoming language barrier-Large sections of the Indian population are not familiar with
English and Hindi, the languages mostly used in bank forms. Banks are therefore required to
provide forms pertaining to account opening disclosure etc. in the regional language as well.
Simplified branch authorization-With the objective of facilitating uniform branch growth,
RBI has permitted banks to freely open branches in tier III to tier VI centres with population
less than 50,000 under general permission consent, subject to reporting (since December
2009).On the other hand, banks can open branches in any centre-rural, semi-urban or urban –
in the North-east without applying for permission each time, again subject to reporting.
General Credit Cards (GCCs)-Banks have been advised to consider introduction of a
General Purpose Credit Card (GCC) facility up to Rs.25,000/- at their rural and semi-urban
branches. The credit facility is in the nature of revolving credit entitling the holder to
withdraw up to the limit sanctioned. Based on assessment of household cash flows, the limits
are sanctioned without insistence on security or purpose. Interest rate on the facility is
completely deregulated.
Kisan Credit Cards (KCCs)- Kisan Credit Cards to small time farmers have been issued by
banks. As on March 2012, the total number of KCCs issued has been reported as 30 million
with a total amount outstanding to the tune of Rs.2, 068 billion.
Business Correspondents (BCs) and Business Facilitators (BFs) Model-The Reserve
Bank permitted banks to engage BCs and BFs as intermediaries for providing financial and
banking services. The BC model allows banks to provide doorstep delivery of services,
especially cash-in-cash-out transactions, thus addressing the last-mile problem.
SHG Bank-Linkage Programme-The credit linkage of Self Help Groups (SHG) and Joint
Liability Groups (JLG) by Commercial Banks is one of the major initiatives to bring low
income poor people into the banking stream. The poor people come together and pool the
savings of group and dispense small loans for meeting the individual requirements of
members.
Opening of branches in unbanked rural locations-To target excluded section of society in
rural locations attention was given to expansion and opening of bank branches in those
centres.
Rural Infrastructure Development- Under Rural Infrastructure Development Fund (RIDF),
NABARD grant loans to State Governments for the creation of rural infrastructure, broadly
under agriculture and related sectors, rural connectivity and social sector.

60
CONCLUSION

61
62
The social and economic factors play an important role in the mission of financial inclusion.
There is a need for proper monitoring from supply side to address the problem behind poor
financial inclusion. The report suggests that apart from the demand and supply dimension
there is another dimension which is forgotten in the process, that is the larger ecosystem
within which demand and supply operates. This ecosystem is maintained through effective
policies and people friendly administration. Ecosystem of different region and state is shaped
by historical incidents, geographical features, economic activities, socio cultural factors,
tradition and technology. Combined effect of these factors imparts some unique features to
different ecosystems. The policy makers have to make policies considering these unique
elements of the different ecosystem. Most of the priority states or region in our country where
financial inclusion is below the expectations; it's the lack of sensitivity towards the
uniqueness of the ecosystem. Thus to make the mission of 'Financial Inclusion' equitably
successful in all the states, need is to synchronize efforts in dealing with demand side and
supply side constraint with due consideration to the distinct features of the region.

63
 REFERENCES
1. Chakrabarty K.C. (2009), Banking Key Driver for Inclusive Growth, RBI Monthly
Bulletin, September 2009.
2. Claessens, S, and Laeven, L., (2005), Financial Dependence, Banking Sector
Competition, and Economic Growth, World Bank Policy Research Working Paper
3481.
3. Dangi, N, Kumar, P., (2013),” Current Situation of Financial Inclusion in India and Its
Future Visions”, International Journal of Management and Social Sciences Research,
Volume 2, Issue 8, August 2013.
4. Das Prasun Kumar (2010, June), “The Upscaling Technology to Build Inclusive
Financial System in India” Journal of Education and Policy studies, Volume. 2, Issue 5.
5. Ganeshkumar, V and Parmasivan, C. (2013),”Overview of Financial Inclusion in India”
International Journal of Management and Development Studies, Volume 2, Issue 3, pp
45-46.
6. Gupta, P., Singh, B., (2013), Role of literacy level in financial inclusion in India:
Empirical Evidence, Journal of Economics, Business and management, Volume 1, Issue
3.
7. Honohan, P and King, M., (2009),”Cause and effect of financial access: cross-country
evidence from the findscope surveys”, prepared for the World Bank conference,
“Measurement, promotion, and impact of access to financial services”, Washington dc,
March 12-13, 2009.
8. Laha, A, Dr, Kuri, P, K., Dr (2011), “Determinants of financial inclusion: a study of
some selected districts of west Bengal”, Indian Council of Social Science and Research.
9. Leeladhar, V (2005). Taking banking services to the common man - financial inclusion,
RBI Monthly Bulletin, December 2005.
10. Martínez, C.H, Hidalgo, X., P, Tuesta, D (2013),”Demand factors that influence
financial inclusion in Mexico: analysis of the barriers based on the ENIF survey”,
Working Paper no.13/37.
11. Pal, R, and Pal, R., (2012), “Income Related Inequality in Financial Inclusion and Role
of Banks: Evidence on Financial Exclusion in India”, Indira Gandhi Institute of
Development Research (IGIDR), WP 2012-13.

12. Rangarajan, C., Report of the Committee on Financial Inclusion, Ministry of Finance,
Government of India, 2008.

64
13. Sarma, M and Pais, J., (2008)”Financial Inclusion and Development: A cross country
Analysis”, Indian council for Research on International Economic Relation, pp1-28.
14. Shabna Mol TP (2014), “financial inclusion: concepts and overview in Indian
context”, Volume 3, Issue 6.
15. Sharma, R.K., Jain, V., and Gupta, S., (2014), “Financial Inclusion in Rural Oman: A
Demand and Supply Analysis”, International Journal of Management and International
Business Studies, Volume 4, Number 3 (2014), pp. 339-348.
16. Sinclair S. P. (2001). Financial exclusion: An introductory survey. Report of Centre for
Research in Socially Inclusive Services, Heriot-Watt University, Edinburgh.
17. Unnikrishnana, R and Jagannathan, L. (2014),”Unearthing global financial inclusion
levels and analysis of financial inclusion as a mediating Factor in global human
development”, Serbian Journal of Management, Volume 10, Issue 1, pp 19 – 32.

65
ANNEXURE

QUESTIONNAIRE

1. District: 2. Ward/ lane/ road/ slum/ block/ street:

3. Town: 4. Name of head of household:

5. Village name: 6.Household no.:

7. Size of house hold:

8. To which group do you belong?

1. APL

2. BPL

3. Any other scheme

4. None of the above

9. Principal source of income?

1. Agricultural Farmers
2. Artisans
3. Labourers
4. Self Employed
10. Type of ownership of the house?
1. Rent
2. Self-owned
3. Parental property
11. For how long you have been staying in this house?
1. 1 year
2. 1-3 years
3. < 5 years
4. > 5 years
12. What is the size of your house?
1. 1 room
2. 2 rooms
3. 3 rooms
4.> 3 rooms

66
13.
Ownership of Assets

Bedstead or
steel / wooden almirah / dressing table
other furniture & fixtures
radio, record player/tape recorder/
stereo/ musical instruments for
television, VCR/VCD, DVD Player, home theatre,
multimedia PC
other goods for recreation , entertainment and
hobby
pressure cooker/ household utensils
gas/electric oven/
microwave oven
electric fan, clock/ watch, water filter /
electric iron/ sewing machine
refrigerator/ air cooler/ air conditioner/
washing machine
other cooking and household appliances
and other personal goods
other durables

total value

67
15. How big is your farmhouse /garage /retail shop?

1.1 room

2. 2room

3. 3 room

4.____decimel(s)

16. Have you ever taken any credit from your neighbour/relatives/bank/society
wholesaler/employer/customer? If yes, what is the amount?

Also state the period of loan amount?

1.______6 months

2. ______1 year

3. ______2 years

4. ______2years and above

17. Are the below mentioned Deposit account used by you in home/office or workshop?

Have you opened the same solely for individual purpose?

1. Normal bank account

2. Postal savings/RD

3. No frills/zero balance account

4. Jan dhan yojana account

5. LIC policy or any other life insurance policy

6. Health insurance

7. Old age pension

8. Auto insurance/property insurance/garage/workshop insurance

9. Bank correspondent account/credit society/micro-finance

10. Any other

18. When and for how many days have you opened the above mentioned accounts?

1.______6 months

2. ______1 year

68
3. ______2 years

4. ______2years and above

19. What is the number of fixed deposits you have in your house/office/workshop?

1. One

2. Two

3. Three

4. Four

5. More than four

20. What were the reasons that your household opened the account?
1. To receive Govt. payments from NREGP
2. To receive Govt. payments from schemes other than NREGP
3. For receiving remittances
4. For saving money
5. To request a loan
6. If others, (please specify) ___________________________

21. Who helped you to open the account?

1. Village Panchayat Officials 2. Bank Officials
3. Neighbour 4. Friends/Relatives
5. If others, (please specify) ___________________________

22. How frequently do you save in your account?

1. Don’t save / never
2. At least once a month
3. Less than once a month
4. I put in money as and when I can
5. I have paid money in but not in past 12 months
6. I have not added money since account was opened
7. If others, (please specify) __________________________

23. Do you find sometimes, necessary to save your household deposits?

1. Business transactions or family needs

2. Govt. scheme benefits
3. Health treatment
4. Migration to other city
5. Not necessary
6. Others____________________

69
24. Reasons for not having a bank account:
1. I have no money/little money to put in
2. No bank in this area
3. No point - benefits received in cash
4. No point - paid in cash
5. High charges
6. Tried to open but was refused
7. Lengthy processes
8. Not important to me
9. Anticipated rejection
10. If others, (please specify) _____________________________

25. Reasons for being refused a bank account:

1. No ID
2. No job, unemployed
3. Had to have a minimum amount
4. Had debts
5. Don't know - did not say
6. If others, (please specify) ___________________________
26. Why do you think the banks are not trustworthy?

1. Gives low rate of interest on deposits

2. Charges high rate of interest on lending
3. Do not give loans at all
4. Difficult to approach for loans
5. Ask for security deposit by cash
6. Others_________________________
27. If borrowed from sources other than banks, which of the following reasons led to this
choice?

1. Being able to borrow relatively small sums

2. I did not need to provide security or guarantees
3. It was available locally
4. I can make repayments in cash in small weekly or fortnightly sums
5. It is convenient because they come to the door to collect
6. It is because I know the lender/collector
7. If others, (please specify) ___________________________

28. If ever borrowed, what was the type of the credit/loan?

1. Housing loan
2. Business Loan
3. Training/Education loan
4. Vehicle loan
5. If personal loan, purpose of the loan
Household items
Computer

70

Day to day living expenses or bills

To pay off other debts

If others, (please specify) ____________ __
6. If others, (please specify) ________________________

29. What were the reasons for not availing any form of insurance?
1. Too expensive, can't afford it
2. Just don't bother, no real reasons
3. No need for it
4. I don't have much, nothing valuable
5. I am in process of doing it
6. No insurance men coming to door now
7. Have to have bank account
8. If others, (please specify) ___________________________________

71