International Institute of Professional Studies

Devi Ahilya Vishwavidyalaya

Indore, M.P

Major Research Project

On

A study on financial inclusion with respect to Pradhan Mantri

Jan Dhan Yojana in Indore
Partial fulfillment of the Requirement of the
Master of Business Administration (Management Science)
2016-17 of International Institute of Professional Studies

Mentored by Submitted by

Dr. Manminder Singh Bharat Verma

Faculty MBA (MS) -10th Semester

IIPS, DAVV IM-2K12-77

 DECLARATION

I hereby declare that the Major Research Project titled “A study on financial
inclusion with respect to Pradhan Mantri Jan Dhan Yojana in Indore” is a
genuine work done by me and information collected is authentic to the best of
my knowledge. I take full responsibility for originality of my work and it is not
pirated in any manner which is deemed illegal. My guide is fully exempted from
any such responsibility as mentioned.

Date: 13th May, 2017 (Bharat Verma)

Place: Indore

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 CERTIFICATE

This is to certify that I have examined the “A study on financial inclusion with
respect to Pradhan Mantri Jan Dhan Yojana in Indore, Madhya Pradesh”
submitted by BHARAT VERMA(IM-2K12-77) of the International Institute of
Professional Studies, DAVV, Indore and hereby accord my approval of it as a
study carried out and presented in a manner required for its acceptance in partial
fulfillment for the award of the degree for “Master of Business Administration
(M.S.) 5 Years, X Semester.”

Signature:
Name:
Date:

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 ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible
without the kind support and help of many individuals and organization. I
would like to extend my sincere thanks to all of them.

I am highly indebted to my mentor Dr. Manminder Singh for his guidance and
constant supervision and for the useful comments, remarks and engagement
through the learning process of this master thesis.

I would like to express my gratitude towards my family & my institute IIPS for
their kind co-operation and encouragement which helped me in completion of
this project.

My thanks and appreciations also go to my colleagues in developing the project

and people who have willingly helped me out with their abilities.

Thank you for keeping me harmonious and helping me in putting the pieces
together. I will be forever grateful for your support.

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 Table of Contents:

Chapter PAGE
CONTENTS
No. NO.

1 INTRODUCTION 7

2 LITERATURE REVIEW 17

3 OBJECTIVES 28

4 RESEARCH METHODOLOGY 30

5 DATA ANALYSIS AND INTERPRETATION 38

6 CONCLUSION 50

REFERENCES 52

APPENDIX 54

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 Index of Tables

Serial Particulars Page

No. no.
1 Pradhan Mantri Jan - Dhan Yojana 16
(Accounts Opened as on 05.04.2017)
2 State wise Index for financial inclusion 39
3 KMO and Bartlett's Test 42
4 Total Variance Explained 43
5 Component 1- Economic and social benefits 44
6 Component 2- Financial Needs 45
7 Component 3- Information availability and financial literacy 46
8 Component 4-Financial Literacy 46
9 Component 5- Hoax 46
10 Component 6- Adequacy 47
11 Component 7- Assistance By Banks 47
12 Regression Analysis Output 48

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 PREFACE

This research paper consists of 6 chapters.

CHAPTER 1 – INTRODUCTION

This chapter introduces the concept of financial inclusion and explains what
Pradhan Mantri Jan Dhan Yojana is and how the two things are correlated.

CHAPTER 2 - LITERATURE REVIEW

This chapter mentions the existing literature about financial inclusion and
Pradhan Mantri Jan Dhan Yojana and the gap this research endeavors to fulfill.

CHAPTER 3 – OBJECTIVES

This chapter mentions what exactly this research aims to achieve with respect to
Pradhan Mantri Jan Dhan Yojana in Indore.

CHAPTER 4 – RESEARCH METHODOLOGY

This chapter mentions the steps taken to achieve the objectives mentioned in the
earlier chapter. It species the research design, data collection technique, sample
size, and which statistical tools have been used and why.

CHAPTER 5 – DATA ANALYSIS AND INTERPRETATION

This chapter analyses the data gathered through different sources on Pradhan
Mantri Jan Dhan Yojana in Indore and then interprets the results of the analysis.

CHAPTER 6 – CONCLUSION

This chapter summarizes the findings of the research about PMJDY and
mentions the further action.

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 CHAPTER-1
INTRODUCTION

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INTRODUCTION
“Exclusion from the banking system excludes people from all benefits that come
from a modern financial system. In this (Pradhan Mantri Jan Dhan Yojna)
mission, households will not only have bank accounts with indigenous RuPay
Debit cards but will also gain access to credit for economic activity and to
insurance and pension services for their social security”

- Shri Narendra Modi, Honorable Prime Minister of India (22nd August, 2014)

In a report it was found that just 48 percent of adults in India have financial
bank accounts and almost 50% of them lie inactive. As per an across the
country overview on financial conduct, India has the most elevated record
torpidity rate. The study directed by the Financial Inclusion Insights program,
contended that the greater part of Indians get cash from family and companions
and not from financial institutions.

Financial Inclusion
Financial inclusion is the conveyance of financial services at reasonable
expenses to segments of distraught and low-pay portions of society, rather than
financial exclusion where those administrations are not accessible or moderate.
Financial alludes to a wide range of financial services, including credit,
investment funds, installments, and credit, from a wide range of formal financial
institutions. An expected 2 billion employed adults universally have no entrance
to the sorts of formal financial services conveyed by controlled monetary
institutions. For instance, in Sub-Saharan Africa, just 24% of grown-ups have
an account despite the fact that Africa's formal financial sector has developed as
of late. It is contended that in the case of financial services significant positive
effects are seen if more individuals and firms take part. The accessibility of
financial services that meet the particular needs of the population without
segregation is a key goal of financial inclusion.
The expression "financial inclusion" has picked up significance since the mid-
2000s, a consequence of discovering financial exclusion and its immediate
relationship to neediness. The UN characterizes the objectives of financial
inclusion as:

 access at a sensible cost for all families to a full scope of financial services,
including savings or deposits, payments and exchange administrations,
credit and insurance;
 sound and secure financial institutions represented by clear control and
industry execution norms;
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 financial and institutional supportability, to guarantee perpetuity and
sureness of investments; &
 Competition to guarantee choice and moderateness for customers.
Former United Nations Secretary-General Kofi Annan, on 29 December 2003,
told: “The stark reality is that most poor people in the world still lack access to
sustainable financial services, whether it is savings, credit or insurance. The
great challenge before us is to address the constraints that exclude people from
full participation in the financial sector. Together, we can and must build
inclusive financial sectors that help people improve their lives.” All the more as
of late, Alliance for Financial Inclusion (AFI) Executive Director Alfred Hannig
highlighted on 24 April 2013 advancement in financial inclusion amid the IMF-
World Bank 2013 Spring Meetings: "Financial inclusion is no longer a fringe
subject. It is now recognized as an important part of the mainstream thinking on
economic development based on country leadership."
In association with the National Bank for Agriculture and Rural Development,
the UN plans to increment financial inclusion of the poor by creating fitting
financial items for them and expanding mindfulness on accessible financial
services and reinforcing financial proficiency, especially among ladies. The
UN's financial inclusion campaign is financed by the United Nations
Development Program.

Financial Inclusion in India before Pradhan Mantri Jan

Dhan Yojana
In the Indian setting, the term 'financial inclusion' was utilized without
precedent on April 2005 in the Annual Policy Statement by Y.Venugopal
Reddy, the then Governor, Reserve Bank of India. Later on, this idea made
strides and came to be generally utilized in India and abroad. While perceiving
the worries as to the managing of bank accounts that have a tendency to exclude
as opposed to drawing in immeasurable areas of the populace, banks were
encouraged to audit their current practices to adjust them to the goal of financial
inclusion. The Report of the Internal Group to Examine Issues identifying with
Rural Credit and Microfinance (Khan Committee) in July 2005 drew quality
from this declaration by Governor Y. Venugopal Reddy in the Annual Policy
Statement for 2005-06 wherein he had communicated profound worry on the
avoidance of boundless areas of the populace from the formal financial
framework. In the Khan Committee Report, the RBI urged the banks to open an
account with a view to accomplishing more prominent financial inclusion to
make accessible an essential "no frills" savings bank account. The suggestions
of the Khan Committee were consolidated into the mid-term survey of the
strategy (2005–06). Financial inclusion again included later in 2005 when it was

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utilized by K.C. Chakraborthy, the director of Indian Bank. Mangalam,
Puducherry became the first village in India where each household had at least
one bank account. Norms were relaxed for people intending to open accounts
with annual deposits of less than Rs. 50,000. General credit cards (GCCs) were
issued to poor people and the disadvantaged with a view to helping them secure
simple credit. In January 2006, the Reserve Bank allowed corporate banks to
utilize the administrations of NGOs/SHGs, micro-finance institutions, and other
common society associations as intermediaries for giving financial and banking
services. These intermediaries could be utilized as business facilitators or
business correspondents (BCs) by commercial banks. The RBI asked the
commercial banks in various locales to begin a 100% financial inclusion
campaign on a pilot premise. Owing to this crusade, states or union territories
like Puducherry, Himachal Pradesh, and Kerala reported 100% financial
inclusion in every one of their areas. RBI's vision for 2020 is to open almost 600
million new bank accounts and administer them through an assortment of
channels by utilizing on IT. In any case, the absence of education and the low
wage funds and absence of bank offices in rural zones keep on being a barrier to
financial inclusion in many states and also the inefficient legal and financial
structure.

As of late, the government of India thought of a strategy under the name "rupee
exchange" to trade higher notes with the expectation of clipping down on tax
defaulters, find degenerate officers (by rendering valueless substantial money
buried covertly) and for the most part re-establishing rational soundness to the
monetary framework. It is disturbing that regardless of the fact that India's
CRISIL index exceeds 40% and it is rumoured to be overwhelming on
innovation and technology, more than 85% of its financial exchanges are in
cash. While income and inequality will broaden, at any rate, it is prescribed that
India grasps - proposed - financial inclusion.

In India, RBI has started a few measures to accomplish more prominent

financial inclusion, for example, encouraging no-nonsense records and GCCs
for small deposits and credit. Some of them are:
No-frills accounts: In commercial banks, a normal customer is required to
maintain a certain balance otherwise it is penalised. RBI introduced No-frills
account wherein nil or very minimal balance is to be kept. Thus, it allures vast
population which earlier was unable to maintain the balance.
Relaxing the know-your-customer (KYC) norms: KYC prerequisites for
opening financial balances were casual for small accounts in August 2005;
subsequently improving systems by stipulating that presentation by an account
holder who has been subjected to the full KYC penetrate would suffice for
opening such accounts. The banks were likewise allowed to take any

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confirmation with regards to the identity and address of the client agreeable to
them. It has now been additionally casual to incorporate the letters issued by the
Unique Identification Authority of India containing name, address, and Aadhaar
number.
Bank correspondents (BCs) model: In January 2006, RBI allowed banks to draw
in business facilitators (BFs) and BCs as mediators for giving banking and other
financial services. The BC model permits banks to give doorstep conveyance of
administrations, particularly cash in-cash out exchanges, hence tending to the
last-mile issue. The rundown of qualified people and entities that can be locked
in as BCs is being enlarged every now and then. With impact from September
2010, for-profit companies have likewise been permitted to be locked in as BCs.
In the grass-root level, the Business correspondents (BCs), with the assistance
of Village Panchayat, have set up an environment of Common Service Centers
(CSC). CSC is a country electronic centre point with a PC associated with the
web that gives e-administration or business administration to rural citizens.
Opening of branches in unbanked rural centres: The governing body RBI felt
that in order to enhance banking penetration and financial inclusion quickly,
there is a requirement for the opening of more branches, other than the
utilization of BCs. Therefore, banks have been ordered in the April fiscal policy
statement to dispense no less than 25% of the aggregate number of branches to
be opened in a year to unbanked rural centers.
Use of technology: Perceiving that technology can possibly address the issues
of outreach and credit conveyance in provincial and remote regions in a feasible
way, banks have been instructed to make powerful utilization of Information &
Communication technology (ICT), to give doorstep banking administrations
through the BC model where the accounts can be worked by even unskilled
clients by utilizing biometrics, subsequently guaranteeing the security of
exchanges and upgrading trust in the banking framework.
Adoption of Electronic Benefit Transfer (EBT): Banks have been encouraged to
execute EBT by utilizing Information and communication technology (ICT)-
based banking through BCs to exchange social advantages electronically to the
bank accounts of the recipient and convey government advantages to the
doorstep of the recipient, along these lines decreasing reliance on cash and
bringing down exchange costs.
Simplified branch authorization: To address the issue of the uneven spread of
bank branches, in December 2009, commercial banks were allowed to
unreservedly open branches in tier III to tier VI centres with a populace of under
50,000 under general consent, subject to reporting. In the north-eastern states
and Sikkim, residential booked commercial banks can now open branches in
rural, semi-urban and urban centres without the need to take consent from RBI
for each situation, subject to revealing.

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GCC: With a view to helping poor people and the burdened with access to
simple credit, banks have been solicited to consider the presentation of a general
purpose credit card facility up to 25,000 at their rural and semi-urban branches.
The target of the plan is to give bother free credit to banks' clients in light of the
appraisal of cash flow without emphasis on security, purpose or end-use of the
credit. This is in the way of rotating credit qualifying the holder to withdraw as
far as endorsed.

Pradhan Mantri Jan Dhan Yojana

PMJDY is a National Mission on Financial Inclusion incorporating a
coordinated way to achieve the far-reaching financial inclusion of all
households in the nation. The arrangement imagines all-inclusive access to
keeping bank accounts with no less than one fundamental account representing
each household, financial literacy, access to credit, pension and insurance.
Moreover, the recipients would get RuPay Debit card having an inbuilt accident
insurance cover of Rs.1 lakh. The arrangement additionally conceives diverting
all Government benefits (from Center/State/Local Body) to the recipients'
records and pushing the Direct Benefits Transfer (DBT) plan of the Central
Government. The technological issues like poor network, on-line transactions
will be looked after. Mobile transaction through telecom administrators and
their built up centers as Cash Out Points are likewise wanted to be utilized for
Financial Inclusion under the Scheme. Additionally, an exertion is being made
to contact the young adults of this nation to take part in this Mission Mode
Program.
This financial inclusion campaign was launched by the Prime Minister of
India Narendra Modi on 28 August 2014. He had announced this scheme in his
first Independence Day speech on 15 August 2014.
Run by Department of Financial Services, Ministry of Finance, on the initiation
day, 1.5 Crore (15 million) bank accounts were opened under this plan.
Guinness World Records Recognizes the Achievements made under PMJDY,
Guinness World Records Certificate says "The most bank accounts opened in 1
week as a part of financial inclusion campaign is 18,096,130 and was achieved
by Banks in India from 23 to 29 August 2014". By 1 February 2017, more than
27 crores (270 million) accounts were opened and practically ₹665 billion
(US$10 billion) were deposited under the plan.

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Purpose
Objective of "Pradhan Mantri Jan-Dhan Yojana (PMJDY)" is to ensure access
to various financial services like availability of basic savings bank account,
access to need based credit, remittances facility, insurance and pension to the
excluded sections i.e. weaker sections & low-income groups. This kind of deep
penetration at a reasonable cost is conceivable only with the viable utilization of
technology.

The objective of PMJDY is to provide 'universal and clear access to banking

facilities' starting with "Basic Banking Accounts" with overdraft facility of up
to ₹5,000 (US$74) after six months but only to Aadhaar seeded accounts
and RuPay Debit card with inbuilt accident insurance cover of ₹1
lakh (US$1,500) and RuPay Kisan Card. In next phase, micro insurance &
pension etc. will also be added.
This scheme is based on six vital elements –

1. Universal access to banking facilities: The First aim is to reduce and remove
the exclusions in financial sector. Districts of each state will be divided into
sub-service area catering to 1000 to 1500 household for access to basic banking
facility by 14 august 2015.

2. Basic Banking Accounts: The challenge would be to first cover every

household with banking services by August 2015, by opening basic bank
accounts. Account holder would be given a RuPay Debit Card. Overdraft to
each basic banking account holder would be considered after a look at his/her
credit history of last six months.

3. Pension schemes like Swavalamban: By 14 August, 2018 and then on an

ongoing basis

4. Credit Guarantee Fund: A Credit Guarantee Fund would be created in order

to cover the defaults in overdraft accounts.

5. Financial Literacy Program: Financial literacy would be a fundamental piece

of the Mission so as to give the beneficiaries a chance to make the best
utilization of the financial services being made accessible to them.

6. Micro Insurance: To provide micro- insurance to all willing and eligible

persons by 14 August, 2018, and then on an ongoing basis.

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 A diagrammatical representation of PMJDY’s key elements:

Universal access to banking

facilities

PMJDY Basic Banking

Micro Insurance
Accounts

Credit guarantee Pension

Overdraft facility and
fund Schemes
RuPay debit card

Special Benefits under PMJDY Scheme

1. Interest on deposit.
2. Accidental insurance cover of Rs. 1 lac.
3. No minimum balance required.
4. The scheme provides life cover of Rs. 30,000/- payable on death of the
beneficiary, subject to fulfilment of the eligibility condition.
5. Easy Transfer of money across India.
6. Beneficiaries of Government Schemes will get Direct Benefit Transfer in the
accounts opened through this scheme.
7. If the operations of the account conducted in six months are considered
satisfactory by the banks, an overdraft facility will be permitted.
8. Access to Pension, insurance products.
9. The Claim under Personal Accidental Insurance under PMJDY shall be payable
if the RuPay Card holder has performed at least one successful financial or non-
financial customer induced transaction at any Bank Branch, Bank Mitra, ATM,
POS, E-COM etc. Channel both Intra and Inter-bank i.e. on-us (Bank
Customer/RuPay card holder transacting at same Bank channels) and off-us
(Bank Customer/RuPay card holder transacting at other Bank Channels) within
90 days prior to the date of the accident including accident date will be included
as eligible transactions under the RuPay Insurance Program 2016-2017.
10.An overdraft facility up to Rs.5000/- is available to only one account per
household, preferably women of the household.

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Progress

On the inauguration day, 1.5 Crore (15 million) bank accounts were
opened. The Prime Minister said on this occasion- "Let us celebrate today as the
day of financial freedom." By September 2014, 3.02 crore accounts were
opened under the scheme, amongst Public sector banks, SBI had opened 30 lakh
(3 million) accounts, followed by Punjab National Bank with 20.24 lakh (2
million) accounts, Canara Bank 16.21 lakh (1.62 million) accounts, Central
Bank of India 15.98 lakh (1.59 million) accounts and Bank of Baroda with
14.22 lakh (1.42 million) accounts.

Approximately 7 Crore (70 million) bank accounts have been opened with
deposits totalling more than ₹50 billion (US$740 million) as of 6 November
2014 according to the official government website of the PMJDY scheme. As
the government met the target, Union Finance Minister Arun Jaitley revised the
target for opening of bank accounts under the Pradhan Mantri Jan Dhan Yojana
(PMJDY). On 20 January 2015, the scheme broke the Guinness book of world
records for the most bank accounts opened in one week.
On November 2016, 255 million (including 57 million zero balance accounts)
accounts were opened under the PMJDY. The amount of deposits rose
to ₹380.47 billion (US$5.7 billion) by April 2016, 19 lakh householders have
availed the overdraft facility of ₹2.56 billion (US$38 million) by May 2016. As
per the 26.11.2016 status total account deposits balance is Rs.64250/-
Uttar Pradesh and West Bengal have got 29% of the total deposits under the
scheme, whereas Kerala and Goa became the first states in the country to
provide one basic bank account to every household.
More than ₹270 billion (US$4.0 billion) were deposited in the PMJDY accounts
between 9 November 2016 and 23 November 2016. Given on the next page is a
table describing the progress made by PMJDY.

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 TABLE 1- Pradhan Mantri Jan - Dhan Yojana
(Accounts Opened as on 05.04.2017)
Bank Name Rural Urban Total No. of Aadhaar Balance in
RuPay Seeded accounts
Cards
Public Sector 12.37 10.31 22.68 17.73 15.22 50025.27
Bank
Regional 3.98 0.65 4.63 3.56 2.84 11819.01
Rural Bank
Private Banks 0.55 0.37 0.92 0.85 0.45 2127.10

Total 16.91 11.33 28.23 22.14 18.50 63971.38

(All Figures in Crores)

Source: https://www.pmjdy.gov.in/account

The table above shows that 282.3 million (approx) accounts have been opened
under PMJDY and $9.9 billion (approx) is the balance in those accounts as on
5th March, 2017.

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 CHAPTER-2
LITERATURE REVIEW

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LITERATURE REVIEW
Throughout the recent decade, financial inclusion has advanced into the main
phase of development policy. Stories of microfinance institutions overcoming
adversity, encapsulated by the Grameen Bank, have prompted an irregular union
of interests between governments, organizations, humanitarians and common
society. Hidden in this accord is a conviction that access to financial services is
a capable method for decreasing poverty. Subsequently, numerous nations, both
rich and poor, have embraced outreach (i.e. coming to the unbanked and
underbanked populace) as a centre target of financial policy (notwithstanding
security and encouraging economic development). With this objective in mind,
it's each financial institution’s dream that one day there can be viable linkages
amongst formal and informal financial sectors to upgrade service delivery, and
therefore the concept of agency banking. Agency banking is the new
advancement that banks are utilizing to take services to the unbanked and
underbanked at a less expensive rate. The idea removes clients from the brick
and mortar banks to kiosks and villages (Beck et al., 2007).

Financial inclusion of the aggregate populace of a nation is each government's

objective. The world over and particularly in the developing nations,
governments are taking a shot at different systems and administrative structures
to guarantee they include every one of those excluded. Each government's
dream is to have a proficient and comprehensive financial framework to
assemble resources for development. In India, RBI has endeavored to make
commercial banks open branches in rural areas. Priority sector lending was
founded to give credits to small and medium undertakings and agriculture
sector. Special banks were set up for rural zones like Rural Cooperative Banks,
Regional Rural Banks. The government additionally set up national level
establishments like NABARD, SIDBI to engage credit to rural territories and
small and medium enterprises. In spite of these efforts, studies say that large
chunk of the population continues to be financially excluded.

Many theories and researches have been conducted on financial inclusion some
of them are as follows:-

RBI defines Financial Inclusion as “a process of ensuring access to appropriate

financial products and services needed by all sections of the society in general
and vulnerable groups such as weaker sections and low income groups in
particular, at an affordable cost in a fair and transparent manner by regulated

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mainstream institutional players”. Along these lines, the goal of Financial
Inclusion (FI) is to stretch out financial services to the up to this point
unreserved populace of the nation to open up its development potential.
Furthermore, it endeavors to accomplish more comprehensive development by
making financing accessible to the poor specifically. Accordingly, keeping in
perspective of the interests of the destitute individuals, the Government of India
(GoI) has taken various measures so that the underprivileged segments of the
general public can receive the rewards of the financial services.

Research Paper on, "Review of Financial Inclusion in India", by C. Paramasivan

and V. Ganeshkumar, Financial inclusion's objective is to give banking and
financial services to all individuals in a reasonable, straightforward and
impartial way at moderate cost. This paper is an endeavour to talk about the
review of financial inclusion in India.

Mr. Nanjibhai D. Ranparia in his Research Paper on, "Financial Inclusion in

Gujarat: A Study on Banker's Initiatives" incorporates the investigation of
various financial inclusion angles and assesses advance and ebb and flow status
of financial inclusion of the state.

Dr. Anupama Sharma and Ms. Sumita Kukreja in, "An Analytical Study:
Relevance of Financial Inclusion for Developing Nations", expresses the part of
financial inclusion, in reinforcing India's position in connection to different
nations' economy. The review accumulated information from secondary sources
including reports of RBI, NABARD, books on financial inclusion and different
articles composed by prominent writers.

Albeit most nations have a household-level income and expenditure which may
incorporate a few inquiries on financial access, these reviews gather an
expansive scope of household data and seldom give enough insight about
financial inclusion to be sufficient. Besides, the household survey is costly, and
usually carried on in years (Kneiding, Al-Hussayni, and Mas, 2009).

As per Arundhati Bhattacharya, Chairman SBI, picking a practical model for

financial inclusion will oblige banks to essentially free up HR, aside from
utilizing a banking correspondent model. With the expansion in financial
inclusion and digitalization of banking, the prerequisite of cash in the economy
will diminish in this manner helping in controlling unaccounted money in the
economy.

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As indicated by Sinha (2013), urban co-operative banks can possibly achieve
the goals of financial inclusion. His review pushes to make financial inclusion a
fruitful plan of action; banks need to concentrate on bringing down the cost of
exchanges by utilizing technology and offering more products of credit to the
effectively included populace.

Dr. Raghuram Govind Rajan, Governor, RBI (2015) "Five Ps of Financial

Inclusion" entitled that Simplicity and unwavering quality are keys what one
supposes is paying for is the thing that one ought to get, without concealed
provisions to trip one up. Transaction costs ought to be low in nature and simple
access to banking services.

Rangarajan Committee (2008) on financial inclusion stated that: “Financial

inclusion may be defined as the process of ensuring access to financial services
and timely and adequate credit where needed by vulnerable groups such as
weaker sections and low income groups at an affordable cost.” The monetary
services incorporate the whole array of savings, loans, insurance, credit,
payments, and so forth. The financial system is relied upon to give its capacity
of exchanging assets from surplus to deficiency units, however, both shortage
and surplus units are those with low livelihoods, poor foundation, and so forth.
By giving these services, the point is to help them leave poverty.

Mandira Sharma and Jesim Pais. (2008). Financial Inclusion and Development:
A Cross-Country Analysis proposes that the issue of financial inclusion is an
improvement strategy need in numerous nations. Among socio-economic
factors, of course, income is emphatically connected with the level of financial
inclusion. Moreover, physical and electronic network and data accessibility,
demonstrated by the roads, phone, and web utilization, likewise assume a
positive part in improving financial inclusion.

The government of India (2008), "Committee on Financial Inclusion" analyzed

financial inclusion as a conveyance instrument giving financial services at a
reasonable cost to the limitless segments of the distraught and low-pay
gatherings. The proposals of the report concentrated on the accompanying
zones. Initially, financial inclusion ought to incorporate access to standard
financial items. Second, payment and banking services ought to be accessible to
the whole populace without segregation. Third, advancement of sustainable
development and era of work in provincial ranges ought to be a need. Fourth,
financial inclusion must be taken up in a mission mode and along these lines

20 | P a g e
proposed the constitution of a National Mission on Financial Inclusion (NMFI)
so as to accomplish widespread financial inclusion inside a particular time
period. Fifth, the Committee likewise prescribed for the constitution of two
assets with NABARD – the Financial Inclusion Promotion and Development
Fund, and the Financial Inclusion Technology Fund for better credit
assimilation limit among poor people and powerless areas of the nation and
furthermore for legitimate and proper utilization of innovation keeping in mind
the end goal to encourage the ordered levels of inclusion. To put it plainly, the
report gave an apprehension of one of the ideal approaches to accomplish
comprehensive development through financial inclusion.

Joseph Massey. (2010) “Role of Financial Institutions in Financial Inclusion”

said that, the part of financial institutions in a creating nation is fundamental in
advancing financial inclusion. The endeavors of the administration to advance
financial inclusion and deepening can be additionally upgraded by the pro-
activeness with respect to capital market players including financial institutions.
Financial institutions have an exceptionally significant and a more extensive
part to play in cultivating financial inclusion.

RBI (2014), “Report on comprehensive financial services for small businesses

and low Income households” concentrated on the arrangement of financial
Services to the private ventures and low-salary family units. Among the
fundamental thought processes of the committee included outlining standards
for maximum financial inclusion and financial deepening and furthermore
encircling strategies for observing the advancement in the improvement of
financial inclusion in India. In this manner, keeping in mind the end goal to
accomplish the objective of maximum financial inclusion and more access to
financial inclusion the committee proposed the accompanying measures:
arrangement of full-administration electronic bank account; circulation of
Electronic Payment Access Points for simple store and withdrawal offices;
arrangement of credit items, investment, and deposit products, insurance and
risk management items by formal institutions. The principle discoveries of the
report highlighted the accompanying key issues. In the first place, most of the
private companies were working without the assistance of formal financial
institutions. Second, the greater part of the country and urban populace did not
have a bank account. Third, savings regarding GDP have declined in 2011-12.
To address these issues, the Committee suggested that every individual ought to
have Universal Electronic Bank Account while enlisting for an Aadhaar card.

21 | P a g e
The committee additionally proposed for setting up of payment banks with the
motivation behind giving payment services and deposit products to private
ventures and low-wage family units. Additionally, banks ought to buy portfolio
insurance which will help in dealing with their credit exposures. Moreover, the
Committee prescribed for setting up of a State Finance Regulatory Commission
where all the state level financial controllers will cooperate.

Paramasivan & Ganesh Kumar,(2013) “Overview of Financial Inclusion in

India”, portrays that the Financial inclusion's objective is to give banking and
financial services to all individuals in a reasonable, straightforward and fair way
at moderate cost. This paper is an endeavor to talk about the diagram of
financial inclusion in India.

Unnikrishnan Roshny (2012) analyzed in her study “Enabling Financial

Inclusion at the bottom of the Economic Pyramid”, the importance of financial
inclusion in economic empowerment. This review distinguished the factors in
empowering financial inclusion, broke down the boundaries to powerful
financial inclusion and the privilege ventures to be taken to defeat the
obstructions and empower comprehensive development. The review closed by
distinguishing the factors that enable the masses financially and expressing the
significance of social inclusion in connection to financial inclusion and
furthermore by fortifying the significance of self-sustenance at the base of the
economic pyramid.

International experience in promoting financial inclusion

A fascinating element which rises up out of the global practice is that the more
developed the society is, the more prominent the push on the strengthening of
the normal individual and low-salary groups. It might be advantageous to
observe the universal involvement in handling the issue of financial exclusion
with the goal that we learn from the global experience.

United Kingdom

The Financial Inclusion Task Force in the UK has distinguished three need
territories with the end goal of financial inclusion, viz., access to banking,
access to affordable credit and access to free up close and personal cash
guidance. The UK has built up a Financial Inclusion Fund to advance financial
inclusion and relegated duty to banks and credit unions in expelling financial
exclusion. The fundamental bank no frills accounts have been presented. An

22 | P a g e
upgraded administrative condition for credit unions has been built up, joined by
more tightly rules to guarantee more noteworthy security for investors. A Post
Office Card Account (POCA) has been made for the individuals who can't or
are unwilling to get an essential bank account. The idea of a Savings Gateway
has been steered. This offers those on low-wage employments £1 from the state
for each £1 they contribute, up to a limit of £25 every month. What's more, the
Community Finance Learning Initiatives (CFLIs) were additionally acquainted
with a view with advancing fundamental financial literacy among housing
association tenants.

United States of America

A civil rights law, in particular, Community Reinvestment Act (CRA) in the

United States denies separation by banks against low and moderate pay
neighborhoods. The CRA forces a positive and proceeding with the
commitment on banks to serve the requirements for credit and banking services
to every one of the groups in which they are contracted. Truth be told, various
reviews directed by Federal Reserve and Harvard University exhibited that
CRA loaning is a win-win suggestion and gainful to banks. In this unique
situation, it is likewise intriguing to know the other activity taken by a state in
the United States. Aside from the CRA test, outfitted with the endorsement of
Banking Law, the State of New York Banking Department, with the goal of
making accessible cheaper banking services to buyers, made necessary that each
banking establishment should offer fundamental banking account and in the
event of credit unions the essential share draft account, which is in the way of
low-cost account with minimum facilities. Some key elements of the
fundamental banking record merit specifying here.

 The initial deposit amount required to open the account shall not
exceed US $ 25
 The minimum balance, including any average balance, required to
maintain such account shall not exceed US $ 0.10
 The charge for an intermittent cycle for the upkeep of such accounts to be
proclaimed in advance.
 The least number of withdrawal transactions which might be made amid
any occasional cycle at no charge to the account holder should, at any
rate, be eight.

23 | P a g e
  A withdrawal might be esteemed to be made when recorded on the books
of the account holder's banking institution
 except, as given underneath, an account holder should not be confined
with regards to the quantity of deposits which might be made to the
account without bringing about any extra charge.
 The banking institution may charge account holders for transactions at
electronic offices which are not worked by the account holder's banking
institution and different expenses and charges for particular banking
services which are not covered under the essential banking account plot.
 Every intermittent explanation issued for the fundamental banking
account should perpetually cover on it or by method for partitioned
communiqué, maximum number of withdrawals allowed amid each
occasional cycle without extra charge and the results of surpassing such
maximum and the expense assuming any, for the utilization of electronic
offices which are not worked by the account holder's banking institution.

An intriguing component of fundamental banking account plan is the

component of straightforwardness i.e. the banking foundation ought to,
preceding opening the account, outfit a composed revelation to the account
holder portraying the fundamental components of the plan i.e. the initial deposit
required to open the account, minimum balance to be kept up, charge per
intermittent cycle for utilization of such account, maximum number of
withdrawal transactions with no extra charge and different charges forced on
transactions for profiting electronic facility not worked by the account holder's
banking establishment, and so forth.

Kenya

The administration of Kenya through CBK is among the most dynamic in the
creating nations in endeavors to upgrade financial inclusion. In Africa, Kenya is
second after South Africa as far as the financial inclusion (National Financial
Access Survey, 2009). Different activities have been embraced to improve this
including building up a structure under which banks would bear on agent
banking and licensing of deposit taking micro-finance institutions among others.

24 | P a g e
BRAZIL

The improvement of a sweeping correspondent banking system is one of the key

components behind Brazil's example of overcoming adversity in financial
inclusion. In the vicinity of 2005 and 2011, the correspondents roughly
multiplied to more than 160,000. The Central Bank urged financial institutions
to contact more distant buyers and to groups where they had not beforehand
been dynamic, including lower pay regions, through associations with an
assortment of retail foundations incorporating some with open ties, for example,
the post office network and lottery offices. Controllers have continuously
decreased confinements on correspondent banking, for example, individual
approval processes, because of early victories with this program. The lawful
system additionally encouraged solid extension by putting the onus on managed
institutions to prepare and screen their correspondents.

PRADHAN MANTRI JAN DHAN YOJANA

Some theories and researches have been done on PMJDY also, some of them
are as follows:-

Bhatia and Singh (2015) have endeavored to concentrate the activities of

Central Government towards financial inclusion, steps brought by the banks
with deference to financial inclusion, techniques embraced by RBI and
Government of India for reinforcing financial inclusion and difficulties
confronted to accomplish financial inclusion as a piece of sustainable
development. They inferred that India is at a moderate level of financial
inclusion and the requirement for productive and viable execution of policies to
accomplish the objective of banking offices being felt.

Patnaik (2015) analyzed that only 13.8% of the respondents in Bhubaneswar

have access to bank accounts and out of the total respondents who do not have
bank account due to various reason are alarmingly not aware of PMJDY
scheme. Amongst males 78.9% and in 95.08% were not aware of the scheme.
The study suggested that the banks should make more effort to create awareness
on zero balance account and should aggressively campaign for such scheme.

Aishwarya Singh, Manoj Sharma, and Mukesh Sadana, (Feb 2015) have
reasoned that accepting few teething issues, PMJDY is all around situated for
achievement. Account acquisition alone won't create constrained effect in the
lives of poor people it is account utilization that is critical.

25 | P a g e
Dr. Kaur and Singh, (2015) have situated financial inclusion as a business
chance to banks and the dispatch of PMJDY reinforces the resolve that when
coordination, devotion, responsibility, trust, fulfillment, and coherence is given
by all constituents and partners, a structure is made which goes about as a
prevailing power for achievement of the mission.

G Madhukar assesses that PMJDY is a mission to destroy poverty and is relied

upon to bring financial inclusion, financial dependability, and financial
flexibility to poor people and underprivileged individuals in rural, semi-urban
and urban regions. United Nations (2006), in its blue book titled "Building
Inclusive Financial Sectors for Development", characterizes financial inclusion
as the "access to the range of financial services at a reasonable cost for the
bankable people and farms". Essential financial services incorporate savings,
short and long-term credit, leasing and factoring, mortgages, insurance,
pensions, payments, nearby cash transfers and worldwide remittances.

Ghandhi Kalpeesh(2015) investigated in his review "The Role of Public and

Private Sectors Bank with Special Reference to Pradhan Mantri Jan Dhan
Yojana " that Banking sector has performed and demonstrated a major
assistance until the current time that development is practically unthinkable
without it. Public sectors have contributed a considerable measure in the field
while the support of private bank is not expected but rather we can urge private
banks to chip away at in the field. The plan like that is a vital device to activate
savings of the economy which won't have been used so that capital formation in
the economy would be possible.

Most as of late a national mission on financial inclusion called "PRADHAN

MANTRI JAN - DHAN YOJANA" was propelled on the 28th of August 2014.
Under the immediate supervision of the Indian Prime Minister and the
Department of Financial Services, Ministry of Finance, the goal of this mission
is to select more than 70 million households and open their bank accounts
alongside giving them as an initial step a RuPay debit card with a Rs. 1,00,000/
- accidental coverage. In due course, the arrangement is to likewise cover these
account holders with insurance and pension products. Around 60% of the
populace in India does not have a bank account. The urban populace of
financially excluded category principally contains low-salary bunches like
urban workers, ghetto tenants of the urban communities and socially avoided
groups. Poverty therefore of the nonattendance of salary or sporadic wage, low
training, the absence of financial literacy, and distant location of financial
26 | P a g e
service providers make it troublesome for the service providers to give financial
services which thusly turns into an essential purpose behind financial exclusion.
It is likewise trusted that financial inclusion additionally prompts social
inclusion.

The above cross-country encounters demonstrate that there have been a few
imaginative investigations worldwide to advance financial inclusion with an
exceptional accentuation on making demand through broadened credit
instruments, outreach contemplations, manageability angles, and conveyance
systems among others. In spite of the fact that these worldwide encounters
accompany their own benefits and negative marks, the activities embraced in
India are interesting in nature, detailed with due thought to the assorted socio-
economic conditions of the nation.

The banking framework resembles a group, which constitutes from different

elements which are diverse in nature, shape, structure and its working however
together they make a framework in which they effectively work for a common
goal.

The Pradhan Mantri Jan Dhan Yojana is a yearning activity on financial

inclusion taken up by the government and has been under a sharp eye of
research analysts. PMJDY is an exceptionally recent activity taken up by the
administration and its viability is still under question. Prominent speakers have
talked long in examining the present situation, the difficulties and the extent of
PMJDY keeping in mind macroeconomic situation. Notwithstanding, the
writing does not have a far-reaching measure that can be utilized to quantify the
degree of financial inclusion in the small city territory. This examination is an
endeavor to fill this gap, and subsequently, a unique commitment to study
financial inclusion because of PMJDY in a specific region of Madhya Pradesh.

Indore being viewed as an urban region, the research concentrates on the

financial inclusivity of the urban poor living in the surveyed zone. The
conclusions drawn from the examination can be of significance to the bankers
working in Tier-II urban areas, calling attention to the requirements of the
general population and supporting them in outlining their methodologies aimed
at inclusion.

27 | P a g e
 CHAPTER-3
OBJECTIVES

28 | P a g e
OBJECTIVES
Substantial literature on financial inclusion in India with particular reference to
groups with low income is very much available. A lot of descriptive researches
have also been conducted on what impacts the Pradhan Mantri Jan Dhan Yojana
would have on Indian economy. Although the Pradhan Mantri Jan Dhan Yojna
Scheme is relatively recent and remains at the early stages, this research aims at
evaluating the impact of PMJDY in the sphere of financial inclusion.

The objective of the research can be stated as:-

1. Measure the standing of Madhya Pradesh with respect to other states in

terms of extent of financial inclusion after the launch of PMJDY.
2. To study the perception of urban population of Indore about the Pradhan
Mantri Jan Dhan Yojana.
3. To identify the willingness and awareness amongst the sample about
PMJDY and the importance of banking and its services.

29 | P a g e
 CHAPTER-4
RESEARCH
METHODOLOGY

30 | P a g e
RESEARCH DESIGN

In order to measure the extent of Financial Inclusion in Madhya Pradesh after

the launch of PMJDY an index of financial inclusion has been chosen. The
details of the index of financial inclusion are given research tool section. The
present study has utilized cross-sectional (study) research design and the review
has been done at a specific point in time. The survey approach was utilized
since the target of the study is to comprehend the more extensive view of
respondents' perception about Pradhan Mantri Jan Dhan Yojana and to deliver
quantitative aspects of the examined populace since the setting has a particular
goal.

DATA SOURCE

Data collection is done through both primary and secondary sources. The
secondary sources include the Pradhan Mantri Jan Dhan Yojana official
website, RBI quarterly and annual reports, and government of India reports. The
primary data was collected with help of structured questionnaire to examine the
awareness level as well as perceptions of people about the PMJDY. The
questionnaire has been designed with the help of various research articles which
includes 12 close ended questions and 30 statements related to Likert scale.

SAMPLING DESIGN AND SAMPLE SIZE

For the collection of data, 109 respondents from Indore were chosen using non-
random sampling. The sample consists of laborers, unemployed people, self-
employed people, service people, professionals, and students.

This research has been divided into two parts, viz.:-

1. Measuring the extent of Financial Inclusion in Madhya Pradesh after the

launch of Pradhan Mantri Jan Dhan Yojana.
2. Perception of Urban Poor regarding Pradhan Mantri Jan Dhan Yojana.

31 | P a g e
PART- I

Financial Inclusion in Madhya Pradesh

This part deals with the measuring the extent of Financial Inclusion in Madhya
Pradesh after the launch of PMJDY in August 2014.

RESEARCH TOOL

Index for financial inclusion

This index has been adopted from working paper-215(Mandira Sarma, JNU).
As an inclusive financial system should be judged from several dimensions, a
multidimensional approach is used to construct the index of financial inclusion
(IFI). The approach to this index is similar to that used by UNDP for
computation of some well known development indexes such as the HDI, the
HPI, and the GDI and so on. As in the case of these indexes, the proposed IFI is
computed by first calculating a dimension index for each dimension of financial
inclusion. The dimension index for the ith dimension, d i, is computed by the
following formula.
𝐴𝑖 −𝑚𝑖
𝑑𝑖 = (1); Where
𝑀𝑖 −𝑚𝑖

Ai = Actual value of dimension i

mi = minimum value of dimension i

Mi = maximum value of dimension i

Formula (1) ensures that 0 ≤ di ≤ 1. Higher the value of di, higher the country’s
achievement in dimension i. If n dimensions of financial inclusion are
considered, then, a country i will be represented by a point D i = (d1, d2, d3, .dn)
on the n dimensional Cartesian space.

In the n-dimensional space, the point O = (0,0,0,…0) represents the point

indicating the worst situation while the point I = (1,1,1,…,1) represents the
highest achievement in all dimensions. The index of financial inclusion, IFI i for
the ith country, then, is measured by the normalized inverse Euclidean distance
of the point Di from the ideal point I= (1,1,1,….1). The exact formula is

√(1−𝑑1 )2 +(1−𝑑2 )2 +..+(1−𝑑𝑛 )2

𝐼𝐹𝐼𝑖 = 1 − (2)
√𝑛
32 | P a g e
In formula (2), the numerator of the second component is the Euclidean distance
of Di from the ideal point I, normalizing it by n and subtracting by 1 gives the
inverse normalized distance. The normalization is done in order to make the
value lie between 0 and 1 and the inverse distance is considered so that higher
value of the IFI corresponds to higher financial inclusion.

The present index

In the index of financial inclusion presented here, we consider three basic

dimensions of an inclusive financial system: banking penetration (BP),
availability of the banking services (BS) and usage of the banking system (BU).
These dimensions are largely motivated by two factors - data availability and
recent development in the literature.

Banking penetration (dimension 1): An inclusive financial system should

have as many users as possible, that is, an inclusive financial system should
penetrate widely amongst its users. The size of the “banked” population, i.e.
number of people having a bank account is a measure of the banking
penetration of the system. Thus, if every person in an economy has a bank
account, then the value of this measure would be 1. In the absence of the data on
“banked” population, the number of bank accounts is used as a proportion of the
total population as an indicator of this dimension.

Availability of banking services (dimension 2): The services of an inclusive

financial system should be easily available to its users. Availability of services
can be indicated by the number of bank outlets (per 10000 population) and/or
by the number of ATM per 10000 people, or the number of bank employees per
customer. In the absence of comparable data on the number of ATMs and
number of bank staff, the number of bank branches per 10000 population is
used to measure the availability dimension.

Usage (dimension 3): This dimension is motivated by the notion of

“underbanked” or “marginally banked” people, as observed by Kempson et al
(2004). They have observed that “in some apparently very highly-banked
countries, a number of people with bank account are nonetheless making very
little use of the services on offer” These people are termed as “under-banked” or
“marginally banked”. Thus, merely having a bank account is not enough for an
inclusive financial system; it is also imperative that the banking services are
adequately utilized. In incorporating the usage dimension in our index, the study
considers two basic services of the banking system – credit and deposit.
33 | P a g e
Accordingly, the volume of credit and deposit as proportion of the state’s GDP
has been used to measure this dimension.

Thus, considering the above three dimensions – penetration, availability and

usage – a state i is represented by a point (pi, ai, ui) in the three dimensional
Cartesian space, such that 0 ≤ pi, ai, ui ≤1, where pi, ai and ui denote the
dimension indexes for state i computed using formula (1). In the three
dimensional Cartesian space, the point (0, 0, 0) will indicate the worst situation
(complete financial exclusion) and the point (1, 1, 1) will indicate the best or
ideal situation (complete financial inclusion). The IFI for the state i is measured
by the normalized inverse Euclidean distance of the point (pi, ai, ui) from the
ideal point (1, 1, 1). Algebraically,

(1−𝑝𝑖 )2 +(1−𝑎𝑖 )2 +(1−𝑢𝑖 )2

𝐼𝐹𝐼 = 1 − √ (3)
3

PART-II

Perception of Urban Poor regarding Pradhan Mantri Jan Dhan Yojana

This part deals with analyzing the perception of Urban Poor regarding the
Pradhan Mantri Jan Dhan Yojana.

Statistical Tools:-

 Factor Analysis

Factor analysis is a data reduction technique which used to summarize data into
few dimensions by removing large no. of variables into a small no. of hidden
variables. In order to know the perception of the people about PMJDY factor
analysis is applied to the 30 statements framed.

34 | P a g e
• Multiple Linear Regression

The multiple linear regression is used to explain the relationship between one
dependent variable and two or more independent variables. The independent
variables can be continuous or categorical (dummy coded as appropriate). The
objective of this statistical technique is to model the relationship between the
exploratory and response variable which in the present study is the
demographics & factors affecting perception of PMJDY and the decision to
open bank account under Pradhan Mantri Jan Dhan Yojana.

The model for MLR has been given below:-

Yi = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + β7X7 + β8X8 + β9X9 +

β10X10 + β11X11 + β12X12 + β13X13 + C + µ; where

Yi - Decision to open bank account under Pradhan Mantri Jan Dhan Yojana

X1 - Age of the respondents

X2 - Educational level of the respondents

X3 - Gender of the respondents

X4 - Monthly Income of the respondents

X5 - Occupation of the respondents

X6 - Religion of the respondents

X7 - Economic and social benefits

X8 - Financial Needs

X9 - Information availability and financial literacy

X10 - Financial literacy

X11 - Hoax

X12 - Adequacy

X13 - Assistance by banks

35 | P a g e
C – Constant variable

µ - Error variable

The age(X1) of the respondents were assigned a value from 1 to 5 where:-

1- 18 to 25
2- 26-35
3- 36-45
4- 46-65
5- 66 and above

The educational qualifications(X2) of the respondents were assigned a value

from 1 to 4 where:-

1- Under matriculation
2- Higher Secondary
3- Graduate
4- Post-graduate and above

The demographic variable gender(X3) of the respondents was given a dummy

value of 0 and 1 where 0 is male and 1 is female.

The monthly income(X4) of the respondents was assigned a value from 1to 4
where:-

1- Less than 5000

2- 5001-10000
3- 10001-20000
4- Above 20000

The occupation(X5) of the respondent was assigned a value from 1 to 4 where:-

1- Student
2- Business
3- Service
4- Other

36 | P a g e
The religion(X6) of the respondents was assigned a value from 1 to 5 where:-

1- Hindu
2- Muslim
3- Christian
4- Sikh
5- Other

The factors X7 to X13 were obtained from factor analysis applied on the 30
statements that were part of the questionnaire. The details of the statements
included in the variables have been mentioned in the next chapter.

37 | P a g e
 CHAPTER-5
DATA ANALYSIS AND
INTERPRATION

38 | P a g e
 MEASUREMENT OF FINANCIAL INCLUSION
Since PMJDY is a national mission for financial inclusion launched by the
government of India so in order to know impact of the scheme an index for
financial inclusion was designed. The Index for financial inclusion was
measured for different states for which the data was available and the following
results were attained.

TABLE 2: State wise Index for financial inclusion

PENETRATION(pi) AVAILABILTIY(ai) USAGE(Ui) INDEX(IFIi)

STATE
Andhra 0.18 1.35 0.81 0.47
Pradesh
0.28 0.63 0.75 0.51
Bihar
0.22 2.09 0.31 0.66
Delhi
0.18 1.26 0.92 0.50
Gujarat
0.24 1.84 1.10 0.34
Haryana
Madhya 0.35 0.87 0.99 0.62
Pradesh
0.17 1.08 1.70 0.37
Maharashtra
0.19 2.24 1.33 0.12
Punjab
0.28 1.002 0.67 0.55
Rajasthan
0.14 2.14 0.54 0.13
Sikkim
0.12 1.42 1.11 0.43
TN
0.25 1.41 1.36 0.47
Telangana
0.22 0.82 1.06 0.54
UP
0.20 1.98 0.81 0.26
Uttarakhand
West 0.30 0.85 1.17 0.58
Bengal

39 | P a g e
 1. BANKING PENETRATION (dimension 1): An inclusive financial
system should have as many users as possible, that is, an inclusive
financial system should penetrate widely amongst its users. The size of
the “banked” population, i.e. number of people having a bank account is a
measure of the banking penetration of the system. Thus, if every person
in an economy has a bank account, then the value of this measure would
be 1. Thus, in the table above it seen that the banking penetration of
Madhya Pradesh is 0.35 which is greater than all the other states. The
population of Madhya Pradesh is recorded according to the census 2011
and is 7.2 crore and the accounts opened through PMJDY are 2.52 crore.
This means that 35% of the population has been penetrated through
PMJDY.

2. AVAILABILITY OF BANKING SERVICES (dimension 2): The

services of an inclusive financial system should be easily available to its
users. In the absence of comparable data on the number of ATMs and
number of bank staff, the number of bank branches per 10000 population
was used to measure the availability dimension. As illustrated in the table
above the Availability dimension for Madhya Pradesh is .87 as the no.
of branches are 6300. This means that for every 10000 population approx
1 branch is available.

3. USAGE (dimension 3): Merely having a bank account is not enough for
an inclusive financial system; it is also imperative that the banking
services are adequately utilized. In incorporating the usage dimension in
our index, the study considers two basic services of the banking system –
credit and deposit. Accordingly, the volume of credit and deposit as
proportion of the state’s GDP has been used to measure this dimension.
The Usage dimension for Madhya Pradesh is 0.99. The deposits and
credits in Madhya Pradesh were Rs. 3,187,519 million and Rs. 1,783,219
million respectively which measured against the GSDP of MP.

40 | P a g e
INDEX FOR FINANCIAL INCLUSION (IFIi): Depending on the value of
IFI, states have been categorized into three categories, viz.:-

 0.5<IFI≤1 - High financial inclusion

 0.3≤IFI≤5 – Medium financial inclusion
 0≤IFI≤0.3 – Low financial inclusion

The index for financial inclusion of MP is measured to be 0.61 which is

considered to be a high level of financial inclusion. The formula for measuring
the index has been mentioned in the Research Methodology.

Possible reasons for high financial inclusion index of Madhya Pradesh

are: -

 State Government initiatives: The state government of Madhya

Pradesh has been proactive in the effective implementation of
PMJDY. Initiatives have been launched to encourage people to
open bank accounts through PMJDY.
 Financial literacy programmes: Various financial literacy
programmes have been launched by the government.
 The PMJDY has effectively been advertised all over the state.

SURVEY RESULTS

The population of Indore is approximately 20 lacs as per Census 2011, and it is

expected to grow as large numbers of people are migrating towards Indore city.
The people are not only immigrating from cities of MP itself but also from other
states like Gujarat, Kerala, and Maharashtra for quality education, business and
peaceful life.

In order to assess the perception of PMJDY amongst the people of Indore, a

survey was conducted in commercial as well as residential areas of Indore
through a questionnaire. The sample was identified by the work places and the
activities carried out by them.

41 | P a g e
Factor analysis
Factor analysis is a data reduction technique which used to summarize data into
few dimensions by removing large no. of variables into a small no. of hidden
variables. In order to know the perception of the people about PMJDY factor
analysis is applied to the 30 statements framed. But before running the factor
analysis we have to find out whether or not the sample selected is adequate.
Thus, KMO and Bartlett’s test of Sphericity were applied.
TABLE 3: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .843
Bartlett's Test of Sphericity Approx. Chi-Square 1.487E3
Df 435
Sig. .000

The table above shows the value of Kaiser-Meyer-Olkin (KMO) and the
Bartlett's Test of Sphericity as 0.843 and 1.49(approx) respectively which is
statistically significant at 1% level of significance. This implies that the sample
is adequate for factor analysis.
Further, factor analysis was applied and the 30 statements that were formed
regarding the perception of the people about PMJDY were reduced into 7
components/factors. The table no. shows the variance explained by the initial
solution and extracted components. The factor analysis was applied on 30
variables and these 30 variables are reduced to 7 factors where each factor
explains a percentage of total variance. The total variance explained by these 7
factors is 62.57%. The extraction of these factors is explained in further
analysis.

42 | P a g e
 TABLE 4: Total Variance Explained
Component Initial Eigen values Extraction Sums of Squared
Loadings
Total % of Cumulative Total % of Cumulative
Variance % Variance %
1 9.297 30.990 30.990 9.297 30.990 30.990
2 2.507 8.356 39.345 2.507 8.356 39.345
3 1.838 6.127 45.473 1.838 6.127 45.473
4 1.566 5.220 50.692 1.566 5.220 50.692
5 1.388 4.627 55.319 1.388 4.627 55.319
6 1.160 3.866 59.185 1.160 3.866 59.185
7 1.017 3.389 62.574 1.017 3.389 62.574
8 .988 3.294 65.869
9 .934 3.114 68.983
10 .851 2.837 71.819
11 .829 2.762 74.582
12 .766 2.554 77.136
13 .701 2.338 79.474
14 .655 2.184 81.658
15 .622 2.074 83.732
16 .578 1.928 85.660
17 .511 1.702 87.362
18 .444 1.481 88.844
19 .441 1.471 90.315
20 .421 1.405 91.720
21 .376 1.252 92.972
22 .347 1.157 94.129
23 .292 .972 95.101
24 .259 .864 95.965
25 .256 .854 96.819
26 .243 .810 97.629
27 .211 .702 98.331
28 .192 .641 98.971
29 .158 .528 99.499
30 .150 .501 100.000
Extraction Method: Principal Component Analysis.

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The scree pot facilitates the determination of the optimal number of
components. The scree plot graphs the Eigen value against the factor number. It
can be seen that these values in the first two columns of the table immediately
above are plotted in the scree plot. From the seventh factor onwards, it can be
seen that the line is almost flat, meaning the each successive factor is
accounting for smaller and smaller amounts of the total variance.

The factor analysis reduced the data into 7 components. Those components
have been given below and explained through tables:-

1. ECONOMIC AND SOCIAL BENEFITS: It is the most significant

factor explaining almost 31% of the total variance. It explains whether or
not people think that PMJDY would provide economic and social benefits
to the country. It is loaded with 9 statements that have been mentioned in
the table- Factor 1.

TABLE 5: Component 1- Economic and social benefits

S No. Statements Factor loading
1. PMJDY is/will be helpful in reducing the spread of
.745
poverty in the country.
2. PMJDY is an effective policy measure to solve the
.714
problem of financial exclusion.
3. PMJDY is helpful in improving the country’s .705

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 economic growth.
4. PMJDY is beneficial for people. .629
5. PMJDY is beneficial in enhancing the standard of
.580
living of people.
6. PMJDY is an important scheme for human welfare. .573
7. PMJDY is helpful in the country's social
.566
development.
8. PMJDY is helpful in providing awareness about
.534
financial products and services.
9. Benefits under this scheme are adequately provided
by banks to all customers (e.g. debit .460
Cards).

2. FINANCIAL NEEDS: It is the second most significant factor explaining

8% of the total variance. It is loaded with 6 statements which determine
whether people feel that PMJDY would enable them to meet their
financial needs or not.

TABLE 6: Component 2- Financial Needs

S No. Variable Factor loading
1. There is a need to increase awareness about this scheme. .711
2. Banks follow a non discriminatory approach in opening
.688
bank accounts.
3. PMJDY is a hassle free means of linking savings to
.655
banks.
4. PMJDY is helpful in preventing exploitation by money
.608
lenders.
5. PMJDY has helped to reduce dependence on informal
.575
sources (e.g.; money lenders).
6. PMJDY is an important foot forward toward solving the
.502
financial needs of people.

3. AWARENESS OF SCHEME DETAILS: This factor pertains to the

level of awareness of people about the details of the scheme. It is the third
most significant factor explaining 6% of the total variance. It contains 4
statements which have been mentioned in the table labelled Factor-3.

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 TABLE 7: Component 3- Information availability and financial literacy
S No. Variable Factor loading
1. People are aware of the provision of Life Insurance
.836
worth Rs. 30,000 under this scheme.
2. People are aware of the provision of Accidental
Insurance worth Rs. 1, 00,000 under this .715
Scheme.
3. People are aware of the provision of overdraft facility
.598
(up to Rs 5,000) under this scheme.
4. Banking infrastructure is adequate to reach out to
.401
people.

4. FINANCIAL LITERACY: This component pertains to the financial

literacy of the people with respect to PMJDY. This factor explains 5% of
the total variance. It contains 5 statements which have been mentioned in
the table.

TABLE 8: Component 4-Financial Literacy

S No. Variable Factor loading
1. PMJDY is effectively advertised/ publicized. .723
2. Banking officials are cordial in providing information
.560
about the scheme.
3. PMJDY is/will be helpful in improving the extent of
.543
financial literacy.
4. People are aware of the provision of RuPaY debit card
.513
under this scheme.
5. Processing under this scheme is easy. .462

5. HOAX: This is the fifth most significant factor explaining 4% of the total
variance and is loaded with 4 statements which are related to the
perception of people about PMJDY to be a hoax or not. The statements
along with their factor loadings have been mentioned in the table.

TABLE 9: Component 5- Hoax

S No. Variable Factor loading
1. In the real sense, PMJDY cannot help in poverty
.822
reduction in the country.
2. PMJDY is eyewash. .639
3. Information regarding this scheme is not adequately
.586
available at the bank.

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 6. ADEQUACY: This factor tells whether the people feel that information
regarding PMJDY is adequate or not. It explains 3.8% of the total
variance. It comprises of two statements which have been mentioned in
the table along with their factor loadings.

TABLE 10: Component 6- Adequacy

S No. Variable Factor loading
1. Information regarding this scheme is not adequately
.845
available online.
2. Processing of accounts under PMJDY is a tedious
.702
task.

7. ASSISTANCE BY BANKS: This is the last component which explains

3% of the total variance and contains one statement which ascertains
whether the respondent feel that banks provide assistance about PMJDY
or not.

TABLE 11: Component 7- Assistance By Banks

Serial Variable Factor loading
No.
no6 Banking staff is not helpful in assisting about this
.777
scheme.

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Multiple Linear Regression Analysis

Table 12: Regression Analysis Output

Variable Coefficient Std. Error t-Statistic Prob.

Age -0.045384 0.055099 -0.823675 0.4122

Education -0.040790 0.051958 -0.785062 0.4344
Gender 0.088911 0.106523 0.834666 0.4060
Monthly Income 0.092423 0.051201 1.805108 0.0742
Occupation -0.038968 0.062392 -0.624565 0.5338
Religion 0.078732 0.052343 1.504160 0.1359
Economic and social benefits -0.013034 0.046706 -0.279074 0.7808
Financial needs 0.017648 0.046642 0.378370 0.7060
Awareness of scheme details 0.047342 0.044925 1.053811 0.2946
Financial literacy 0.016961 0.044872 0.377992 0.7063
Hoax 0.029875 0.046549 0.641808 0.5225
Adequacy 0.088258 0.045777 1.928017 0.0568
Assistance by banks 0.007551 0.045951 0.164337 0.8698
C 0.197228 0.213573 0.923470 0.3581
R-squared 0.105793 Mean dependent variance 0.284404
F-statistic 0.864565 Durbin-Watson stat 1.660769
Prob(F-statistic) 0.592035

In the table above, Regression coefficient represents the mean change in

response variable for one unit in predictor variable while other predictors are
kept constant.

INTERPRETATION: -

Regression analysis shows that:

 Higher the Monthly Income of the respondents the less inclined he/she is
to open a bank account under PMJDY and lower the monthly income
he/she is inclined to open a bank account under PMJDY. The coefficient
of correlation is 0.09 at 7.4% level of significance. This might be due to
the fact that a person with higher income already has a bank account so
he doesn’t need to open a bank account under PMJDY and the benefits of
the scheme would be available only to poor population according to the

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 government norms. Thus, a person with lower monthly income is
motivated to open the bank account.
 The regression analysis also shows that the factor Adequacy effects the
decision to open a bank account under PMJDY. The factor Adequacy
includes two factors one being whether the information is adequately
available in the banks or not and the second that whether the processing
of accounts is a tedious task under the scheme. This means that if
information is adequately available then the respondent is inclined to
open a bank account and vice versa. It can also be inferred that if the
processing of accounts is tedious then the respondent is less inclined
to open bank account and vice versa. The coefficient of correlation is
0.09 and the result is applicable at 5.6 level of significance.

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 CHAPTER-6
CONCLUSION

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CONCLUSION

The objective of the research was to measure the index for financial inclusion of
Madhya Pradesh in lieu of Pradhan Mantri Jan Dhan Yojana and compare it
with other states. It was found that Index for Madhya Pradesh is 0.62 which is
considered to be high level of inclusion. Compared to other states Madhya
Pradesh stands at a good position in terms of financial inclusion but there are
still steps to be taken further to eliminate financial inclusion. The reasons
attributed to effective banking penetration through Pradhan Mantri Jan Dhan
Yojna were the proactive steps taken by the state government and effective
marketing of PMJDY in the state.

Through the survey it was found that the majority of the respondents were
aware about PMJDY had a favorable opinion about it. It was also found that the
income of the respondent and the ease through which people can process
accounts through PMJDY affects their decision to open a bank account under
PMJDY. People with high income tend to have a bank account already thus they
do not need to open bank accounts through this scheme and the people with less
income are more inclined to open the bank accounts in order to reap the benefits
provided by this scheme launched by the government. If the processing of bank
accounts is made easy then more people would be encouraged to open bank
accounts. PMJDY has been advertised well but there is a need to increase the
awareness of the scheme details amongst the population. Financial literacy is
still lacking amongst the people of Indore and launching of various literacy
programmes and their effective implementation might help. To conclude it can
be said that Pradhan Mantri Jan Dhan Yojana has been successful in the task of
banking penetration in Madhya Pradesh but the population still lacks financial
literacy and thus they are unable to take advantage of the benefits provided by
the Yojana. The availability of banking further needs to be improved and the
people should be encouraged by both banks and government to use the bank
accounts so that the accounts do not stay dormant and there is improvement in
financial inclusion in the actual sense.

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 REFERENCES

 Aishwarya Sigh, Manoj Sharma & Mukhes Sadana; assessing the most
ambitious public financial inclusion drive in history, Microsave India
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Finance, July-September 2015
 Banking on Change: Breaking the Barriers to Financial Inclusion,
Barclays bank, 2012
 Brij Mohan, “Pradhan Mantri Jan Dhan Yojana (PMJDY): Features,
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 Gitte Madhukar, PMJDY: national mission on financial inclusion in
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  Rangarajan Committee, Report of the Committee on Financial Inclusion,
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Web References:-

 http://www.pmjdy.gov.in
 http://www.pmjdy.gov.in/pdf/PMJDY_BROCHURE_ENG.pdf
 http://www.pmjdy.gov.in/scheme_detail.aspx
 https://rbi.org.in/
 http://www.wikipedia.com

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 APPENDIX

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