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A detailed study done in


Submitted in partial fulfillment of the requirement for the award of degree of

Master of Management Studies (MMS) under the University of Mumbai

Submitted by
ROLL NO: 2017MMS076
BATCH: 2017-2019

Under the guidance of


Bharati Vidyapeeth’s
Institute of Management Studies & Research
Navi Mumbai


I am highly indebted to Bharati Vidyapeeth’s Institute of Management Studies & Research

Prof. V. Padmavathi and Dr. Anjali Kalse for their guidance and constant supervision as well
as for providing necessary information regarding the project & also for their support in
completing the project.
I also wish to extend my appreciation to others who have contributed towards this project
through their feedback and comments to complete the findings and report.

Mr. Shubham Ramesh Pagade



This is to certify that the Final Semester Project- in General Management titled
“Access to financial services in Rural Areas” is successfully done by Mr.
Shubham R. Pagade, a student of Bharati Vidyapeeth’s Institute of Management
Studies and Research, submitted in partial fulfillment of Master of Management
Studies under the University of Mumbai during the academic year 2018-2019.


Prof. V. Padmavathi Dr. Anjali Kalse

Project Guide I /c Director

Sr. No. Contents
Objectives of Project 02
1.1 Background of Study 03
1.2 Meaning of Financial Services 04
1.3 Functions of Financial Services 05
1.4 Financial Services in Rural Areas 06
1.5 Challenges in rural area banking 08

2.1 Literature Review 10

3.1 Regional Rural Banks 17

4.1 Research Methodology 28

5.1 Data Analysis 31

6.1 Findings of the Study 49
6.2 Recommendations of the Study 51
6.3 Conclusion 51
7.1 Webliography/Bibliography 53


The study was conducted to analyze the awareness, usage and satisfaction
regarding financial services in rural areas of PANVEL. The study was
carried out by collecting primary data from 52 respondents in 10 villages of
Ludhiana. The respondents were interviewed through structured non-disguised
questionnaire. The respondents were asked about their awareness, usage and level
of satisfaction from various formal and informal financial services. Major Findings
of the study were that even though the people of rural areas would like to shift
from informal financial services to formal financial services due to more
transparency in operations, less chances of fraud and lower interest rates, still
prefer informal financial service providers over formal financial service providers
because of easy access to these resources.


This chapter contains the background and information about meaning of the
financial services, functions performed by financial services, financial services
available in rural areas and various challenges with regards to financial services in
rural areas.

The objectives of this study are:

1. To study the rural banking system in India
2. To understand the challenges faced by the rural banks in India.
3. To study the level of satisfaction with respect to formal and informal financial
services in rural areas around PANVEL.
4. To study the access to formal and informal financial services in the rural areas
around PANVEL.

All these are covered under the following heads:

1.1 Background
1.2 Meaning of financial services
1.3 Functions of financial services
1.4 Financial services in rural areas
1.5 Challenges in rural areas regarding financial services

1.1 Background
In today’s world, it’s very hard to imagine life without access to various
financial services like savings accounts, home loans, car loans, personal loans,
Internet banking, ATMs. It’s very safe to say that without access to financial
services it would be very difficult to realize our dreams. Financial services like life
insurance and health insurance come to our rescue in difficult times.
Life in big cities in 21st century is fairly easy where we take such financial
services for granted, however, it’s not the same for more than 68% (as per Govt of
India 2011 census) of our population living in rural areas. Banks and other
financial institutions are reluctant to start operations in these areas due to perceived
low returns. And because of this attitude of financial institutions, people in rural
areas have to resort to informal financial sector like going to money lender or
borrowing money from friends or relatives and resorting to extreme measures like
selling off their land and other property when in dire need of money. Resorting to
such measures are risky and expensive and often leads to further degradation of
them already deplorable living conditions. Moreover, they practice limited or no
financial planning, lack business management and entrepreneurial skills, have no
access to information networks to identify and invest in economic opportunities
leading to further deterioration in their economic status.
Poor living conditions and lack of earning opportunities in rural areas are
forcing earning members of the families to move to cities or even foreign countries
in search of better opportunities to earn. In such a situation, the need for financial
services in rural areas is felt even more.
Financial services are not just essential for individuals who might need them
for remittance and money transfer, savings and insurance, these are essential for
overall rural development as well.
It can be observed that the problems listed above are prevalent not just in a
few developing countries. Almost all developing and underdeveloped countries
face these problems. Some of these countries have worked hard towards financial
inclusion of their rural population and with determination improved the economic
conditions in rural areas.
Efforts are being made by government to improve the level of financial
services. Nationalized commercial banks are setting up business through them
subsidiaries in the form of regional rural banks. A Number of microfinances
institutions are now working to provide small credits to poor people and self help
groups, especially in rural areas.
Despite the efforts, a large proportion of India’s rural population is living in
deplorable conditions. With limited or no access to financial services, small and
marginal farmers take loans from moneylenders and are unable to pay on time.
These moneylenders often resort to harassing the borrowers, in some cases forcing
the borrowers to commit suicide.
In view of such lamentable conditions prevailing in the country, a need to
conduct a study to look into the prevailing conditions and how the availability of
better financial services can improve these conditions was felt.

1.2 Meaning of financial services

Financial services refer to services provided by the finance industry. The
finance industry encompasses a broad range of organizations that deal with the
management of money. Among these organizations are banks, credit card
companies, insurance companies, consumer finance companies, stock brokerages,
investment funds and some government sponsored enterprises. The firms providing
these financial services, study the needs of their customers in detail before deciding
their financial strategy, giving due regard to costs, liquidity and maturity
Financial services firms continuously remain in touch with their customers, so that
they can design products which can cater to the specific needs of their customers.
The providers of financial services constantly carry out market surveys, so they can
offer new products much ahead of need and impending legislation. Newer
technologies are being used to introduce innovative, customer friendly products
and services which clearly indicate that the concentration of the providers of
financial services is on generating firm/customer specific services. In a highly
competitive global environment brand image is very crucial. Unless the financial
institutions providing financial products and services have good image, enjoying
the confidence of their clients, they may not be successful. Thus, institutions have
to focus on the quality and innovativeness of their services to build up their
credibility. Also, production of financial services and supply of these services have
to be concomitant. Both these functions i.e. production of new and innovative
financial services and supplying of these services are to be performed

1.3 Functions of financial services

Financial services are a very vital part of the financial system. Financial
services serve the needs of individuals and organizations through a network of
financial institutions, financial markets and financial instruments. Financial
services play a key role in growth and development of any country. This is done by
managing various financial instruments in such a way that money is funneled from
those that don’t need it right away to those that need it and probably want to use it
for some productive work. Tremendous growth of the countries that have highly
efficient financial systems in place is a testimony in itself as to how highly
efficient financial markets lead to strong overall growth of the economy.

Following are considered to be the primary functions of financial services
(Caprio, 2001):
1. Facilitating transactions (exchange of goods and services) in the economy.
2. Mobilizing savings (for which the outlets would otherwise be much more
3. Allocating capital funds (notably to finance productive investment).
4. Monitoring managers (so that the funds allocated will be spent as envisaged).
5. Transforming risk (reducing it through aggregation and enabling it to be carried
by those more willing to bear it).

1.4 Financial services in rural areas

The availability of quality financial services in rural areas is extremely
important for the growth of the economy as this will enable the large number of
rural households to fund the growth of their livelihoods. The growth of the
economy is dependent on the growth of the rural market in the country. Therefore,
greater financial inclusion in these segments is imperative.
Rural finance is about providing financial services – secure savings, credit,
money transfer and insurance – in rural areas. Indeed, financial services can play
an important role in rural development. Savings and insurance schemes assist the
rural population in reducing vulnerability to risks, planning more reliably for the
future and saving for upcoming investments, as well as smoothing out irregular
income flows and covering unexpected expenses. The latter is particularly
important in rural areas where income depends on agricultural cycles. Loans for
investments and working capital are crucial elements that enable rural
entrepreneurs to make investments, seize economic opportunities, and purchase
agricultural inputs and working capital. Short term consumption or emergency

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loans can help households to avoid difficult situations that might have forced them
to sell an asset.
However, loans are not always favorable: some poor borrowers experience
difficulties in repaying their debts, due either to circumstances beyond their control
(e.g. sickness, theft, natural disasters) or to a lack of knowledge and wrong
investment strategies. Money transfer services make it possible for people who
leave rural areas to work in cities or abroad to send home their remittances safely
and at reasonable costs. In addition to fostering rural development, rural finance is
increasingly used as an incentive to promote sustainable use of natural resources,
use of alternative energies, and environmentally sound behavior.

In recent years, several banks and microfinance institutions have attempted to

achieve not only financial and social, but also environmental sustainability, which
has been dubbed the “triple bottom line”.
Despite the significant demand for financial services in rural areas, institutions
offering financial services – such as banks, credit unions, microfinance
institutions (MFI) or insurance companies – are typically reluctant to serve rural
areas. As a result, the majority of the developing world’s rural population does not
have access to the formal financial system. Confronted with this lack of access,
households, farmers and small entrepreneurs rely on informal ways of accessing
financial services. Entrepreneurs usually rely on family savings or borrow money
from friends to make small investments, and in emergency situations people tend
to borrow from acquaintances.
Such loans are usually repaid without interest. Also, people typically rely on
moneylenders to obtain loans. Moneylenders often ask for usurious interest rates
and sometimes try to recover the loans by violent means. On the other hand,
moneylenders can provide loans rapidly in an emergency, and they do not ask for
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collateral. Community self-help schemes such as self-help groups (SHG), rotating
savings and credit associations (ROSCAs), community-based savings and credit
mechanisms are useful instruments to encourage savings, provide small-scale
insurance and avoid debt at exorbitant interest rates.
Formal institutions can offer a broader range of financial products. Formal
services such as microfinance cannot replace loans from friends and family, but
they do complement them and enable the rural population to access a wider range
of services. Moreover, formal financial institutions belong to the economic
infrastructure of a country or region and can thus help to foster economic

1.5 Challenges in rural areas regarding financial services

Rural households and entrepreneurs still face a number of obstacles that
make it difficult to access financial services. Following are a broad array of
challenges faced by service users as well as financial institutions (Schlaufer, 2008):

High transaction costs: Operating in Rural Areas comes at a very high cost
for financial service providers. Lack of infrastructure, information technology and
communication play a major role in restricting the institutions from venturing into
this sector. Adding the remoteness of these areas and very thinly spread clientele to
the list of the problems makes it simply not worthwhile for financial institutions to
make investments in rural areas. To avail these services, the consumers of these
services have to travel long distances and that too usually by foot, can cost them an
entire working day. Because of the remoteness of the areas, the financial service
providers face high charges on account of ensuring security and maintaining
liquidity. These high costs are passed on the customers resulting in higher rates of

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interests and thereby making the entire proposition unviable, for both, the
institution and the customer.

Higher risks: Incomes in rural households are volatile as they mostly

depend on seasonal agricultural production which are highly risk prone to weather
fluctuations, diseases or pests. All this results in higher credit risk for borrowers as
well as rural financial institutions. Increasingly, lot of variation has been observed
in prices of rural commodities. Historically, rural households have depended on
only one or two sources of income thereby increasing the risk of credit default.
This has been changing of late, but still the change is not very substantial.
Financial institutions usually have no means of securing their credits in case of
default as many households either entirely lack collateral or do not have a legal
title to their house or land. Defaulting clients run high risks as well as financial
institutions will typically impose punitive interest rates for delayed payments and
might even confiscate assets of defaulting clients.

Higher rates of illiteracy: Illiteracy rates are very high in developing

countries like India and even more so in rural areas. People who are not well read
face an extra challenge in accessing financial services: it is difficult for them to
analyze credit risks and the profitability of a loan or savings scheme, to provide all
documents and information (such as a business plan) required to apply for a loan,
and to understand conditions and contracts. Some institutions fail to communicate
interest rates and commissions in a transparent manner, and small prints in
contracts can contain additional costs for borrowers. On the other hand, financial
institutions those want to expand into rural areas experience difficulties in finding,
hiring and keeping a well-trained staff that is willing to work in a rural region.
Lack of experienced staff, in turn, leads to poor institutional capacity among rural
financial institutions.

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An attempt has been made to present, in brief, a review of past studies,

which have a direct or indirect relevance to this study. This is likely to provide a
glimpse of work done on the studies related to financial services in rural areas.
These studies have been placed in chronological order so that proper perspective
may be developed for pursuing the present project.
Mauri (1985) highlighted Rural development of LDCs calls for an overall
strategy aiming at an economic and social improvement of peasants. The
advancement of this process relies on capital formation and on efficiency with
which capital is used in agriculture? Domestic savings mobilization and resource
allocation play a crucial role at the moment when inflow of foreign capital has
dropped. Conventional views on rural finance of these countries underestimate the
savings potential and concentrate on the need to supply farmers with funds at
concessional terms through institutional channels. An empirical analysis shows,
however, that rural areas of LDCs have a positive, and by no means negligible,
saving capacity. Hoarding is a widespread phenomenon in African and Asian
peasant societies. Hoarding is assumed to be a measure of the gap between savings
and productive investments. Where the economy has attained a certain degree of
monetization and cash crops are produced in addition to subsistence crops, a
surplus in money may emerge. At this stage household savings may be mobilized.
Efficient rural financial markets would greatly contribute to achieve the two
savings mobilization and improvement of the quality of investments. The
performance of these markets in LDCs is however poor. The development of rural
financial markets require specific measures and appropriate action.

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Financial innovation is the driving force behind financial development and may be
defined as any qualitative change that has a decisive impact on the structure and
the performance of the financial sector. A whole range of financial innovations,
some of which may even seem banal, is required on both sides of the activity of
financial intermediaries: the deposit taking and the lending functions. Institutional
innovations as well as new financial technologies are recommended.
Mahajan and Ramola (1996) reviewed the performance of Indian financial
institutions in providing services to the rural poor and examined the key issues
facing policy makers and institutions. They highlighted that rural financial
institutions are faced with a lot of constraints and to improve access of financial
services in the country a whole range of macro-economic issues like
depoliticization, ownership, governance, etc. need to be addressed.
Klaus (1998) analyzed the objective function of a financial cooperative (FC)
to investigate to which extent, they may be suited to finance SME under conditions
of economic and financial reforms in developing countries. They concluded that
the success in promoting the establishment of FC is likely to be dependent on the
level of spontaneous sociability that exist in the society. For those societies with a
high level of spontaneous sociability promoting the establishment of FC may be a
relatively easy task. The establishment of a network of FC may, however, be more
difficult in societies with a low level of spontaneous sociability.
Mauri (2000) highlighted the role of informal finance in developing
economies, in rural as well as in urban areas, and the main characteristics of the
informal financial markets. He analyzed various types of operators of the informal
financial sector, both individuals like money lenders and associations like Roscas.
He also examined the links between formal and informal sectors and how financial
flow takes place between the two.

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Wenner (2001) highlighted that rural markets in Latin America and the
Caribbean do not function properly. The rural population has limited access to
formal financial services and pay a lot to access these financial services and this
therefore, has a negative effect on growth in rural areas. Improved functioning of
rural markets will be critical to support modernization of agriculture. With time,
more of the rural population will depend on non-farm activities for livelihood.
Thus, the improvement of rural financial markets is also important in order to
reinforce the growth of the non-farm economy.
Burgess et al (2002) evaluated the impact opening of more than 50,000 new
branches between 1969 and 1992 in unbanked, rural locations of India. They
concluded that branch expansion into unbanked locations helped to transform
production and employment activities and reduced poverty and inequality.
Hess (2003) highlighted that financial service providers perceive the costs of
entry and operating in rural areas to be high as markets are limited and inefficient.
He concluded as to how crop loan insurance and risk management scheme can help
banks significantly increase their lending volumes, especially in rainfed areas and
at the same time it can bring down default rates as well as transaction costs. It
could help farmers stabilize their incomes and even allow farmers access to a
greater credit line due to enhanced collateral.
Zeller (2003) highlighted that because of the specific characteristics and the
diversity of different rural areas and of agriculture, institutional and technological
innovation and adaptation are crucial to reduce transaction costs for institutions
and clients alike. He further added that innovation can be enhanced through
participatory processes and public-private partnerships; credit unions and village
banks having comparative advantages. He concluded that all these approaches
support the development of a diversity of financially sustainable institutions.
Admassie (2004) in his paper reviewed the operational performance of rural
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finance in Ethiopia before and after the financial reforms. He identified various
obstacles in providing financial services in rural areas and highlighted how an
efficient rural financial system would help accomplish the dual objectives of
boosting agricultural production and alleviating rural poverty.
Gardiol (2004) gave an overview of the demands of low-income households
for savings services (micro level), as well as savings mobilisation from the
perspective of a financial institution (meso level) and the regulatory financial
authorities in developing and transition countries (macro level).
Basu et al (2005) analyzed the success with which self-help group Bank
linkage has been able to reach the poor and examined the reasons behind it. They
concluded that India's rural poor currently have very little access to finance from
formal sources and microfinance approaches have tried to fill the gap. They argued
that in a country as vast and varied as India, there is scope for diverse microfinance
approaches from private and public sector to coexist.
Chakrabarti (2005) discussed how self-help group-based microfinance,
nurtured and aided by NGO's, have become an important alternative to traditional
lending in terms of reaching the poor without incurring huge operating costs. He
highlighted that despite the visible benefits and impressive figures, microfinance in
India is too small to create a massive impact in poverty alleviation, but if pursued
with skill development of the poor, it may change the lives of India's poor.
Conning et al (2005) examined rural financial markets and household behavior in
the face of risk and uncertainty. They emphasized on studying the important role of
financial intermediaries, competition and regulation in shaping the changing
structure and organization of rural markets, rather than on household strategies and
bilateral contracting. They provided a framework within which the evolution of
financial intermediation in rural economies can be understood. Gallardo et al
(2006) analyzed the motives of selected rural finance institutions (RFIs) in the
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alliances they form with other commercial and non-profit organizations like rural
banks, non-bank rural microfinance institutions, post offices, insurance companies
and financial cooperatives. They examined how constraints to access and delivery
of financial services in rural markets are relieved through strategic alliances. They
highlighted the experiences of selected rural finance institutions in employing
strategic alliances and development partnerships to overcome obstacles and
barriers to scaling up access through introducing new products and expansion in
market coverage. Kilbara (2006) examined a number of evolving models of rural
financial services, which of these models were giving positive results and the
reasons of their success. This study also examined the extent to which these
models had improved access to rural financial services for producers and traders in
rural areas.
Leeladhar (2006) outlined that banks would have to evolve specific
strategies to expand the outreach of their services in order to promote financial
inclusion. One of the ways in which this can be achieved in a cost-effective manner
is through forging linkages with micro finance institutions and local communities.
Banks should give wide publicity of no-frills account. Banks need to redesign them
business strategies to incorporate specific plans to promote financial inclusion of
low income group treating it both a business opportunity as well as a corporate
social responsibility.
Agriculture and Rural Development Department, World Bank (2007) in its
study demonstrated that how financial cooperatives can be a sustainable provider
of financial services in rural areas and development assistance needs to consider
supporting them as a means to enhance access to rural finance.
Dellien and Lynch (2007) provided an introduction to the key elements of
success in the expansion of micro lending to rural areas. First, common risks in
agricultural production that may impact clients’ repayment capacity are analyzed.
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Then institutions and the various steps for their expansion in a responsive and
sustainable way into rural markets are considered.
Elibariki (2007) examined the role of Foreign Direct Investment in
improving an agricultural firm’s efficiency in Tanzania and reforms required for
more effective investment promotion in agriculture. He further examined how
investment in agriculture sector helped in increasing efficiency of smallholder
farmers and thus their productivity.
Schlaufer (2008) highlighted the challenges faced by rural financial
institutions. These challenges include difficult legal and economic environment,
high transaction costs and higher risks in agricultural lending. It also highlighted
the fact that it’s difficult to reach the poorest by focusing on credit only as these
poor household need means to reduce their vulnerability. Therefore, emphasis
should be placed on savings and insurance services rather than on credit only.
Blank and Barr (2009) highlighted that low-income families need financial
services to smooth their income over short term fluctuations due to less stable
employment and earnings. They identified that the low-income families are left
unbanked because financial institutions perceive them as high-risk category and
because of this they resort to expensive but convenient measures like borrowing
from money lenders.
Fletschner and Kenney (2011) reviewed rural women’s access to financial
services and how it plays a key role in rural growth and development. They argued
that development strategies that aim to boost rural women’s productive capacity
must enhance women’s direct access to financial services, i.e. not mediated
through their husbands. They also highlighted that women’s direct access to and
control over resources has a direct impact on children’s health, nutrition and

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Karthikeyan (2011) highlighted that the main focus of financial inclusion in
India is to promote sustainable development and generating employment in rural
areas for the rural population. Out of 19.9 crore households in India, only 6.82
crore households have access to banking services. As far as rural areas are
concerned, out of 13.83 crore rural households in India, only 4.16 crore rural
households have access to basic banking services. In respect of urban areas, only
49.52% of urban households have access to banking services. Over 41% of adult
population in India does not have bank account. There are many factors affecting
access to financial services by weaker section of society in India. Several steps
have been taken by the Reserve Bank of India and the Government to bring the
financially excluded people to the fold of the formal banking services. The 100 per
cent financial inclusion drive is progressing all over the country. The State Level
Bankers Committee (SLBC) has been advised to identity one or more districts for
100 per cent financial inclusion. So, far, the SLBC has identified 431 districts for
100 per cent financial inclusion. As on 31st March 2009, 204 districts in 18 States
and 5 Union Territories have reported having achieved the target. Keeping in view
the enormity of the task involved, the Committee on Financial Inclusion
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 (55.77 million) of the excluded rural households by 2012 and
the remaining by 2015. The review of above literature indicates that though a lot of
studies have been conducted in relation to access to financial services in rural
areas, but there seems to be an absence of such a study in relation to access to
financial services in rural areas in Panvel. A study which measures the awareness,
level of access and satisfaction level with regards to various formal and informal
financial services has never been done before. An attempt has been made to fill this
gap through this study.
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Regional Rural Banks: -

3.1. Introduction: -
Regional rural banks were established under the provision of an ordinance
promulgated on 26th September 1975 and RRB Act,1976 with an objective to
ensure sufficient institution credit for agriculture and rural sector. The RRBs
mobilize financial resources from rural /semi-urban areas and grant loan and
advance mostly to small and marginal farmer, agriculture laborers’ and rural
artisans. The area of operation RRBs is limited to the areas as notified by
Government of India covering one or more district in the state.
As state earlier RRBs are jointly owned by government of India, the concerned
state government and sponsor banks (27 scheduled commercial banks and one state
cooperative banks); the issued capital RRBs is shared by the owners in the
proportion of 50%,15%and 35% respectively.
The institution of regional rural banks (RRB) was created to meet the excess
demand for institutional credit in the rural area, particularly among the
economically and socially marginalized section. Although the cooperative banks
and the commercial banks had reasonable records in terms of geographically
coverage and disbursement of credit, in terms of population groups the cooperative
banks were dominated by the rural rich, while the commercial banks had a clear
urban bias.
In order to provides access to low-cost banking facilities to the poor, Narasimha
working group 919750 proposed the establishment of a new set of banks as
institution which “combine he local feel and the familiarity with rural problems
which the cooperative possess and the degree of business organization, ability to
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mobilize deposits, access to central money markets and monetized outlook to sub-
server both develop which the commercial banks have” The multi-intensive
agriculture strategy (Green Revolution ) which had initially focused on “betting on
the strong’ but by the mid-seventies was ready to spread more widely through the
Indian countryside. In addition, the positional and need for diversification of
economic activities in the rural areas had
2.2. Overall vision & objectives: -
The RRBs were established” with a to developed the rural economy by providing,
for the purpose of developed of agriculture, trade, commerce, industry and other
productivity activities I the rural areas, credit and other facilities, particularly to
small and marginal farmer, agricultural laborers, artisan’s small entrepreneur, and
for matter connected therewith and incident thereto
Table 1Growth of Regional Rural Banks
Year No of Growt No of Grow No. of Growth
RRBs h Rate Branches th District Rate
of RRBs Rate Covered with
2007-08 91 -6.2 14761 1.31 594 11.23
2008-09 86 -6.49 15181 2.84 617 3.87
2009-10 82 -5.65 15480 1.96 618 0.16
2010-11 82 0 16001 3.36 620 0.32
2011-12 82 0 16909 5.67 638 2.9
2012-13 64 -22.97 17861 5.63 635 0.47
2013-14 57 -11.84 19082 6.84 642 1.1
2014-15 56 -1.7 19964 4.6 642 0
2015-16 56 0 20342 1.84 648 0.93
2016-17 56 0 20924 2.86 648 0
Mean 80 -13.02 16927.15 3.12 606.38 2.7
SD 40.3 13.17 1960 2.06 45.89 3.7
CV 51.38 -101.31 9.01 75.73 8.17 141.56

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Table 1 shows that the numbers of Regional rural Banks are ranging from 91 to 56
representing with an average of 80 over the study period having a standard
deviation and co-efficient variation of 40.30 and 51.38 respectively. The
significant observation is the number of RRBs registered continuous declining
trend from 91 (2007) to 56 (2017) indicating their negative growth. This
phenomenon shall be endorsed to the policy measures initiated by the Government
of India towards amalgamation of RRBs in sponsored banks at state level in order
to give operational freedom and to improve their financial efficiency and
performance. National Conference on Marketing and Sustainable Development
October 13-14, 2017
For illustration by March 2017, RRBs of the same sponsor banks with in a State
were amalgamated bringing down their number from 91 to 56. During the year
2013- 14, 13 RRBs have been amalgamated into 6 new RRBs in 5 States
(Chhattisgarh, Uttar Pradesh, Kerala, Karnataka and Haryana). With this, the
effective number of RRBs as on 31st March, 2017 stands at 56 playing a
significant role in developing agriculture and rural economy.

The following one-and a-half decades saw large-scale effort to increase the number
of banks, bank branches, and disbursement nationwide.
By 1991, there were 196RRs with over 14,000 predominantly rural branches in
476 districts with an average of three village per branch.
This bank had districts over Rs.3,500crore in credit and mobilized over Rs.4,100
corers in deposits.
Perhaps the most significant achievement of the RRBs during this period was in
enabling the weaker section of the rural community access to institutional credit.

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The bulk of the loan from RRBs was to the total priority sector, which accounted
for over 70 per cent of the total. Agriculture and allied activities took up more than
50 percent of the total advance
Year Advances Growth Rate
2007-08 48492.6 21.64
2008-09 58984.3 14.95
2009-10 67802.1 21.27
2010-11 98917.4 20.31
2011-12 116385 17.66
2012-13 137078 17.78
2013-14 159660 16.47
2014-15 178420 17.44
2015-16 194785 19.43
2016-17 223562 18.52

Demonstrates that the amount of deposit mobilized in absolute term has registered
an increasing trend continuously from Rs 62,143 crores (2005) to Rs 2, 39,504.00
crores (2014) representing an average of Rs 138244 crores. The Standard
Deviation and C V is 61373.79 and 44.40 respectively over the study period. The
growth rates are showing a rapid increasing trend from 14.78% (2006) to 21%
(2009). But the significant observation is that, though there is expansion in the
branch network, the growth rate of deposits has declined from 21.3 percent (2009)
to 13.2 percent (2014). The declining trend in the growth rate shall be attributed to
the recessionary trend prevailed in the economy. From the above, it is evident that
the RRBs have failed to maintain the tempo of growth performance of deposits.
The year 1990 marks the end of the expansion has of regional banking, beyond
which there has been no growth in the number of regional rural banks (including
branches). In addition, the RRBs were instrument in extending credit for poverty
alleviation scheme (e.g. IRD) and disadvantaged area (drought- prone regions and

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deserts) development programmer. The expansionary phase of the late seventies
and the eighties while more focused on outreach Was Not devoid of blueprint for
viability of the RRBs, unlike what academia and claim to be the case. It was
understood has the RRBs to survive as credit becomes viable in the initial years.

This expectation was however, tempered by the prevalent situation on the field
and the ultimate objective for which these specialized institutions were created. It
was realized early that question of viability of the RRBs could not be the same as
other business venture.

A business unit has all the freedom to take decision on many matters such as
opening branches, developing its resource, staff recruitment, its b purchase method
rendering service etc. But the RRBs could not be flexible in many of their affairs;
even their clients were specific, scattered, remote and the nature of operation of
anyone. Keeping in view the objectives, structure and the nature of operation of the
RRBs, these institutions could certainly not be evaluated on the basis of mere
financial viability.
There was a general agreement that the viability of the RRBs had to be assessed in
terms of composite criteria including increase in business per branch, recovery rate,
productivity of staff, and cost effectiveness of operations, closer monitoring,
socioeconomic upliftment and improvements in the standards of living of the
Again, in respect to the viability questions, there was considerable flexibility
accorded to banks on the time dimension. It was estimated that the RRBs would need
about seven years to become viable, through for the RRBs with large number of
infant branches even this period might not be adequate.

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 Profit Position of RRBs in India

Demonstrates that the amount of profit of RRBs is swelling from 748.11 crores to
2273 crores and the number of RRBs were reduced from 196 to 57 (2014). It is the
clear indication that more than 85 percent of RRBs are operating on profitable line.
It is also observed that there is a decline in the number of RRBs over the years due
to the process of amalgamation increase in the amount of profit of RRBs. This
shall be inferred that the process of amalgamation has enabled the RRBs to
improve their profitability position. It is also significant to wittiness that the
number of loss making RRBs have reduced from 30 to nil National Conference on
Marketing and Sustainable Development October 13-14, 2017 and amount of loss
declined from 154.5 crores to zero. From the above, it is evident that better
operative utilization of the bank funds and increased efficiency of RRBs.

Profit Position of RRBs in India

Year Indicators
No. of RRBs Amount RRBs in Amount Net
RRBs IN of Profit Loss of loss Profit
Profit (Rs)
2007-08 91 82 1383.6 8 55.58 1328.1
9 1
2008-09 86 80 1823.5 6 35.91 1787.6
5 4
2009-10 82 79 2514.8 3 5.65 2509.1
3 8
2010-11 82 75 2420.7 7 71.32 2349.4
5 3
2011-12 82 79 1886.1 3 28.87 1857.2
5 8

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2012-13 64 63 2275 1 2.07 2272.9
2013-14 57 57 2833 0 0 2833
2014-15 56 59 3211 0 21.4 2459.4
2015-16 56 69 3916 0 22.3 1937.2
2016-17 56 79 4315 0 25.1 2392.9

Between 1980 and 1987 while the number of RRBs increased a little more than two-
fold the number of branches of RRBs increased more than four-fold. It was not
totally unexpected therefore that by the end of 1980s several of these banks were
showing losses on their books.

Table 2: - Purpose Wise Advances of RRBs, Outstanding (end of sept,1990)

Rs. Crores.
1 Short term (crop loan) 615
2 Term loan and Agriculture Activities 669
3 Allied Activities 555
4 Rural Artisans, village & cottage industries 277
5 Retail Trade and Self- employed etc. 1052
6 Consumption Loan 54
7 Other Purpose 290
8 Indirect Advances 43
Total 3555

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2.3. Need of Rural Finance

India ‘s rural poor are overwhelmingly dependent on agriculture as their primary

source of income; the majority is marginal or small farmers, and the poor holds are

The financial needs of India ‘s rural poor reflect the volatile, uncertain, and
irregular income streams and expenditure patterns of these households. The
recently completed World Bank-NCAER Rural Finance Access Survey of 2003
(henceforth referred to as RFAS 2003) indicates that while rural families are
predominantly multiple-income households, their two main sources of income
include the sale of agricultural products and wage labor. Irregular employment is
the most important source of income from wage labor. For households with more

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than one source of income, agricultural income is the most important secondary
source, with sales of farm produce and dairy products being the most prominent.

Clearly, rural households depend on one or both of two types of income: seasonal
(post-harvest sale) or highly irregular, due to irregular or part time wage labor, with
the dependence on the latter being inversely proportional to the size of land holdings.

The typical expenditure profile of the households is also of small, daily, or irregular
expenses incurred throughout the month. Moreover, the overwhelming majority of
rural household’s report having to deal with at least one unusual expense each year,
which they are forced to finance either from cash at home or through informal loans
from family, friends, or money lenders.

Research shows that poor people value financial services and want these to be
reliable, convenient, continuous, and flexible. They understand that financial
services help them spend at one time the income they have earned at other times.
And because those incomes tend to be small, irregular, and unreliable, they need the
full armory of intermediating modes—saving up for future spending, taking
advances against future savings, and building cash reserves that can be called on at
any time.

The poor need a wide range of financial services-from small advances to tide over
consumption needs to loans for investment purposes to long-term savings that help
them manage life-cycle needs.

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The various problems are: -

1. Inadequate Finance: -
A basic feature of the credit problem is its overall inadequacy; particularly of the
institutional credit. The credit provided by the cooperative banks and commercial
banks is not sufficient to meet the requirements of the farmers. The banks mostly
provide short term credit and not the long-term credit. There is a need of more long-
term finance from land development banks.
Not only the right quality of long-term institutional finance is available, but also it
is not available at the right time. Hence the farmer depends upon moneylender for
their requirement.

2. Problems of Security: -
Normally the banks insist on security to sanction loan to the farmer. The security
may be in form of land or other assets. The small and marginal farmers find it
difficult to obtain funds as they have limited amount of land to offer as security.

3. Problems of Maintaining Branches: -

The commercial banks as well as the cooperative banks find it difficult to maintain
branches in rural area. This is due to low banking business and high overheads in
from of staff salaries, office rent, and other overheads. Hence the banks do not give
much importance to set up branches in certain rural areas. The commercial banks
also have face problems in sanctioning and monitoring of a large no. of small
advances in their rural branches, as its time consuming and unprofitable.

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4. Lack of Trained Manpower: -
The banks often face problem of untrained manpower in rural areas. The staff and
the officers often lack knowledge of the financial requirements of the farmer and
again they may have a negative attitude towards the farmers. In order to achieve
about the financial requirement about the farmers.

5. Problem of Recovery: -
There is the problem of recovery of credit provided to the farmers both the rich
farmers as well as the poor ones. The large and rich farmers deliberately avoid
repaying loans and small farmer find it difficult to repay their loans. Also, quite
often, there is political pressure on the banks to write off loans. This result in
demonization to the banks to provide credit in rural areas.

6. Corrupt official: -
The official of banks adopts corrupt practice. They often provide finance to their
friends and relatives. Small and marginal farmer face great difficulty in obtaining
finance. Hence, they have to depend upon the money lender for their financial
requirement. Not only the official favors their and relatives to obtain loans. But they
are also corrupt in sanctioning loans they do ask for the rubes and adopt other corrupt
practices at the time of sanctioning, and disbursement of loans.

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It is imperative to decide upon the research methodology well in advance to

carry out the research in a most effective and systematic way. This chapter
describes the research methodology adopted to serve the objective of the study in
an effective manner.

This chapter consists of mainly five sections.

4.1 Conceptual Framework
4.2 Population and sample selection
4.3 Collection of data
4.4 Analysis of data
4.5 Limitations of study

These sections are discussed as follows:

4.1 Conceptual Framework

The present study is based on usage of financial services in villages of
PANVEL District. For the purpose of the study, we define financial services as the
services provided by the finance industry, which includes a broad range of
organizations that manage money, including credit unions, banks, credit card
companies, insurance companies, stock brokerages, investment funds, etc. This
study aims to identify the awareness, level of access and satisfaction with formal as
well as informal financial services available in the area under study. For the
purpose of this study, access to financial services means how many respondents
have used a particular financial service in the last 12 months. The study also

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measures the level of satisfaction with regards to various formal and informal
financial services. There are numerous formal and informal financial services
available in the financial markets. However, due to the limited scope of our study,
we have just included a few of the basic, well established financial services. The
formal financial services that we have included are Fixed deposits, Mutual funds,
Recurring deposits, Post office schemes, Insurance, Kisan Credit Card and Loans.
The informal financial services that we have included are money
lenders/commission agents, friends/relatives and selling property. The study is
based on primary data collected from rural areas of Ludhiana. Statistical tools like
frequency, mean score, standard deviation, Friedman Anova and Factory analysis
have been applied to analyze the data.

4.2 Population and sample selection

The population of the study consisted of the people in rural areas. District
PANVEL was chosen as the area of study. 10 villages from the list of all the
villages of PANVEL District were selected using lottery method and thereafter, 10
respondents were selected from every village who were willing to participate in the
study. Villages included in the study were Takka, Bhingari, Palaspe, Pargaon,
Kalundre, Sukapur, Kolkhe, Devad, Karanjade, Chinchpada.

4.3 Collection of data

To meet the objectives of the study, primary data was collected through a
predesigned, structured questionnaire (Annexure I). Various studies were reviewed
to have a thorough understanding about various parameters to be included in
questionnaire and accordingly a self–administered and structured questionnaire (as
given in the Appendix) was designed to collect information from the respondents.

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Questions were designed to get information about access to various financial
services and satisfaction with respect to them. Question regarding their awareness
about financial services were included, to know about the trend and awareness of
financial services. The respondents were asked about their preferences and usage
of financial services. Also, the respondents were asked about which channel
whether formal or informal channel they avail frequently. Respondents were asked
multiple choice and scale-based questions. For scale-based questions, respondents
were given a scale of 1 to 5, where ‘1’ showed strongly agree, ‘2’ as agree, ‘3’ as
neither agree nor disagree, ‘4’ as disagree and ‘5’ as strongly disagree.
The suitable modifications were made in the questionnaire before the final
selection of text of the questionnaire. Before filling the questionnaire, main
objectives of the research were explained to the respondent.

4.5 Limitations of the study

Any study based on survey through questionnaire suffers from the basic
limitation of possibility of difference between what is recorded and what is the
truth, no matter how carefully the questionnaire has been designed ad field
investigation has been conducted. This is because respondents may not deliberately
report their true perceptions and even if they want to do so, there are bound to be
differences owing to problems in filters of communication process. The error has
been tried to be minimized by conducting interviews personally, yet there is no
way of obviating the possibility of error creeping in.
In addition to this:
1. The scope of rural financial services is so wide that it is difficult to gather
all the data.
2. Scope of study is confined to rural areas PANVEL. It is difficult to find
conclusions about Maharashtra state.
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This chapter contains results and discussion of the primary data collected from
people in the rural areas of PANVEL. The data was collected related to
demographic profile, their requirements and preferences regarding various
financial services.

Table 1: Demographic Profile of Respondents

Age No. of Respondent Percentage
18-28 21 40%
29-35 18 35%
36-45 7 13.5%
>45 6 11.5%
Total 52 100%
Business 26 21.2%
Farming 15 28.8%
Service 11 50%
Total 52 100%
<10,000 10 19.6%
10,000-20,000 21 41.2%

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20,000-30,000 12 23.5%
>30,000 8 15.7%
Total 52 100%
<10th 5 9.6%
10th 8 15.4%
12th 11 21.2%
Graduation 19 36.5%
Post-Graduation 9 17.3%
Total 52 100%

Table 1 shows the demographic profile of the respondents. The age is segregated
into 18-28 years, 29-35 years, 36-45 years and above 45 years, wherein out of the
sample of 52 respondents, i.e. 11.5% lie in the age group of above 45 years of age

36 | P a g e
followed by 13.5% in the age group 36-45, 35% in the age group 28-35 and 40% in
the age group 18-28.

Also, majority of the respondents were Service sector constituting 50% of the total
respondents followed by 21% having their own business and 29% from the
Farming sector.

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The respondents were also asked about their income level. It was found that 23.5%
of the respondents earn more than 20,000 and 15.6% earn more than 30,000. On
the other hand, 41% earn between 10,000 to 20,000 and only 19.6% earn less than

38 | P a g e
Out of the total 52 respondents, 36.5% were graduates and only 17% were
postgraduates, 21% were qualified till 12th.

Table 2: Time taken to get finances from formal sources

Time Frame No. of Respondent Percentage
Within 1 week 1 2%
1 week to 15 days 7 14.6%
16 days to 1 month 20 41.7%
More than 1 month 20 41.7%
Total 52 100%

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Table 3: Time taken to get finances from informal sources
Time Frame No. of Respondent Percentage
Within 1 week 15 29%
1 week to 15 days 17 33%
16 days to 1 month 13 25%
More than 1 month 7 13%
Total 52 100%

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According to tables 4 and 5, out of the total 52 respondents, 98% felt that it took
more than 1 week to get finances from formal financial services, whereas
astounding 21% respondents felt that finances from informal financial service
providers was available in less than a week.

Rate of interest charged by various sources of finance

According to table 6, majority of the respondents felt that the interest rate charged
by moneylenders was more than 20%, whereas finances from relatives were
available for less than 5% for most of the respondents. 60.5% of the respondents
felt that the interest rate charged by commercial banks was between 5-15%.

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Table 4: Awareness about Formal financial services
available in the area

Services No. of Respondent Percentage

Fixed Deposit 34 65.4%
Mutual Fund 16 30.8
Recurring Deposit 29 55.8
Post office Scheme 27 52
Insurance 19 36.5
Kisan Credit Card 23 44
Loan 35 67

From table 4 we can see that 65% of the respondents are aware of fixed deposits as
a financial service. Next comes the recently introduced Kisan Credit Card service.
44% of the respondents are aware of this service which enables the farmers to draw
credit at subsidized interest rates. Also 52% of the respondents are

42 | P a g e
aware of Post office schemes. On the other end of the spectrum, only 30% of the
respondents were aware of Mutual funds.

Table 5: Formal financial services availed by respondents in

the past 12 months

Services No. of Respondent Percentage

Fixed Deposit 21 40%
Mutual Fund 9 17
Recurring Deposit 21 40
Post office Scheme 15 29
Insurance 18 35
Kisan Credit Card 23 44
Loan 21 40

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Table 5 shows that 40% of the respondents have availed the fixed deposit service
in the past 1 year followed by Kisan Credit Card with 44% of the respondents
having availed it in the past 1 year. Also, a large percentage, i.e. 40% of the
respondents have availed Fixed Deposit in the same period. On the other
end only 17% of the respondents have availed Mutual funds service.

Table 6: Awareness about Informal financial services

available in the area

Services No. of Percentage

Money lenders/Commission Agent 31 63%
Money from friends/ Relatives 32 65
Selling Property 39 80

Table 6 shows that 80% of the respondents are aware of selling property as a
means of arranging finance. Also, a very high percentage of respondents, i.e. 63%

44 | P a g e
of the respondents are aware of Money lenders / Commission Agents as a means of
arranging finance. It is followed by friends and relatives as a means of securing
finance and 65.5% of the respondents are aware of it.

Table 7: Informal financial services availed by respondents

in the past 12 months

Services No. of Percentage

Money lenders/Commission Agent 12 27%
Money from friends/ Relatives 27 61
Selling Property 18 42
Not Availed - -

Table 7 shows that a staggering 27% of the respondents have availed services of
money lenders in the past one year. Also 61% of the respondents arranged money

45 | P a g e
from their friends and relatives in the last one year. 24% of the respondents also
arranged finances by selling their property in the last one year.

Table 8: Various channels through which respondents access

the services
Channels No. of Respondent Percentage
Directly 17 33.3%
Through Agent 16 31.4
Through Salesmen 14 27.5
Employees 4 7.8

Table 8 shows that 33.3% of the respondents access the services directly, i.e. by
themselves. 31.4% of respondents access the services through agents followed by
27% of respondents that access the services through Salesmen and only 7.8% of
the respondents access the services through the Employees of the Financial Service

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Table 9: Reasons for availing financial services
Services No. of Respondents Percentage
Investment in Agriculture 11 21.2%
Home Loan 13 25
Car Loan 13 25
Festivals 7 13.5
Social Obligation 8 15.4

According to table 9, majority of the respondents still use the financial services for
basic services like Savings and fulfilling their social obligations like marrying of
their children etc. However, 21% of the respondents use the financial services for
productive purpose like investment in agriculture.

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Table 10: Source of information regarding financial services

Source No. of Respondent Percentage

Friends 25 50%
Media 15 30
Direct approach by Agents 10 20

Table 10 shows that majority of the respondents, i.e. for 50% of them, the source
of information regarding financial services is their friends followed by 30% of the
respondents who get their information regarding financial services from the media.
20% of the respondents get information directly from agents.

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Reasons for the shift of rural people from informal to formal
financial services

It shows that 79.5% of the respondents’ primary reason for shift from informal to
formal financial services is that the loans from formal financial service providers
are available at a lower rate of interest when compared with rate of interest
available from money lenders. 63% of the respondents said that the staff of
formal financial service providers were professional, educated and courteous and
that also made them shift from informal to formal financial services. Clear terms
and conditions offered by formal financial service providers was another major
reason for the shift from informal to formal financial services for 50.5% of the
On the other hand, subsidized loans for use in agriculture was the least important
reason for shift from informal to formal financial services and only 25% of the
respondents responded positively to it.

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Satisfaction level regarding formal and informal financial
services in rural areas: A Factor Analytic Approach


Access to No difficult procedure or certification is required to
Financial Service avail loans from moneylenders.
Providers I have good relationship with moneylenders so
there is no difficulty for availing credit.
I would like to avail services from
moneylenders even if some other sources are
Benefits of Formal financial services in rural areas have raised
Formal Financial the standard of living of rural masses.
Services Terms and conditions offered by the formal
financial service provider are easily
Introduction of formal financial services has led to
a strong and efficient rural financial system.
Money from moneylenders is available in no time.
Transparency in Time taken to avail the benefits of formal financial
operations services is much less than informal financial

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Availability of subsidy by government on formal
financial services has benefited the rural population
a lot.
The repayment schedule of various formal financial
services is easy and understandable.
I am forced to take money from
Lack of moneylenders.
Awareness Being illiterate/unaware I don’t know about
among rural sources of finance other than informal ones.
According to Table 15 the most significant factor was found to be “Access to
financial service providers” with factors like No difficult procedure or certification
is required to avail loans from moneylenders and good relationship with
moneylenders. It was followed by “Benefits of formal financial services” with
factors like easily understandable terms and conditions, strong and efficient rural
financial system. The third most significant factor was “Transparency in
with factors like clear repayment schedules and subsidies provided by the
government. The least significant factor was “Lack of awareness among rural
masses” with factors like illiteracy and lack of information about formal financial
Further, in order to identify the important factors underlying the satisfaction of the
respondents regarding formal and informal financial services, factor analysis was
undertaken, wherein 12 statements covering the various aspects which lead to
satisfaction regarding financial services in rural areas were framed using Well
Structured Questionnaire.

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Satisfaction Level regarding formal and informal financial
services in rural areas

The most significant factor was found to be “Access to financial service providers”
with factors like No difficult procedure or certification is required to avail loans
from moneylenders and good relationship with moneylenders. It was followed by
“Benefits of formal financial services” with factors like easily understandable
terms and conditions, strong and efficient rural financial system. The third most
significant factor was “Transparency in operations” with factors like clear
repayment schedules and subsidies provided by the government. The least
significant factor was “Lack of awareness among rural masses” with factors like
illiteracy and lack of information about formal financial services.

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In this chapter, a brief summary of the study has been presented, so as to

understand the implications of the findings. The chapter also discusses
recommendations of this study.

6.1 Findings of the study

This section deals with findings and conclusions drawn from the study.
Most of the people in rural areas are earning more than Rs 20,000 a month
and agriculture and service sector is their major occupation. More than 10%
of the respondents didn't complete high school.
People in rural areas have faith in formal financial institutions as these
institutions are recognized and approved by Government.
Many farmers prefer informal financial institutions as they are easily
Most of the moneylenders charge high rate of interest from rural people
whereas as friends and relatives give loans at very low rate of interest. Banks
also provide loans at low rate of interest as government provides subsidy.
Formal financial institutions have lots of formalities and it takes long time to
process the loan application. Out of the total 52 respondents, 56% felt that it
took more than 1 week to get finances from formal financial services,
whereas astounding 91% respondents felt that finance from informal
financial service providers was available in less than a week.

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Rural people are aware about basic financial products like fixed deposit and
post office deposits and they also use these products frequently but they are
not aware of or even interested in advanced financial products like mutual
Almost all of the respondents were aware about informal financial services
available in their locality.
A staggering 78.5% of the respondents have availed services of money
lenders in the past one year. People in rural areas still prefer informal
financial services.
People from rural areas prefers to access financial services themselves.
68.5% of the respondents access the services directly.
Majority of the respondents still use the financial services for basic services
like Savings and fulfilling their social obligations like marrying off their
children etc.
There is a lack of sources of financial information. Friends are the main
source of financial information which is not reliable.
Primary reason for shift from informal to formal financial services is that the
loans from formal financial service providers are available at a lower rate of
interest when compared with rate of interest available from money lenders.

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6.2 Recommendations of the study

Following are the recommendations of the study

1. Government should take initiative to improve infrastructure facilities in rural

areas and make them attractive for the financial industry so that they are no longer
forced to set up offices in rural areas, rather reach out to the rural sector as a viable
business proposition.

2. RBI should take steps to educate people of rural areas about various campaigns
that are run by the Government from time to time so that people can take full
advantage of these campaigns. RBI should also educate people of the rural areas
about new tools of investment like mutual funds which might offer higher returns
on investment than their preferred savings tools of post office schemes and fixed

3.As there are no Banks available and that villagers have to reach Panvel to access
banking services so it is advisable that banks should take initiative to establish their
branches in that remote area so that banks can enjoy sole benefits in that area.

6.3 Conclusion

People in rural areas were aware about basic financial products like fixed deposits,
post office schemes and they had access to these services. They even knew about
various campaigns that government starts like Kisan Credit Card and subsidies.
Respondents used fixed deposits as a major instrument for savings. Even

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though majority of the respondents were not highly educated, yet they availed
these services directly. This shows that enough steps are not being taken to create
awareness about other financial services. Since people are not aware of other
financial products, they are not using them.
Even though people understand the benefits of formal financial services like
transparency, less chances of fraud, subsidies provided by government from time
to time, etc, yet people in the rural areas prefer services of money lenders because
of no cumbersome formalities, no collateral to be submitted, easy availability of
finances and round the clock access to money lenders. Respondents were aware
that finances were available at much lower costs from formal financial service
providers like banks and yet they preferred services of money lenders. Even Factor
analysis shows that these are the major factors that are considered by the people of
rural areas before they avail any kind of financial service.

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 18-28
 26-35
 36-45
 > 45
 Business
 Farming
 Service
 < 10,000
 10,000 – 20,000
 20,000 – 30,000
 > 40,000
 Below Matric
 Matric
 Higher Secondary
 Graduate
 Post Graduate
 Privileged
 General

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Q1. Which of the following formal financial services are available in you?
 Fixed Deposit
 Mutual Funds
 Recurring Deposits
 Post Office Schemes
 Insurance
 Kisan Credit Card
 Loans

Q2. Which of the following formal financial services have you availed in the
past 12 months?
 Fixed Deposit
 Mutual Funds
 Recurring Deposits
 Post Office Schemes
 Insurance
 Kisan Credit Card
 Loans

Q3. Which of the following informal financial services are available in your
 Money lender/Commission Agents
 Money from Friends/relatives
 Selling property

Q4. Which of the following informal financial services have you available in
the past 12 months?
 Money lender/Commission Agents
 Money from friends/relative
 Selling Property
 Not Applicable

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Q5. How do you access these services?
 Directly
 Through Agents
 Through Salesmen
 Employees

Q6. For what purpose do you use the finances availed from financial
services provider?
 Investment in Agriculture
 Savings
 Home Loans
 Car Loans
 Festivals
 Social Obligations

Q7. What is your source of information regarding financial services?

 Friends
 Media
 Direct approach by agents

Q8. Rank the various benefits of formal financial services over informal
financial services
Low rate of interest
Subsidy by government
Fixed rate of interest
Clear terms and conditions
Less chances of fraud

Q9. Rank the various benefits of informal financial services over formal
financial services.
Personal Attention
Easy availability
Easy access
No documentation required

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Negotiable Rate of Interest
Q10. What is the rate of interest at which the funds are available from
various sources?
Monthly Lender/Commission Agent
Friends and Relatives
Commercial Banks

Q11. How much time does it take to get the finances from formal sources?
 Within 1 week
 1 week to 15 days
 15 days to 1 month
 More than 1 month

Q12. How much time does it take to get the finances from informal
 Within 1 week
 1 week to 15 days
 15 days to 1 month
 More than 1 month

Q13. What according to you is the reason for the shift of rural people from
informal to formal financial services?
 Loans available at low rate of interest when compared with money lenders
 Highly subsidized loans for use in agriculture
 Good investment options available and expert advice
 Professional, educated and courteous staff
 Clear terms and conditions offered by formal financial services
 Less or no chances of fraud in formal financial services

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