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I wish to express my gratitude to Reserve bank of India, New Delhi, for giving me an opportunity to be a part of it and enhance my knowledge by granting permission to do my summer project under RBI Young Scholar Award Scheme. I’m grateful to my Mentor Dr. Dileep Singh (AGM,RPCD),Mr. S.Chaudhri (GM, RPCD), Mrs. Usha Jain, Mrs. Harmesh Khanna (GM, HRDD), Mr. Rajul Naithani,Manager (HRDD), Mr. Kulwant Singh (AM,HRDD),& Mr. Sandeep Kohli(AM, HRDD) for their invaluable guidance and cooperation during the course of the project. They provided me with their assistance and support whenever needed that has been instrumental in completion of this project. The learning during the project was immense & invaluable. My work includes study of Financial Inclusion, reason behind a large number of resident has no access to the banking services, and how could we deliver Financial Services to excluded section of society, various initiatives taken by Government of India and Reserve Bank Of India, strategical drivers for enabling financial inclusion viz. Banks, Regional Rural Banks, Urban Co-Operative Banks (UCBs), Microfinance Institutions, Design & Delivery Issues in Microfinance etc., I also conducted survey to assess the impact of various policy initiative in Hari Nagar(west Delhi).



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Chapter -1

The World is moving at an amazing pace. Thanks to the advances in technologies, distances have become meaningless. Globalization has enabled the rise of global trade leading to wealth generation in developed as well as developing countries. Wealth can be created in any part of the world with a single click of the mouse. Developing nations, like India have immensely benefited from the globalizing economy. Wealth has been pouring into the country as investments (both direct and institutional). Indian companies are acquiring companies all over the world, hence benefitting from expansion. This has directly affected the lives of many citizens in our country. For many, there has been a dramatic increase in the disposable income. The savings, consumption and investment patterns have changed in the past few years. This has meant that there has been an increase in demand for many financial services from different financial firms. The market has responded to this soaring demand with making attractive offers and services for the customers at affordable rates. The liberalization of the economy in the 1990s has brought in new players into the field which has not only brought in some much needed fresh air to the stagnant financial sector but also competition for the same market space which was relatively unknown in the financial sector till then. Since then, there have been progressive reforms in the financial sector allowing for better and easier facilities and options to the consumer. An increasing financially aware middle class have realized the importance of financial services. Banks have streamlined and rationalized themselves to meet with the changing demands of the people. Banks have become partners in growth for many offering them a safer and secure future. However, not all the reforms in the financial services sector have still been able to bring in the other half of India’s population who are un-banked. There are many reasons that are obvious for this kind of financial exclusion. The new surge in the economy has not yet percolated into the lower strata of the society. It is easy to blame the capitalist growth for this sort of income disparities. Even after 60 years of Indian independence, 1/3 of our population is still illiterate (let alone financially literate) and at least 26% of the population still lives under the poverty line. There are many statistics, which goes on to prove that for even a developing nation India has a long way to go. Most of the un-banked or financially excluded population of India live in rural areas; nevertheless, there is also a significant amount of the urban population of India who face the same situation even with easy access to banks. Many of the financially excluded in these


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areas are illiterates earning a meagre income just enough to sustain their daily needs. For such people, banking still remains an unknown phenomena or an elitist affair. It is easier for them to keep their money at their house or with some moneylenders and easily make immediate purchases (which make up most of their expenditure) rather than to follow the cumbersome process at banks. A lot of the financially excluded populations are at the mercy of moneylenders or pawn shop owners. They should be made a part of the formal banking structure so that they could also have the benefits that the others enjoy. By making them financially inclusive, we are making their financial position less volatile. At the same time, we are treating them on an equal par with other members of the population so that they would not be denied of access to a basic service such as banking. FINANCIAL EXCLUSION Financial Exclusion is the process by which a certain section of the population or a certain group of individuals is denied the access to basic financial services. The term came to prominence in the early 1990’s in Europe where the geographers found that a certain pockets or regions of a particular country were behind the others in utilizing financial services. It was also found that these pockets or regions were poorer compared to regions which utilized more of financial services.

The definition of financial exclusion will range upon several dimensions, but the most important dimension are the breadth & focus of financial exclusion and the concept of relativity or degree i.e. Financial Exclusion is defined in relation to some predefined standard(i.e. inclusion). Breadth means the scope of definition; the broadest definitions of financial exclusion recognize that there are many factors interacting between financial exclusion and social exclusion and disadvantage. The type of such a broad definition is found in the seminal work of Leyshon and Thrift, who define financial exclusion as “processes that prevent poor and disadvantaged social groups from gaining access to the financial system” 1. The other end of extreme definitions are narrowed its scope, for example, while Rogaly has a broad view of social exclusion, his working definition of financial exclusion is narrow which he stated as “Exclusion from particular sources of credit and other financial services (including insurance, bill-payment services, and accessible and appropriate deposit accounts)”2

1 2

Leyshon & Thrift 1995 Rogaly 1999


. RESERVE BANK OF INDIA.. 2000 RURAL PLANNING AND CREDIT DEPARTMENT. to a wider definition covering access to and use and understanding of products and services. This line of thinking defines the problem of financial exclusion as that emanating from increased inclusion. or access to. originating from country-specific problems of financial exclusion and socio-economic conditions. the contexts specific dimensions of financial exclusion assume importance from the public policy perspective. Thus.Financial Inclusion P age |5 Extreme definition may be seen as a somewhat sweeping definition. The focus here refers to the group of people (communities) to household. payment and remittances or for saving some of part of his income to meet future contingencies/future requirement is said to be financially included despite the fact that he is not availing all/majority of other financial services such as Insurance. imposes real costs on them -often the most vulnerable people. A person transacting regularly with his saving fund bank account and availing very basic of services i. in turn. Treasury.. 3 4 H. financial exclusion defined relative to some standard (i.2004 Kempson et al. a region to the specific type of business. including forms of credit and insurance. particular types of financial services or products. NEW DELHI . cannot access mainstream financial products such as bank accounts and low cost loans. with its apparent reference to access to the financial system as a whole. The other extreme of definitions of financial exclusion are those that take a very narrow perspective based on a lack of ownership of. an individual having access to mainstream-necessary financially services is considered to be financially included as opposed to the first extreme definition stated above.3 Operational definitions are context-specific.e. leaving a minority of individuals and households behind 4. which. In other words. definitions of financial exclusion vary considerably according to the dimensions such as the concept of relativity.e. rather than access to specific financial services or products and access to specific channels of distribution. In recent development definitions have witnessed a shift in emphasis from the earlier ones. This also underscores the role of financial institutions or service providers involved in the process Finally.e. particularly those living on low income. this is more often implicitly rather than explicitly acknowledged in the literature Further study of literature suggest that the operational definitions have also evolved from the underlying public policy concerns that many people. inclusion).M. investment schemes etc. i. which defined financial inclusion and exclusion largely in terms of physical access.

NEW DELHI .. There could be multiple levels of financial inclusion and exclusion. we may have the financially excluded. could avoid social exclusion but the legal validity of such financial services pose an obstacle for creating a modern globalizing economy. This phenomenon is observed mostly in developed countries with high degree of financial development. THE INDIAN SCENARIO In India the focus of the financial inclusion at present is confined to ensuring a bare minimum access to a savings bank account without frills. At the other extreme. RURAL PLANNING AND CREDIT DEPARTMENT. In between are those who use the banking services only for deposits and withdrawals of money. and may not enjoy the flexibility of access offered to more affluent customers. The large presence of informal credit. who are denied access to even the most basic of financial products.Financial Inclusion P age |6 Figure 1: Anatomy of Various Financial Products or Services and the Institutional Structure Thus. But these persons may have only restricted access to the financial system. Further.e. i. and who have at their disposal a wide range of financial services and products. to all. it is possible to identify the ‘super-included’. there exists duality of hyper inclusion with some having access to a range of financial products and at the same time a minority lacking even the basic banking services. Financial exclusion may not definitely mean a social exclusion in India as it does in the developed countries. At one extreme. but it is a problem that needs to be addressed. RESERVE BANK OF INDIA. those customers who are actively and persistently courted by the financial services industry.

Some attributes of informal financial services. Even to their members. due to which there is exclusion are: A. which number around one lakh are also often exclusionary. not many PACS offer saving services. it would be impossible even for the most efficient of the governments to reach out to all sections of the people.  Primary Agricultural Cooperative Societies (PACS). RURAL PLANNING AND CREDIT DEPARTMENT.  Inadequate access to formal financial institutions that exist to the extent that the banks could not extend their outreach to the poor due to various reasons like high cost of operations. High risks to saving: loss of savings is an easily discernible phenomenon in lowincome neighbourhoods in urban areas. which the poor pay for in many ways.Financial Inclusion P age |7 Without a formal and a legally recognized financial system in which all sections of the population are a part of. Financial exclusion could be looked at in two ways: Lack of access to financial services mainly payment system. A stable and healthy financial service sector creates trust among the people about the economy and only with this trust (which has legal validity) could a strong. B. RESERVE BANK OF INDIA. which are popular for the ubiquitous moneylenders but do not have (safe) saving deposit and insurance services. NEW DELHI .  High information barriers and low awareness especially for women and in rural areas. Lack of access to formal financial services in of both rural and urban areas. stable and an inclusive economy be created. The distinction between access to formal and informal services is crucial to understand. etc. rates paid by hawkers and vendors who repay on daily basis are very high. High cost of credit and exploitative terms: credit against collateral such as gold is even more expensive than the effective interest rates. as their membership is restricted to persons with land ownership. less volume and more number of clients. which could be due to several reasons such as:  Lack of sources of financial services in our rural areas. which limit the effectiveness of their outreach figures.  Poor functioning and financial history of some beleaguered financial institutions such as financial cooperatives in many states. among many others. similarly. as informal financial markets suffer from several imperfections. but is a larger issue in cities and small towns.

RURAL PLANNING AND CREDIT DEPARTMENT. Financial exclusion is often related to more complex social exclusion issues. Near absence of insurance and pension services: life. asset. and health insurance needs.Financial Inclusion P age |8 C. RESERVE BANK OF INDIA. NEW DELHI . D. In India. Another key aspect of financial exclusion is the lack of “financial education and advice”. but also equally difficult. as the basic literacy rate is low supporting basic financial capability is indeed not just necessary. which makes financial literacy and access to basic financial services even more complex. High cost and leakages in money transfers: the delays in sending money home through all informal channels add to these.

or unemployment benefits. RESERVE BANK OF INDIA. so that they can be brought into the mainstream RURAL PLANNING AND CREDIT DEPARTMENT. Financial Inclusion allows the state to have an easier access to its citizens.& protect them from exploitation of informal credit market. “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” (The Committee on Financial Inclusion (Chairman: Dr. for e. It is a process by which financial services are made accessible to all sections of the population. The objective of Financial Inclusion  The access to various mainstream financial services e.Financial Inclusion P age |9 Chapter -2 FINANCIAL INCLUSION The word Financial Inclusion could be described as being the opposite of financial exclusion. with an inclusive population. but also other financial services such as Insurance. It could prove to be a boon in a situation like a natural disaster.  The main objective is to provide the benefit of vast formal financial market.g. 2008)) Financial Inclusion does not merely mean access to credit for the poor.: the government could reduce the transaction cost of payments like pensions. It allows for more transparency leading to curtailing corruption and bureaucratic barriers in reaching out to the poor and weaker sections. An intelligent banking population could go a long way by effectively securing themselves a safer future. a financially included population means the government will have much less headaches in ensuring that all the people get the benefits. Rangarajan. NEW DELHI . C. financial inclusion is more of a process rather than a phenomenon. However. It is a conscious attempt to bring the un-banked people into banking.g. insurance. payments and remittance and financial and credit advisory services. credit. saving bank account.

RESERVE BANK OF INDIA. where to go credit needs. BASIC SAVING BANK ACCOUNT IMMEDIATE CREDIT ENTREPRENEURIAL CREDIT HOUSING FINANCE PAYMENT & REMITTANCES SERVICES INSURANCE – LIFE/HEALTHCARE FINANCIAL EDUCATION/CREDIT COUNSELING Figure 2: Mainstream Financial Services RURAL PLANNING AND CREDIT DEPARTMENT. they should be provided immediate plan future better  Financial education\credit counselling centres – to guide them which product suits them better. so that financial dependence can be created amongst households. to run/expand small scale business/shop or any economic activity.  Housing finance. NEW DELHI .  Entrepreneurial credit – this means.funding for purchasing new residential or reconstruction  Insurance – life\healthcare. what are various services available to better their personal financial planning. medical treatment account with all basic feature of saving account. easy credit should be provided.  Payment and remittances services –  Immediate credit – in case of contingencies like accidents.Financial Inclusion P a g e | 10 WHAT IS CONSIDERED AS MAINSTREAM FINANCIAL SERVICES NECESSARY FOR FINANCIAL INCLUSION OF HOUSEHOLD?  Basic saving bank account.

mainly in cash Irregular income due to seasonality of occupation No income. Savings history and credibility checks to be used as a proxy for collateral. pension. NEW DELHI . Micro-Credit for working capital to increase stock and business. remittance. Investment plan for child's education 6. Opening a no-frills account is just a beginning to a continuous process of providing banking and financial services. where he/she can save small amounts at regular intervals ideally with savings being collected at their place of work or a specified point of transaction (SPOT) in the locality 2. mutual funds. Once the first step of safety of savings is achieved. RESERVE BANK OF INDIA.Financial Inclusion P a g e | 11 Financial Inclusion therefore. 3. Health Insurance for minor illnesses and hospitalization 5. let’s take life of migrant street vender living in almost every part of Delhi. If he misses a day due ill health To send money regularly to his family living in village To make small. To understand it better. This credit can be short term and repayment to be configured at regular intervals. the poor require access to schemes and products which allow their savings to grow at rates which provide them growth beyond mere inflation protection. though market driven costs. Pension for old age Daily cash income Frequently purchases stock. delivered at affordable. A bank account. is delivery of not only banking. and his financial life will look like this--> WHAT TYPE OF PRODUCT OR SERVICES IS REQUIRED FOR THIS TYPE OF CUSTOMER 5?? POSSIBLY 1.Ramesh and Preeti Sahai of BASIX RURAL PLANNING AND CREDIT DEPARTMENT. but also other financial services like insurance. The focus narrows down mainly to the 5 As discussed in paper titled Universal Financial Inclusion in India: The Way Forward by S. regular payment for fee for child’s education Working or operational definitions of financial exclusion generally focus on ownership or access to particular financial products and services. etc. Insurance for life 4.

Treasury. This attains special importance at this stage of rising food and oil prices. RESERVE BANK OF INDIA. 2004). the operational definitions have also evolved from the underlying public policy concerns that many people. home insurance. NEW DELHI . 2004 RURAL PLANNING AND CREDIT DEPARTMENT. without an inclusive economy the country’s development will suffer. 6 7 Bridgeman.. the World Bank chief Robert Zoellick reiterated the importance of creating an inclusive economy in an increasingly globalized World. Japan. imposes real costs on them . cannot access mainstream financial products such as bank accounts and low cost loans. Financial Inclusion is imperative for creating an inclusive economy at all fronts. short and long-term credit and savings6.often the most vulnerable people7 More importantly. Such financial products may include money transmission. which.M. in turn. 1999 H.Financial Inclusion P a g e | 12 products and services provided by the mainstream financial service providers (Meadows et al. particularly those living on low income. In the recently concluded G8 meeting in Hokkaido. Furthermore.

Sector Banks) and various annual maintenance charges(AMC) levied by banks. ii. adding to that they also anticipate that bank will refuse if they transact with so small amount. Further provided that. as they have low earning they cannot maintain minimum balance requirements of a normal saving bank account which ranges from Rs. Financial Services Being Very Complex In Nature: excluded sections of the society find dealing with organized financial sector cumbersome. DEMAND SIDE BARRIERS The people who have the requirement\need but still not demanding\availing the financial services\products which can be due to the following reasons: i. A. 500 in case of PSB and Rs. the overall transaction cost to the customer in terms of both time and money proves to be a major deterrent for visiting financial institutions. The excluded section of the society find informal sector more reachable due to proximity and ease of transaction. Most the people belonging to financially excluded group are having irregular/seasonal income. hence the market lacks incentives in providing financial service/products. first the demand side and the second supply side. stringent documentation and collateral requirements and increased competition in financial services. 5000 for Pvt. The Causes of financial exclusion can be identify broadly in two categories. RURAL PLANNING AND CREDIT DEPARTMENT. RESERVE BANK OF INDIA.e. Consequently. deposit and withdrawal in very small denominations with high frequency will increase the cost of transaction. Transaction cost: Vast number of rural population resides in small villages which are often located in remote areas devoid of financial services. Hence opening of a bank account and operating it i.Financial Inclusion P a g e | 13 Chapter -3 CAUSES OF FINANCIAL EXCLUSION Financial Exclusion may also have resulted from a variety of structural factors such as unavailability of products suiting their requirements. 500 to Rs 5000(Rs. NEW DELHI . Low Income: A higher share of population below the poverty line results in lower demand for financial services as the poor may not have savings to place as deposit in savings banks. iii.

Low literacy level: The lack of financial awareness about the benefits of the banking and also illiteracy act as stumbling blocks to financial inclusion. Sophisticated Financial Terminologies: Bankers often use complex financial terminologies. birth certificates or written records often exclude women. cumbersome documentation/procedures. cultural and religious barriers to banking have also been observed in some of the countries. Some of the poor that do not have property find it impossible to get credit without the collateral. term and conditions and its framework is generally so tedious and detailed that understanding it is not possible for those who cannot even write their name or are less literate and do not understand English or Hindi(in case of some regional rural areas). vii. RURAL PLANNING AND CREDIT DEPARTMENT. Legal identity: Lack of legal identities like identity cards. There might also be cultural reasons for trusting a moneylender rather than a bank. The lack of financial awareness maybe the single most risk in financial inclusion as those who are newly included in the financial sector have to maintained within the formal financial sector. unsuitable products. branch timings. Easy access to alternative credit: For a good amount of low income people. Terms and conditions: Terms and conditions attached to products such as minimum balance requirements and conditions relating to the use of accounts as in the case of saving bank account often dissuade people from using such products/services Further. However.Financial Inclusion P a g e | 14 iv. The uneducated poor would rather put their trust in moneylenders who provide easy non-collateral credit than on the well established commercial banks. language. staff attitude are common reasons – Higher transaction cost v. ix. RESERVE BANK OF INDIA. the alternative credit provided by the money lenders and pawn shop owners are far more attractive and hassle free compared to getting a loan from a commercial bank. vi. economic and political refugees and migrant workers from accessing financial services. viii. which the masses are unable to comprehend and hence do not approach for financial services voluntarily. Psychological and cultural barriers: The feeling that banks are not interested to look into their cause has led to self-exclusion for many of the low income groups. NEW DELHI . ethnic minorities. Distance from bank branch.

KYC requirements: The KYC 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. Perception among banks about rural population: Generally. there exists a perception among banks that large number of rural population is un-bankable as their capacity to save is limited. cost of its assessment and management. most of their credit needs are in form of small lump sums and banks are reluctant to give small amounts of loan at frequent intervals. ii. iv. they do not look favourably at small loans often required by marginalized section. Therefore. due to the lower cost involved in banking with them. Miniscule margin in handling small transactions : As the majority of rural population resides in small villages that too in remote areas. B. they have to resort to borrowing money from moneylenders at uxorious rates.Financial Inclusion P a g e | 15 x. lack of rural infrastructure. The bank would rather give smaller number of large credits to middle and upper class individuals and institutions. Consequently. and vast geographical spread of the rural areas with more than half a million villages. For example. banks find small transactions cost ineffective. NEW DELHI . Unsuitable products: One of the most important reasons for the majority of rural population not approaching the formal sector for financial services is the unsuitability of products and services being offered to them. some sparsely populated i. Such loans are considered to be non-productive. Supply side barriers Some of the important causes of relatively low extension of institutional credit in the rural areas are risk perception. Disincentives for the consumer: The cost of maintaining an account (non-zero balance accounts) and procedural problems in accessing formal credit act as disincentives for consumers with weaker financial background. iii. v. Staff attitude: As public sector banks(PSBs) cater to more than 70% of banked population and about 90% of rural banked population. a majority of staffs in these PSBs RURAL PLANNING AND CREDIT DEPARTMENT. RESERVE BANK OF INDIA. All these act against the interest of a consumer from a poor background. The banks and other financial service firms have fewer financial products which are attractive to the poor and the socially disadvantaged.

Poor credit record: Areas with poor credit record. 75% of villages in rural areas have no electricity arrangement. Poor market linkage or say penetration of service providers also constitutes the major factors of financial exclusion. NEW DELHI . they do it in a manner of corporate social responsibility or social service and treat them differently instead of trying to bring them into the mainstream. vii. RESERVE BANK OF INDIA.Financial Inclusion P a g e | 16 remain insensitive to needs of customer and shirk away from duty. as banks blacklist such areas as the part of their risk management strategy. vi. bad past experience. so it can be imagined that how much penetration market would be having especially when it comes to providing financial services/products. Banks are in business to make profit and would like to only indulge in activities that give them profit. The situation is even worst in rural branches where they behave with rural poor in a condescending manner. xi. Poor market linkage: It is often argued that we may have been growing second fastest in the world. RURAL PLANNING AND CREDIT DEPARTMENT. they see banking with poor as unviable. but still our 40-55% of people living in rural and semi-urban areas do not have access to basic necessities of life. this may be that they are reluctant or there is no institutional as well as physical. Therefore there is no institutional infrastructure available in the rural area. Lack of interest from Commercial Banks: There is a lot of criticism on the commercial banks because of their inherent tendency to think that poor people are not worthy of being banked on. Due to high transaction costs on smaller transactions and the speculated high risk in lending credit to the lower strata of the society. socially unstable and poor recovery of previous loan/credit given are observed to be highly financially excluded. Unless banks see any incentive in banking with the weaker sections of the society. Even if banks are concerned at the poor. they would not be willing to do so.

II. and Exclusion from mainstream society. III. a wider dimension of financial exclusion can be identified as socio-economical consequences i. Barriers to employment as employers may require wages to be paid into a bank account. These include I. a last dimension can be identified as the social consequences generated by financial exclusion. and use their monetary resources. families and society as a whole. They impact the way in which people behave both in terms of purchase decisions and the way in which they choose to spend their time. credit and insurance are now widely regarded as essential supports for personal financial management and for undertaking transactions in modern societies (Speak and Graham. These are the consequences affecting the various links that are binding the individuals: link to corresponding to self esteem. groups which are socially excluded are mostly also found financially excluded.Financial Inclusion P a g e | 17 Chapter -4 CONSEQUENCES OF FINANCIAL EXCLUSION There are three dimensions of consequences that financial exclusion has on the people affected: Firstly. RURAL PLANNING AND CREDIT DEPARTMENT. These consequences are affecting individuals’ patterns of consumption. Finally. NEW DELHI . links binding to the society and links binding to community and/or relationships with other individual or groups. According to the Treasury Committee. Opportunities to save and borrow can be difficult to access. as well as their overall quality of life. Owning or obtaining assets can be difficult. RESERVE BANK OF INDIA.e. the way they participate to economic activities or access to social welfare and the distribution of incomes and wealth. Difficulty in smoothening income to cope with shocks. allocate. IV. UK (2006). financial exclusion can generate financial consequences by affecting directly or indirectly the way in which the individuals can raise. financial exclusion can impose significant costs on individuals. Secondly. V. Access to a bank account. 1999).

contributes to a much wider problem of social exclusion. These business related concerns of banks were. Financial exclusion is not evenly distributed throughout society. resulting in greater financial strain and unmanageable debt. The strides in technology have now reduced the required initial investment in a significant manner. RESERVE BANK OF INDIA. Another cost of financial exclusion is the loss of business opportunity for banks. in turn. 8 Invest India Incomes and Savings Survey undertaken by Invest India Market Solutions (IIMS). RURAL PLANNING AND CREDIT DEPARTMENT. particularly in the unorganized and informal sectors may give rise to large potential demand for credit. the difficulty in obtaining finance from formal sources has major social implications. Moreover. The evidence on the demand for credit in India suggests that medical and financial emergencies are the major reasons for household borrowings. would have the potential to increase savings deposits as well as credit demand. illness or death. it is concentrated among the most disadvantaged groups and communities and. Medical emergencies were particularly high for the lowest income quartile (IIMS. financial exclusion is often a symptom as well as a cause of poverty. It exposes the individual to the inherent risk in holding and storing money – operating solely on a cash basis increases vulnerability to loss or theft. 2007) 8 . credit may be needed to achieve a reasonable and viable scale of activities. NEW DELHI . implying profitable business for banks in the mediumterm. availability and usage of financial services by the otherwise excluded population groups would lead to increase in their income levels and savings. Thus. The rising entrepreneurship spanning rural. It could also lead to denial of access to better products or services that may require a bank account. At the wider level of the society and the nation. however. Banks often avoid extending their services to lower income groups because of initial cost of expanding the coverage may sometimes exceed the revenue generated from such operations. meaningful when technology development was at a nascent stage and expanding the coverage of financial services required substantial initial investment. A significant portion of demand for credit by rural households arises in order to ease the financial burden of crop failures. What is required is to explore the appropriate technology which is suitable to socio-economic conditions of the region under consideration. semi-urban and urban areas.Financial Inclusion P a g e | 18 In terms of cost to the individuals. poverty as well as all the other associated economic and social problems. This. Thus. particularly in the medium-term. as a result. besides all round impediments in basic/ minimum transactions involved in earning livelihood and day to day living. financial exclusion leads to social exclusion. Individuals/families could get sucked into a cycle of poverty and exclusion and turn to high cost credit from moneylenders. In the case of microenterprises. and health care. financial exclusion leads to higher charges for basic financial transactions like money transfer and expensive credit.

and micro and small enterprises deal entirely in cash and are susceptible to irregular cash flows. the nature and forms of exclusion and the factors responsible for it are varied and. and b. high charges and penalties. From the macroeconomic standpoint. The most conspicuous dimension of exclusion is that a majority of the low-income population do not have access to the very basic financial services. First. For instance. The resultant lack of savings and saving avenues means recourse to non-formal lenders such as moneylenders. could lead to two adverse consequences – a. mainly located in rural areas To sum up. Judged in this specific context. and self exclusion because of the fear of refusal to access by the service providers. this raises the problem of inter-linkage between two apparently separate markets. thus. NEW DELHI . informal saving channels are much less secure than formal saving facilities. financial exclusion is a serious concern among low-income households. people who save by informal means rarely benefit from the interest rate and tax advantages that people using formal methods of savings enjoy. Even amongst those who have access to finance. This.Financial Inclusion P a g e | 19 Two other factors have often been cited as the consequences of financial exclusion. RESERVE BANK OF INDIA. in turn. it complicates day-to-day cash flow management . Apart from the above mentioned supply side factors. particularly in rural areas. The financial exclusion process becomes self-reinforcing and can often be an important factor in social exclusion. The principal barriers in the expansion of financial services are often identified as physical access. most of them are underserved in terms of quality and quantity of products and services. price exclusion. conditions attached to products which make them inappropriate or complicated and perceptions of financial service institutions which are thought to be unwelcoming to low income people. lack of financial planning and security in the absence of access to bank accounts and other saving opportunities for people in the unorganized sector limits their options to make provisions for their old age. condition exclusion (conditions attached to financial products). low level of income and hence low RURAL PLANNING AND CREDIT DEPARTMENT. The inability of customers to service the loans or to repay them As loans from non-formal lenders are often secured against the borrower’s property.being financially excluded means households. demand side factors may also significantly affect the extent of financial inclusion. absence of formal savings can be problematic in two respects. Second. The critical dimensions of financial exclusion include access exclusion. especially for communities with limited access to financial products. First. no single factor could explain the phenomenon. Second. Exposure to higher interest rates charged by informal lenders. There has also been particular emphasis on socio-cultural factors that matter for an individual to access financial services.

NEW DELHI . at low level of income.Financial Inclusion P a g e | 20 savings would result in lower deposits. both demand and supply side factors have an important bearing on the usage of financial/banking services. RESERVE BANK OF INDIA. In the Indian context. Similarly. RURAL PLANNING AND CREDIT DEPARTMENT. the ability to borrow is affected because of low repayment capacity and inability to provide collateral.

several initiatives were undertaken for enhancing the use of the banking system for sustainable and equitable growth. FIRST PHASE DEVELOPMENTS (1969-1981) In 1969. So.Financial Inclusion P a g e | 21 Chapter .5 Policy Developments We have seen in the previous chapter that in our country the financial services has been\being used by a very limited group of people\individuals. the planning strategy recognized the critical role of the availability of credit and financial services to the public at large in the holistic development of the country with the benefits of economic growth being distributed in a democratic manner. In recognition of this role. These included RURAL PLANNING AND CREDIT DEPARTMENT. SHGs. the banks were nationalised in order to spread bank’s branch network in order to develop strong banking system which can mobilise res ources/deposits and channel them into productive/needy sections of society and also government wanted to use it as an important agent of change. To enlarge the area and service sector. certain policy measures have been taken by government. MFIs etc were allowed •easier credit facilities •determining new model for effective reach •leveraging on technology based solutions •improvements in •Credit absorption capcaility •exisiting formal credit delivery system 1969-1991 Rangrajan Committee Report I. Policy development in India for financial inclusion can be seen in three stages •Nationalisation of banks •presecription of priority sector targets •lead bank scheme Annual Policy 2005-2006 •No Fril bank account •simple KYC norms •NGOs. the authorities modified the policy framework from time to time to ensure that the financial services needs of various segments of the society were met satisfactorily Before 1990. RESERVE BANK OF INDIA. NEW DELHI .

V. small business and the weaker sections within these sectors. SOCIAL NETWORKING APPROACH The announcement of the policy of social control over banks was made in December 1967 with a view to securing a better alignment of the banking system with the needs of economic policy. inclusive of export credit. regional areas etc. The National Credit Council was set up in February 1968 mainly to assess periodically the demand for bank credit from various sectors of the economy and to determine the priorities for grant of loans and advances. The RURAL PLANNING AND CREDIT DEPARTMENT.. The Lead Bank Scheme. A special emphasis was laid on providing credit facilities to the weaker sections of the economy. Nationalization of private sector banks. smallscale industry. NEW DELHI . religious minorities and scheduled tribes. THE PRIORITY SECTOR APPROACH The administrative framework for rural lending in India was provided by the Lead Bank Scheme introduced in 1969. The immediate tasks set for the nationalised banks were mobilisation of deposits on a massive scale and lending of funds for all productive activities. self-employed. Realising that the flow of credit to employment oriented sectors was inadequate. Social control of banking policy was soon followed by the nationalisation of major Indian banks in 1969. Sub targets under the priority sector. Introduction of priority sector lending norms. the priority sector guidelines were issued to the banks by the Reserve Bank in the late 1960s to step up the flow of bank credit to agriculture. which was an important step towards implementation of the two-fold objectives of deposit mobilisation on an extensive scale and stepping up of lending to weaker sections of the economy. there was a very less or no emphasis was on financial inclusion of Individual/household level. along with other guidelines including those relating to Government sponsored programmes. III. Interest rate ceilings for credit to the weaker sections and Creation of specialised financial institutions to cater to the requirement of the agriculture and the rural sectors having bulk of the poor population. The target for priority sector lending was gradually increased to 40 per cent of advances in the case of domestic banks (32 per cent. Branch licensing norms with focus on rural/semi-urban branches.Financial Inclusion P a g e | 22 I. II. were used to encourage the flow of credit to the identified vulnerable sections of the population such as scheduled castes. RESERVE BANK OF INDIA. The Differential Rate of Interest (DRI) Scheme was instituted in 1972 to provide credit at concessional rate to low income groups in the country LEAD BANK SCHEME APPROACH But all these measure were focused towards inclusion of a sector. VI. in the case of foreign banks) for specified priority sectors. IV.

to make available a basic banking ‘no frills’ account either with nil or very minimum balances as well as charges that would make such accounts accessible to vast sections of the population. with a view to achieving greater financial inclusion. as a tool for reducing inter-regional disparities in banking development. urged banks to review their existing practices to align them with the objective of financial inclusion. of basic banking services to the common person. It is observed that there were legitimate concerns in regard to the banking practices that tended to exclude rather than attract vast sections of population. as a proactive measure. The scheme. in particular pensioners. implicit or explicit.Financial Inclusion P a g e | 23 promotional aspects of banking policy have come into greater prominence. The nature. 2. resulting in a significant expansion of bank branches and decline in population per branch. II. while recognizing the concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population. In the Mid Term Review of the Policy (2005-06). In 2004 RBI appointed an internal group to look into ways to improve Financial Inclusion in the country. scope and cost of services would be monitored to assess whether there was any denial. NEW DELHI . It has tried to make banking more attractive to citizens by allowing for easier transactions with banks. RBI exhorted the banks. and 3. With a view to enhancing the financial inclusion. inter alia. The major emphasis of the branch licensing policy during the 1970s and the 1980s was on expansion of commercial bank branches in rural areas. SECOND PHASE – ANNUAL POLICY (2005-2006) As the central bank of the country. Implement policies to encourage banks which provide extensive services. was subsequently discontinued. The nature and number of transactions in such accounts would be restricted and made known RURAL PLANNING AND CREDIT DEPARTMENT. It also indicated that the Reserve Bank would 1. including the underprivileged. The branch expansion policy was designed. however. the Reserve Bank promoted the establishment of the Credit Guarantee Corporation of India in 1971 for providing guarantees against the risk of default in repayment. the RBI in its Annual Policy Statement for the year 2005-06. while disincentivising those which were not responsive to the banking needs of the community. the Reserve bank of India has taken steps to ensure financial inclusion in the country. RESERVE BANK OF INDIA. Banks urged to review their existing practices to align them with the objective of financial inclusion. In order to encourage commercial banks and other institutions to grant loans to various categories of small borrowers. deployment of credit and urban-rural pattern of credit distribution. self-employed and those employed in the unorganised sector.

There is no account maintenance cost Similar types of accounts. The holder is not required to maintain any minimum balance requirement and also nothing is charged for opening this type of account 2. ATM facility is provided free of cost 5.Financial Inclusion P a g e | 24 to customers in advance in a transparent manner. Financial Inclusion offers immense potential not only for banks but for other businesses. Brief glimpses of main initiative are followings:a) No-Frill Accounts It is a basic saving fund account having all the features of a normal saving fund account which it differs in the following aspects 1. the government agencies as well as the banks can be partners in growth. Transaction are limited to 5-10 free transactions per month 4. RESERVE BANK OF INDIA. promoting the use of IT and intermediaries. the NGOs. KYC norms have been simplified so that everyone can have this account 3. Through an integrated approach the businesses. offering GCC cards to the poor. and asking SLBCs and UTLBCs to start a campaign to promote financial inclusion on a pilot basis. RURAL PLANNING AND CREDIT DEPARTMENT. RBI has realized that a push is needed to kick start the financial inclusion process. can be met in. though with different names. Some of the steps taken by RBI include the directive to banks to offer No-frills account. NEW DELHI . any accidental charges etc. Through such policies the RBI has tried to improve Financial Inclusion. easier KYC norms. have also been extended by banks in various other countries with a view to make financial services accessible to the common man either at the behest of banks themselves or the respective Governments b) Overdraft in Saving Bank Accounts Bank were advised to give credit in form of overdraft on saving bank account to its customer so that in case of small credit need like medical bill. better customer services. RBI came out with a report in 2005 (Khan Committee) and subsequently RBI issued a circular in 2006 allowing the use of intermediaries for providing banking and financial services. All banks are urged to give wide publicity to the facility of such no frills account so as to ensure greater financial inclusion.

2008. In the course of this process.000/-) in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed rupees one lakh (Rs. The members also learn to handle resources of size. 2.00. Once the group is stabilized. They involve voluntary thrift activities on a regular basis. and shows mature financial behavior.1. banks have been advised to keep in mind the spirit of the instructions and avoid undue hardships to individuals who are otherwise classified as low risk customers. it is considered for linking to banks. along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her. In case of close relatives who find it difficult to furnish documents relating to place of residence while opening accounts.Financial Inclusion P a g e | 25 c) KYC norms The Know Your Customer (KYC) norms were revised in order to make it easy for people to avail financial services on February 18. Banks find it comfortable to lend money to the groups as the members have already achieved some financial discipline through their thrift and internal lending activities.000/-) in a year. NEW DELHI . Banks are encouraged to provide loans to SHGs in certain multiples of the accumulated savings of the SHGs. They begin to appreciate the fact that the resources are limited and have a cost. Further. d) SHG Model A Self Help Group (SHG) is a group of about 15 to 20 people from a homogenous class who join together to address common issues. The groups decide the terms and conditions of loan to their own members. 3. The peer pressure in the group ensures timely repayment and becomes social collateral for the bank loans. which generally takes up to six months to 1 year. RURAL PLANNING AND CREDIT DEPARTMENT. banks can obtain an identity document and a utility bill of the relative with whom the prospective customer is living. These guidelines include 1. Banks should review the risk categorization of customers at a periodicity of not less than once in six months. much beyond their individual capacities. the KYC procedure for opening accounts has been simplified for those persons who intend to keep balances not exceeding rupees fifty thousand (Rs. Banks can also use any supplementary evidence such as a letter received through post for further verification of the address. RESERVE BANK OF INDIA. 50. Loans are given without any collateral and at interest rates as decided by banks. in order to ensure that persons belonging to low income group both in urban and rural areas do not face difficulty in opening the bank accounts due to the procedural hassles. 4. they imbibe the essentials of financial intermediation and also the basics of account keeping. and use of the pooled resource to make interest-bearing loans to the members of the group.

government agencies. NEW DELHI . Revolving cash credit facility allowing any number of withdrawals and repayments within the limit. Model III: This involves lending. with limited point-ofsale (POS) and limited ATM facilities.Financial Inclusion P a g e | 26 Generally. B. These SHPIs include various NGOs. e) KCC / GCC Guidelines A. Model II accounted for around 74 per cent of the total linkage at end-March 2007. There are three different models that have emerged under the linkage programmeI. Model II: This envisages lending by banks directly to SHGs with facilitation by NGOs and other agencies. KCC Scheme Eligible farmer will be provided a Kishan Credit Card and a Pass Book or a Card-cumPassbook. as indirect finance to agriculture under priority sector. based on the assessment of income and cash flow of the household similar to that prevailing under a normal credit card. selfemployed individuals and federations of SHGs. The Reserve Bank further advised banks in May 2008 to classify 100 per cent of the credit outstanding under GCCs as indirect finance to agriculture sector under the priority sector with immediate effect. the Reserve Bank advised all scheduled commercial banks. farmers’ clubs. respectively . banks. some SHGs have also been formed without any assistance from such SHPIs. RESERVE BANK OF INDIA. Model I: This involves lending by banks directly to SHGs without intervention/facilitation by any NGO. the SHGs need self-help promoting institutions (SHPIs) to promote and nurture them. in December 2005 to introduce a General Credit Card (GCC) Scheme for issuing GCC to their constituents in rural and semi-urban areas. II. GCC SCHEME With a view to providing credit card like facilities in the rural areas. with an NGO acting as a facilitator and financing agency. including RRBs. III. The Reserve Bank also advised banks to classify fifty per cent of the credit outstanding under loans for general purposes under General Credit Cards (GCC). while Models I and III accounted for around 20 per cent and 6 per cent. RURAL PLANNING AND CREDIT DEPARTMENT. However.

margin and rate of interest as per RBI norms. As incentive for good performance. urban poor. RESERVE BANK OF INDIA. In due course. women. Withdrawals through slips /cheques accompanies by card and passbook. Various initiatives taken by the Reserve Bank in order to promulgate Financial Literacy:   A multilingual website in 13 Indian languages on all matters concerning banking and the common person has been launched by the Reserve Bank on June 18.for partial disability available to Kishan Credit Card holder at an annual premia of Rs. The objective of the project is to disseminate information regarding the central bank and general banking concepts to various target groups. changing in cropping pattern etc. Comic type books introducing banking to schoolchildren have already been put on the website. banks. short term credit needs may also be covered. 15/. including. films. Seasonal sub limits may be fixed at the discretion of banks. Personal Accident Insurance of Rs. Limit to be fixed on the basis of operational land holding. school and college going children. rural and urban poor. RURAL PLANNING AND CREDIT DEPARTMENT. allied activities and non. women and small entrepreneurs. Conversion /re-schedulement of loans also permissible in case of damage to crops due to natural calamities.Financial Inclusion P a g e | 27 Entire production credit needs for full year plus ancillary activities related to crop production to be considered while fixing limit. The banking information would be disseminated to the target audience with the help of. Limit of valid for 3 years subject to annual review.000/. defense personnel and senior citizens. The Reserve Bank has undertaken a project titled “Project Financial Literacy”. schools/colleges using pamphlets. NEW DELHI . brochures. Operations may be through issuing branch / PACS or through other designated branches at the discretion of bank. Similar books will be prepared for different target groups such as rural households. the Reserve Bank has taken a number of measures towards imparting financial literacy and promotion of credit counseling services. 25.per annum. defence personnel. among others. credit limits could be enhanced to take cares of increase in costs. as also. f) Financial Literacy Program Recognizing that lack of awareness is a major factor for financial exclusion.000 for death and permanent disability and Rs. 50. local government machinery. cropping pattern and scales of finance. the Reserve Bank’s website. 2007.

financial advisory services and insurance facilities. The Report of the Committee on Financial Inclusion Committee has also recommended that the Government should constitute a National Mission on Financial Inclusion (NaMFI) comprising 9 “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” RURAL PLANNING AND CREDIT DEPARTMENT. This would require semi-urban and rural branches of commercial banks and RRBs to cover a minimum of 250 new cultivator and non-cultivator households per branch per annum. The ‘Financial Inclusion and Financial Literacy Cell’ has been established the college of Agricultural Banking. and  Leveraging on technology-based solutions. remittances and payment services. Rangarajan) constituted the Committee on Financial Inclusion on June 26. Eastern and Northeastern regions with 64 per cent of all financially excluded farmer households.  Evolving new models for effective outreach. Keeping in view the enormity of the task involved. Exclusion is most acute in Central.  Suggesting measures for improving credit absorption capacity especially amongst marginal and sub-marginal farmers and poor non-cultivator households. therefore. The Report observed that in India 51. should include access to mainstream financial products such as bank accounts. which would act as a resource centre in this field. C. The Committee submitted its final Report on January 4.Financial Inclusion P a g e | 28   Financial literacy programs are being launched in each state with the active involvement of the state government and the SLBC. III. credit. NEW DELHI . THIRD PHASE . the Committee recommended the setting up of a mission mode National Rural Financial Inclusion Plan (NRFIP) with a target of providing access to comprehensive financial services to at least 50 per cent (55. Financial inclusion.RANGRAJAN COMMITEE The Government of India (Chairman Dr. RESERVE BANK OF INDIA. particularly by vulnerable groups such as weaker sections and low-income groups at an affordable cost9. the overall strategy for building an inclusive financial sector should be based on  Effecting improvements within the existing formal credit delivery mechanism. 2008.4 per cent of farmer households are financially excluded from both formal/informal sources and 73 per cent of farmer households do not access formal sources of credit. According to the Report. according to the Committee. The Report viewed financial inclusion as a comprehensive and holistic process of ensuring access to financial services and timely and adequate credit.77 million) of the excluded rural households by 2012 and the remaining by 2015. 2006 to prepare a strategy of financial inclusion. Each SLBC convener has been asked to set up a credit counselling centre in one district as a pilot project and extend it to all other districts in due course.

CREATION OF SPECIAL FUNDS The “Committee on Financial Inclusion” set up by the Government of India (Chairman: Dr. RBI and NABARD in the ratio 40:40:20. widening of network and expanding coverage in a time bound manner. separate credit plans for excluded regions to be drawn up by RRBs and strengthening of their boards. in his Budget Speech for 2007-08 announced the constitution of the Financial Inclusion Fund (FIF) and the FITF. Rangarajan) in its Interim Report recommended the establishment of two Funds. NEW DELHI . The Union Finance Minister. private and NGO sectors in undertaking promotional initiatives. RURAL PLANNING AND CREDIT DEPARTMENT. targeted branch expansion in identified districts in the next three years. the major recommendations were early implementation of Vaidyanathan Committee Revival Package. measures for urban micro-finance and separate category of MFIs.Financial Inclusion P a g e | 29 representatives of all stakeholders for suggesting the overall policy changes required. In the case of co-operative banks. and supporting stakeholders in the domain of public. and the “Financial Inclusion Technology Fund (FITF)” to meet the cost of technology adoption. The major recommendations relating to commercial banks included target for providing access to credit to at least 250 excluded rural households per annum in each rural/semi urban branches.500 crore each at NABARD. credit and insurance products.25 Crore each in the two funds by the Central Government. The final report of the Committee has been submitted to the Government in January 2008. provision of customised savings. namely the “Financial Inclusion Promotion and Development Fund” for meeting the cost of developmental and promotional interventions for ensuring financial inclusion. no further merger of RRBs. Other important recommendations of the Committee are encouraging SHGs in excluded regions. legal status for SHGs. The major recommendations relating to RRBs are extending their services to unbanked areas and increasing their credit-deposit ratios. incentivising human resources for providing inclusive financial services and simplification of procedures for agricultural loans. RESERVE BANK OF INDIA. The Government advised that for the year 2007-08 it was decided to initially contribute Rs. C. use of PACS and other primary co-operatives as BCs and co-operatives to adopt group approach for financing excluded groups. with an overall corpus of Rs. as a source of finance for micro-entrepreneurs. Hence. 100000 Crore. NGOs have played a commendable role in promoting SHGs and linking them with banks.6 HOW GOVERNMENT AND RBI CAN BUILD ON EXISTING BANKING STRUCTURE TO PROVIDE FINANCIAL SERVICES TO ALL Banking system is like a team. Currently. the spread of the SHG. SHG BANK LINKAGE PROGRAM The SHG-Bank Linkage program can be regarded as the most powerful initiative since independence for providing financial services to the poor in a sustainable manner. NEW DELHI . This number needs to be increased substantially. which constitutes from various entities which are different in nature. it becomes critical to examine the prospect of providing a simplified legal status to the SHG MICRO FINANCE INSTITUTIONS (MFIs) From the late 1980s. Many states with high incidence of poverty have shown poor performance under the program. But this is not enough to reach the entire mass. As of now. The program has been growing rapidly YOY basis. RURAL PLANNING AND CREDIT DEPARTMENT. but exhibiting low performance in implementation of the programme. structure and its working but together they makes system in which they efficiently work for a common motive. RESERVE BANK OF INDIA. NABARD has identified 13 states with large population of the poor. They may evolve to a higher level of commercial enterprise in future. The ongoing efforts of NABARD to upscale the programme need to be given a fresh impetus. However. 10 million SHG’s are working across the country with a credit base of Rs. the emergence of the Grameen Bank in Bangladesh drew attention to the role of micro. Lack of access to credit was seen as a binding constraint on the economic activities of the poor.Bank linkage program in different regions has been uneven with southern states accounting for the major chunk of credit linkage.Financial Inclusion P a g e | 30 Chapter . SHGs are operating as thrift and credit groups.

Despite the phenomenal outreach and volume of operations. out of some 400 million poor workers. the potential of MFIs as promising institutions to meet the demands of the poor has been realized. In India. less than 20 per cent have been linked with financial services provided by MFIs. Steps needed to promote MFIs  One of the ways of expanding the successful operation of microfinance institutions in the informal sector is through strengthened linkages with their formal sector counterparts. the health of a very large proportion of these credit cooperatives has deteriorated significantly. which provide thrift.   COOPERATIVE CREDIT INSTITUTIONS Rural credit cooperatives in India were originally envisaged as a mechanism for pooling the resources of people with small means and providing them with access to different financial services. RESERVE BANK OF INDIA. providing food security. there is exigency to upscale their outreach. For example. NEW DELHI . informal sector microfinance institutions have comparative advantage in terms of small transaction cost achieved through adaptability and flexibility of operations.Financial Inclusion P a g e | 31 Microfinance Institutions (MFIs) are those. generating employment opportunities in rural areas and ensuring social and economic justice to the poor and vulnerable sections. Efforts are needed to make MFIs an integral part of mainstream banking and to bring down the rates of interest on microcredit to ensure the micro finance movement gets further impetus A mutual beneficial partnership should be established between MFIs and Banks contingent on comparative strength of each sector. Lately. credit. It has served as an effective institution for increasing productivity. semi-urban or urban areas for enabling them to raise their income level and improve living standards. The closer proximity with the people at grassroots level and the mix of offering right products at right price based on the actual needs of the masses makes their role very important in deepening financial inclusion. and other financial services and products of very small amounts mainly to the poor in rural. Various problems faced by these institutions are:       Low resource base High dependence on external source of funding Excessive government control Huge accumulated losses and imbalances Poor business diversification Low recovery RURAL PLANNING AND CREDIT DEPARTMENT. However.

THE BUSINESS CORRESPONDENT MODEL In January 2006. represent a powerful instrument for financial inclusion. they need to be oriented suitably to serve the rural population with a specific mandate to achieve financial inclusion. The intention behind the model is to promote the business of banking with low capital cost by enabling outsourcing of rural business to agents on a commission basis. They account for 31% of deposit accounts and 37% of loan accounts in rural areas. RRBs account for 37% of total rural offices of all scheduled commercial banks and 91% of their workforce is posted in rural and semi-urban areas. thus addressing the last mile problem. the Reserve bank permitted banks to utilize the services of nongovernment organizations (NGOs/SHGs). RRBs RRBs. micro-finance institutions and other rural organizations as intermediaries in providing financial and banking services through the use of business facilitator (BF) and business correspondent models(BC). semi-urban and urban areas. NEW DELHI . RRBs have a large presence in regions marked by financial exclusion of high order. The BC model allows banks to do ‘cash in cash out’ transactions at a location much closer to the rural population. It is hoped that recent regulatory changes and fresh impetus provided by the regulator will help in making RRBs front institution in achieving the target of reaching out to financially excluded people.Financial Inclusion P a g e | 32 Taking all these facts in mind. there is an urgent need to address the structural deficiencies of these institutions in order to make them play an effective role in meeting the financial inclusion goal. However. RRBs are. post-merger. the best suited vehicles to widen and deepen the process of financial inclusion. RURAL PLANNING AND CREDIT DEPARTMENT. Recent guidelines issued by RBI to ensure adequate supervision over operations of BCs:   Every BC to be attached to a certain bank to be designated as the base branch The distance between the area of operation of a BC and the base branch should not exceed 30 km in rural. thus. Banks are also entering into agreement with Indian Postal Authority for using the enormous network of post offices as business correspondents for increasing their outreach and leveraging the postman’s intimate knowledge of the local population and trust reposed in him. RESERVE BANK OF INDIA.

with cost of funds today at 9%. this may be one of the most preferred choices for banks for spreading their network in unbanked areas.   However. which account for 70% of assets. ROLE OF TECHNOLOGY IN FINANCIAL INCLUSION According to recent Boston Consulting Group report. NEW DELHI .Financial Inclusion P a g e | 33 Initiatives needed to be undertaken to promote BC model    Allow more entry to private well governed small finance banks. public sector banks (PSBs). As mobile phones have reached out to segments and geographies but not yet penetrated by banking sector. Banks could leverage the network for expanding operations. provision for bad debts at 10% and cost of operation and transaction at 13% for poor customers in far flung areas. different villages are separated by large distances and poor connectivity. RESERVE BANK OF INDIA. Facilitate the use of existing networks like cell phone kiosks or kirana shops as business correspondents to deliver products of large financial institutions. Unfortunately. banking for the poor by formal sector becomes unviable. Mobile Banking can become the most promising front end technology for facilitating financial inclusion in India. The key role the technology is expected to play is to reduce the last two components drastically. banks need to consider certain facts before leveraging technology to bring more and more population under the net of financial inclusion     Cost effectiveness of technology Security of accounts Financial viability of technology in rural areas Ability of potential beneficiaries to use the technology RURAL PLANNING AND CREDIT DEPARTMENT. Liberalize the business correspondent regulation so that a wide range of local agents can serve to extend financial services. reducing costs and increase reliability of their operations. As more than one million new mobile users are being added every month in India. have been slow in making use of modern technology to bring down transaction costs. The telecom network in India is expanding rapidly as more and more private operators are entering in the telecom sector. communication technology could play an important role in bridging the last miles between the customer and the provider thus facilitating faster transactions. Consequently. How technology can lower operating costs as well as lending rates?  In rural areas. The intent is to bring local knowledge to financial products that are needed locally.

2009)  Number of ATMs –44. RBI AT 20TH SKOCH SUMMIT 2009.Financial Inclusion P a g e | 34 Chapter.00% 40. 2009) out of which 187 million (46%) do not have a bank account (Source: Cellular Operators Association of India) Measure of access to banking services in India PRESENT LEVEL OF ACCESS TO VARIOUS FIANANCIAL SERVICES 50.00% 20.00% 0. MUMBAI ON JULY 17.00% 2. RESERVE BANK OF INDIA.727 constituting 39. NEW DELHI .857 (as on May 31.70.7% of total bank branches (as of June.C. DY GOVERNOR. 2008)  Number of rural bank branches –31.7 PRESENT STATUS OF FINANCIAL INCLUSION IN THE COUNTRY A GLIMPSE OF EXTENT OF FINANCIAL INCLUSION IN THE COUNTRY  Number of No-Frill Accounts –28.00% SOURCE: PRESENT STATUS OF VARIOUS FINANCIAL SERVICES AS DISCUSSED BY DR. 2009)  Number of Cards –167.60% 13.00% 40. 2009)  Number of POS –4.09 million (as on May 31. 31. K.00% Check in accounts Life Insurance Non-Life Insurance Credit Card ATM + Debit Card 10. 2009 RURAL PLANNING AND CREDIT DEPARTMENT.237 (as on May 31.30. 31.23 million (as on Dec.CHAKRABARTY.00% 10.00% 0.00% 30. 2009)  Number of Kisan Credit cards –76 million (Source: CMIE publication 2007-08)  Number of Mobile phones–403 million (as on Apr.

POPULATION (IN THOUSAND) 60 50 40 30 20 10 0 1969 1981 1991 2001 2007 Rural Urban Total YEARS (ENDING MARCH) Rural 82 20 14 16 17 Urban 33 17 16 15 13 Total 63 19 14 16 16 RURAL PLANNING AND CREDIT DEPARTMENT. RESERVE BANK OF INDIA.Financial Inclusion P a g e | 35 POPULATION PER BANK BRANCH (SCHEDULED COMMERCIAL BANKS) 90 80 70 End March 1969 1981 1991 2001 2007 Note: figures are in thousands OBSERVATIONS  Less penetration of banks in rural areas is resulted in very high population per branch. NEW DELHI .  Even though it has come down significantly but population per bank branch is still very high especially in rural areas.

followed by Kerala and Gujarat.00 41.20 454.94%).00 300.96%).00 400.30 54.07%) and Andhra Pradesh (5.90 52. The highest growth is observed in Jammu and Kashmir (6.00 700. States where negative growth in bank accounts is observed are Chandigarh (-. Andaman and Nicobar island (.01%). followed by Pondicherry (6. Andhra Pradesh achieved the highest growth rate of 5. constituting top three states in India.60 47.60 51.80 610.69%) and West Bengal (-.00 1993 2002 2007 Total Account SCBs RRBs PACs UCBs Post offices Per 100 persons No.00 200.80 50.60 46.70 125.00 500. RESERVE BANK OF INDIA. NEW DELHI .69% in rural areas.70 102.00 100.50 454.61%). of saving Account (in millions) Years Growth in bank accounts State wise growth in bank accounts suggests that during post reform period. The growth in bank outreach in urban areas in various states during the post reform period is much better as compared to rural areas.Financial Inclusion P a g e | 36 NUMBER OF SAVINGS ACCOUNTS INSTITUTION SCBs RRBs PACS UCBs Post Offices Total Total A/C per 100 persons 1993 246.50 36.01% RURAL PLANNING AND CREDIT DEPARTMENT. only West Bengal witnessed a negative growth rate in bank accounts of -0. Among all urban areas.00 2002 246.00 30. Delhi (-.10 42.00 600.00 60.00 60.00 0.50 89.93%).00 2007 320.

RESERVE BANK OF INDIA. education and other purposes. low income. RURAL PLANNING AND CREDIT DEPARTMENT. B-Block & Mayapuri Phase-II) in West Delhi. Of the total sample.e. In order to assess the level of financial inclusion in New Delhi. i. generally do not have access to financial services. Hari Nagar B Block (west Delhi) Methodology 40 household were randomly surveyed regarding financial inclusion/financial literacy through a well constructed questionnaire (annexure I) in surrounding area of Hari Nagar (Slums nearby MS Block. a survey was conducted in area of Hari Nagar (West Delhi) through a questionnaire. 34 were males and 6 were females (the low numbers of females was due to reluctance in answering questions). small shopkeepers migrant. labour coming from other part of country in search of employment. people employed in unorganized sector who are unbanked Objective To assess the impact of policy initiatives on financial inclusion in Delhi Survey brief Survey Sample size: 40 Households Area: MS Block. NEW DELHI . Target group were labourers. Mayapuri Phase-II. This groups being financially weak due to low literacy.Financial Inclusion P a g e | 37 Chapter 8 Study result Population of Delhi consist a big group of migrants.

family having 2 earning member were 7(17%) and only 3 families (8%) were having earning members more than 2 earning members (as shown in the figure) Earning members 1 Earning members=3 Earning members=2 Figure 2: Earning members in the Family RURAL PLANNING AND CREDIT DEPARTMENT. Size FZ=7 10% FZ=3 7% When asked about their how many members they have in their family? FZ=3 FZ=4 FZ=5 FZ=6 18% The Response Was As Follows Majority of them were having family size of 4 were 17(42%) and family size of 3 was the lowest 3(7%) Family size of 5.6 and 7 were 9(23%).HOUSEHOLD PROFILE I.7(18%) .Financial Inclusion P a g e | 38 PART I . 30 7 3 75% 8% 17% Earning members Families having 1 Earning members Families having 2 Earning members Families having 3 Earning members 30 (75%) families were having Sole earning member. NEW DELHI .4(10%) respectively FZ=4 42% FZ=6 FZ=7 FZ=5 23% Figure 1: Family Size of Sample surveyed II. How many of them are earning? Nos. RESERVE BANK OF INDIA.

50%). RESERVE BANK OF INDIA. RURAL PLANNING AND CREDIT DEPARTMENT. & 1 respondent didn’t answer this question.e.e. Secondary (8 i. It also means that as they are not very educated they won’t be having fixed income as most of them are working daily wages and are underpaid.Financial Inclusion P a g e | 39 III. IV of earning group (Figure 5). Majority were school dropout (20 i. Literacy level Of the total sample.5%) and Sr.e. NEW DELHI . 12. or the complications attached with opening a saving bank account or operating it conveniently. 20%) (As Shown In Figure 3) which implies that their literacy level was not enough to understand a financial product. High school (5 i. 25 20 15 10 5 0 School Dropout High School Sr. hence they cannot afford high charges and penalties. Secondary Graduate PG or Above NA Figure 3: Literacy level Graduates consisted 6(15%) People who were the main constituents of Cat II and Cat.

Employment 1(3%) 2(7%) Organised Sector Un-organised NA 38(90%) Figure 4: Employment Of the total 40 people surveyed 2 were found working in organized sector and 38 were found working in unorganized sector (Figure 4). RESERVE BANK OF INDIA. To understand the financial position of household they were further asked further about their employability or the nature of employment. 10 were self employed i. NEW DELHI . 6 were engaged in service in unorganized sector(as depicted in Figure 5) 16 16 14 12 10 8 6 4 2 0 10 6 3 3 Self Employed Figure 5: Unorganized Sector Labour Service Student NA RURAL PLANNING AND CREDIT DEPARTMENT. shopkeepers and running small scale business activities.Financial Inclusion P a g e | 40 IV. out of the 40 respondent 16 were labourers working in Factories in nearby areas.e.

Cat.IV Cat. 12000-16000 & Cat V = Rs. 4000-8000. 16000 & above The observation indicates that Cat. I consist of respondent whose earning is in the range of Rs 0-4000. Earnings In figure 6. Cat IV =Rs.I Figure 3: Earnings Cat.5% respectively) consist mainly those who are self employed i. Cat III = Rs.e.5% &12.5%).e. I & cat.FINANCIAL POSITION I. Earnings(in thousands) 20 15 10 5 0 Cat. V people engaged in organized sector and those who are having business which is stable in nature. II. 0% 68% Daily Weekly Monthly NA Figure 7: Earning pattern RURAL PLANNING AND CREDIT DEPARTMENT.II Cat. 8000-12000. 4 respondent did not answered on this. V It may be seen from the above that nearly 75% (cat. Students (3) etc. IV and Cat. RESERVE BANK OF INDIA. Cat. shopkeepers. and Cat. similarly Cat.Financial Inclusion P a g e | 41 PART II . III Cat. Earning pattern 10% 22% On the further question about earning pattern. 68% of the respondent were earning monthly whereas 22% had earning on daily basis and 10 i. II & Cat III (42. II) of the respondent pertains to low income group. NEW DELHI . II=Rs. I consist mainly the labors and household working on daily wages (32.

Financial Inclusion P a g e | 42 III. 2 didn’t replied to this. RESERVE BANK OF INDIA. NEW DELHI . 3 respondent are saving weekly and there was no one saving on quarterly basis. 14 were saving on monthly basis. 45 %( 18) of respondent are not saving anything and 5% (2) didn’t responded to this question It was interesting to see that all those who were earning on daily basis were saving on regular basis No 45% Yes 50% Figure 8: Saving Out of the 20 respondent who have saving habit. Do you save? 50 %( 20) of respondent said that they are saving some part of their income. 16 14 12 10 8 6 4 2 0 Weekly Figure 9: Saving Frequency 14 3 2 1 0 Monthly Quarterly Semi-annually NA RURAL PLANNING AND CREDIT DEPARTMENT. this can be contributed to the fact that 70% of them were earning on monthly basis. Saving NA 5% Q.

10-15% 15% & Above 20% 15% 60% 5% 0-5% 5-10% Figure 10: How much? Q. RURAL PLANNING AND CREDIT DEPARTMENT. Where do you keep your savings? WHERE DO YOU KEEP YOUR SAVING Bank Insurance Scheme In cash at Home PO/NSC/FD 5% 45% 45% 5% Figure 11: Where do you keep your saving? Majority of the respondent were either keeping their saving in saving bank account or cash at home (45% each) and only 5% were putting it in investment alternatives.Financial Inclusion P a g e | 43 Q. 3(15%) and 4(20%) were saving 10-15% and 15% and above respectively of their earnings. RESERVE BANK OF INDIA. NEW DELHI . How much? Out of 20 respondent 12(60%) said that they save 0-5% of their income which means they generally have very small amount of savings which implies that they will be transacting on regular basis but with very little amount which Commercial banks generally found to be reluctant.

1 recurring deposit account.BANKING HABITS Q. 17 were having saving bank account and 2 among them also having fixed deposit account. Out of 19 respondent. 19(47%) are having saving bank account and 21(53%) are not having bank account. Out of 19 respondent. Figure 13: Did you face any problem while opening bank account RURAL PLANNING AND CREDIT DEPARTMENT.Financial Inclusion P a g e | 44 PART III . who have bank account 74% of the respondent didn’t faced any problem while opening bank account. The general problems faced were No 74% Yes 26% Not finding an introductory to open a normal saving bank account Not having document regarding proof of address those who were putting up on rent. while 26% said they faced. Figure 12: Do you have bank Account Q. 11(74%) were having only 1 bank account & 2(11%) were having 2 and 4 bank account. 47% 53% Provided further. NEW DELHI . Did you face any problem while opening account? Out of the 19 respondent. Do you have bank account? DO YOU HAVE BANK ACCOUNT? Yes No Of the 40 respondent. RESERVE BANK OF INDIA.

RESERVE BANK OF INDIA. 1 respondent were using 3 services\product on his two bank accounts and 2 respondent skipped this question. 11 respondent were using 2 services. 7% 14% 79% Figure 14: Distance of Bank Branch Q. NEW DELHI . among them 5 respondent were using 1 service/product. What are the services\product you avail along with your bank account? 15 10 1 2 1 1 Payment & remittances Mobile banking ATM/DEBIT CARD Loan & Advances Credit Card Net banking Figure 15: Product and Services Availed 19(47%) respondent were having bank account (figure 12). RURAL PLANNING AND CREDIT DEPARTMENT. How far is the bank branch from your residence? 0-2KM 2-5KM 10-12KM The majority of respondents have no problem of distance of bank branch from their residence as 79% respondent have bank branch within range of 0-5 Km and 14% within 2-5 Km.Financial Inclusion P a g e | 45 Q.

and other 19% uses bank account for making and receiving payment And rest 5% uses bank account as means of becoming eligible for other financial services.Financial Inclusion P a g e | 46 Q. NEW DELHI . RESERVE BANK OF INDIA. 19% uses bank account for accumulating funds and interest thereon for meeting future contingencies. For what purposes you use your account Depositing and withdrawing money so that cash flow is managed accumulating funds/interest earning for future requirement making and receiving payment to become eligible for other services 5% 19% 19% 57% Figure 16: Usage of bank account The majority of sample population. RURAL PLANNING AND CREDIT DEPARTMENT.57% uses bank account for managing their cash flow as they get their salary or earning in beginning of month but expenditure is over the month.

16(76. REASONS FOR NOT HAVING BANK ACCOUNT tried but refused 6% not aware of benefits a bank account 29% cannot meet MBR* and service charges 26% tedious procedure/paper work 7% low level of literacy 13% lack of awareness and guidance 19% Figure17: Reasons for not having bank account RURAL PLANNING AND CREDIT DEPARTMENT. NEW DELHI .19%) respondent said that they have never been approached by anyone to open saving bank account in Hari Nagar area. RESERVE BANK OF INDIA. family and specifically by their employer.33%) said yes they have been approached by various people like friends.Financial Inclusion P a g e | 47 PART IV -THOSE WHO DO NOT HAVE BANK ACCOUNT (21 RESPONDENT.5%) There was no respondent having anticipated rejection from bank or those who have voluntarily excluded himself from banking system. Further when asked about whether they have been approached by anyone to open a saving bank account. 52. 7(33.

but majority of the respondent (29) were not aware about this kind of bank account. bank officials. 32% felt that the banking is their need whereas on the contrary 27% said that banking is only meant for High Net worth Individuals (HNI) and privileged group of society. They know about this sort of bank account offered by banks as they came to know about it from newspapers.Financial Inclusion P a g e | 48 Q. NEW DELHI . RESERVE BANK OF INDIA. Those who were not having bank account were further asked whether they are know anything about “No Frills Account” or “zero balance bank account” 6 respondent said yes. Perception towards banking time and cost contraint 6% PERCEPTION TOWARDS BANKING only for HNI* and priveledged group 27% trust 35% need 32% Figure 18: Perception towards banking 35% of the respondent felt that banking means trust. 6% said they are connected to banking system due to time and cost constraints (figure 18). RURAL PLANNING AND CREDIT DEPARTMENT. friends & relatives.

CREDIT PATTERN This part of questionnaire was to evaluate the credit and advance pattern of the sample. and other questions related to their indebtness and credit as they consider it personal and many of them were afraid that this can be used to evaluate their creditworthiness when they visit banks for loan and advance. people were not willing to reveal their information regarding how much debt they have. RESERVE BANK OF INDIA. Purpose of borrowing Total of 17 who responded to this question 65% said that they have borrowed money for personal purpose. THEN Food and clothing Celebrations or social obligations Day to day living expenses or bills To repay older debts 12% 12% 18% 23% for funding PURPOSE OF BORROWING business 6% residential house purchase 12% Personal 65% Education of children 17% Figure 19: Purpose of borrowings RURAL PLANNING AND CREDIT DEPARTMENT. The first question was the last three occasions they borrowed but no one replied to this question. 17% said they have borrowed money for education of children.Financial Inclusion P a g e | 49 PART V . On further asking about the purpose of borrowing and other related things. ON ASKING FURTHER IF PERSONAL. the responded were conservative. 6% for funding business. NEW DELHI . what the last occasion they borrowed. Q. 12% for residential house purchase.

of respondent 8 6 4 2 0 moneylenders Figure 4: Source of Borrowings NGOs Friends/relatives Bank If they borrowed from money lender then further they were asked why they preferred moneylender over banks for credit needs. borrowed from their friends and relatives and whereas only 36% borrowed from bank and moneylender in both categories. RESERVE BANK OF INDIA.Financial Inclusion P a g e | 50 Q. NEW DELHI . Source of borrowing Majority of respondent. 12 10 No. response was that from money lender they get instant cash without any mortgage. RURAL PLANNING AND CREDIT DEPARTMENT.

TOTAL AMOUNT OUTSTANDING & RATE OF INTEREST Amount outstanding\Interest charges 350000 300000 250000 200000 150000 100000 50000 0 1 2 8.05%. of respondent AWARENESS ASPECT Q. 6000 to the highest 0f Rs.50% 3 4 5 6 7 8 10% 9 10 8.the debt was ranging from Rs. whereas 46% knows what is banking credit. RESERVE BANK OF INDIA.50% 10% 11. 300000.Financial Inclusion P a g e | 51 Q.00%. interest rate ranged from lowest of 8. 37571 with avg.50% No. rate of interest of 10. 46% 54% Figure 5: Awareness of banking credit RURAL PLANNING AND CREDIT DEPARTMENT. NEW DELHI .00% to 20. Total amount outstanding 14 respondent who filled this question.00% 14% 10.00% 0 11 0 12 0 13 0 14 0 20% 8. Do you know about banking credit? Yes No 54% of the respondents do not know what is banking credit. the average debt was Rs.

Q . RESERVE BANK OF INDIA. is there any credit counselling centre in their area? Only one respondent said yes and rest 30 said no. only 3 people have purchased some insurance scheme.Have you purchased any insurance scheme? Out of 37.Financial Inclusion P a g e | 52 Q. where 34 people have not purchased any insurance scheme as they are not aware about what is insurance. Have you ever approached any bank for credit need? Yes 5% No 95% Figure 6: Approached for banking credit needs It is revealed from the above that only 5% of the respondents have approached banks for credit needs. RURAL PLANNING AND CREDIT DEPARTMENT. Further they were asked. have you been anywhere for advice about money matters? Majority with 33 respondent said no they never been to anyone for financial advice. Q. whereas 3 responded that they have been to financial advisor for their credit guidance and financial planning.Over the past couple of years. NEW DELHI .

RESERVE BANK OF INDIA. Do you think that every bank should have the following things in place to enable financial inclusion? Customer care/reception/may I help you counter Credit counseling centers Compulsory No Frill Account offering from every bank Any suggestion (specify)____________________________________________________ Majority with 53% of respondent felt that establishing customer care counter/may I help you counter should be made compulsory.SUGGESTIONS Q.Financial Inclusion P a g e | 53 PART VI . 24% felt that every bank should be made to offer “No Frill account” and 23% said there should be atleast one credit counselling centre/financial education centre in their area. When told about what is “no frills account. compulsory no frill account offering from every bank 24% Suggestions compulsory customer care counter 53% credit counseling center 23% Figure 7: suggestions RURAL PLANNING AND CREDIT DEPARTMENT. NEW DELHI .

While doing survey it was found that people are not voluntarily excluding themselves from banking system. The reasons behind not approaching banks are mainly the minimum balance requirements which have been taken care by No Frills Bank Account but most of the respondent was not aware about this type of account. In other words. it may be said as per the study conducted in Hari Nagar Area. literacy level and awareness about various other products/services. To increase the awareness. Where the amount to be borrowed is generally small. Suggestions Every bank should be forced to establish a customer care /May I help you Counter at every branch so that new customer should be guided and relevant information is provided. Every bank should be made to offer No frill saving account with basic services without terms & conditions which are class/group specific but are applicable to all. the desired results have not come up. Hence it needs to be advertised. NEW DELHI .Financial Inclusion P a g e | 54 Chapter .9 Conclusion Steps taken towards bringing lower income groups to the banking system has been successful to a significant extent. Private sector should be involved in process of financial inclusion and they should be made realise that it is not only a business opportunity for them but corporate social responsibility too. as the main causes observed earlier like distance of bank branch. Despite the thrust given to financial inclusion. The need varies from managing cash flow as they earn on daily basis or irregular basis. unawareness about banking services has improved. whereas for other productive purposes they borrow from banks. It was also found that people prefer to borrow from personal/informal sources when the purpose is personal or consumption. RURAL PLANNING AND CREDIT DEPARTMENT. there is a good scope of having financial literacy cell or credit counselling centres in each district so that it can take care of uneducated/illiterate individuals. RESERVE BANK OF INDIA. the people found to be reluctant to approach banks. most of them have faith in banking and feels that they need banking services. RURAL PLANNING AND CREDIT DEPARTMENT.Ramesh and Preeti Sahai The need for financial inclusion with an Indian perspective by Amol o http://cab. Challenges and Way Forward . General Manager.grameen-info.A Presentation by Dr.Chakrabarty Deputy o http://aryavart-rrb. NABARD Working paper on social. economical and financial Consequences of financial exclusion by Bernard Bayot Internet o www. K. RESERVE BANK OF NEW DELHI . RBI Presentation on Financial Inclusion & Banking System by S K o o www.Financial Inclusion P a g e | 55 BIBLIOGRAPHY Annual Policy report 2005-2006 Report on currency and Finance 2006-08 Ranjrajan Committee report on Financial Inclusion(2008) Universal Financial Inclusion in India: The Way Forward by S. IDBI Pushing Financial Inclusion – Issues.

Know Your Customer Norms SLBC – State levels banker committee GCC.Financial Inclusion P a g e | 56 GLOSSARY MBR.a zero balance saving bank account with no annual maintenance charges RURAL PLANNING AND CREDIT DEPARTMENT. NEW DELHI .General credit card KCC-Kisan Credit Card SHGs – Self Help groups SHPIs – Self help Promoting Institutions POS – Point of sale RRB’s – Regional Rural Banks UCB’s – Urban Cooperative banks MFIs – Micro-finance Institutions PACS – Primary Agricultural Cooperative Societies No Frill Bank Account.Minimum balance requirement AMC – Annual maintenances charges HNI – High Net worth Individuals KYC norms. RESERVE BANK OF INDIA.

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