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Management of Financial Services A Proje PDF
Management of Financial Services A Proje PDF
A
PROJECT REPORT
ON
RURAL BANKING IN INDIA
SUBMITTED TO:
SUBMITTED BY:
ACKNOWLEGMENT
“Chain of mistakes leads towards failures, chain of failures leads to experience and chain
of experience leads to success.” That’s what a life’s path is.
Some is applicable to my project work. I do not claim that I have a complete knowledge
of the subject. First, I would like to thanks my friends and many persons who directly or
indirectly helped me during my project.
Doing most favorable my project part, who help me and acknowledge me, I would like to
express my profound gratitude to M/s. Khushbu Shah, Assistance faculty, S.P.B.Patel
eng. college for guiding me right related to topic.
Kinjal prajapati
Aisha shah
(M.B.A. 4th sem)
CONTENT
Not only is there a large disparity between India and other countries in
banking penetration but there is also a large variation in banking
penetration within urban and rural India. While urban India seems to be
over-banked with more than 100% penetration (many urban Indians
have more than one bank account), rural India lags far behind with a
19% penetration. The variance in rural and urban deposit and credit
account penetration is not restricted only to few states but is common
across all states.
SBI has 30 Regional Rural Banks in India known as RRBs. The rural
banks of SBI is spread in 13 states extending from Kashmir to
Karnataka and Himachal Pradesh to North East. The total number of
SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in
rural banking in India, there are 14,475 rural banks in the country of
which 2126 (91%) are located in remote rural areas.
Apart from SBI, there are many other banks which function for the
development of the rural areas in India. These banks are listed below:
Andhra Pradesh
Bihar
Bank
Karnataka Rajasthan
120 100
100
80
47 53
60 37 Series1
40 24 18
16 13
20 6
0
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Source: Census India ;BSR 2008—Reserve Bank of India; World Bank &
NCAER (2008).
- NGOs, SHGs, MFIs and - MFIs directly lend to the poor - This
channel delivers limited
Cooperatives that act as and also act as agents for
services in its current form
ATM Intermediaries to take financial he banks
Services to the rural areas - SHGs borrow from banks and
are beneficiaries of loans
themselves
Branches are the most used channel in rural areas. This is because
many rural people are not literate and are not comfortable using
technology-driven channels such as ATMs, phone banking or internet
banking. On the other hand, a branch is an expensive channel for
banks (Following Table). In addition, rural people, whenever they have
access to banks, have frequent low ticket and cash-based transactions,
which increase the overall transaction cost for their bank.
40
30 25 Series1
18
20
8
10 4
0
Branch Phone (Call ATM Phone(IVR) Internet
Centre)
Information Asymmetry:
Since many rural people do not have bank accounts, there is a lack of
information on customer behavior in rural India. Absence of a Credit
Information Bureau also complicates the problem as banks have to rely
on informal sources to learn the credit history of rural customers. A lack
of reliable information can result in either missed opportunities in not
approving otherwise eligible loan candidates, or nonperforming loans.
The financial service needs of rural customers are not confined to just
savings and credit, as is usually assumed. Their financial needs are
linked to their life cycle needs, ranging from savings to credit to
insurance to remittances. In fact, even the savings and credit products
currently offered to rural customers do not entirely meet their needs.
Access to savings and investment facilities is critical for the poor. The
two critical needs for the rural poor are micro-savings and frequent
withdrawals. These needs facilitate a customer in building capital
over the long term, as well as coping with income shocks in the near
term. However, banks do not offer adequate services to address these
needs. The lack of services, therefore, leaves the rural poor with little
option than to transact with the informal banking market. A study
conducted by Micro Save also concludes that the poor transact with the
informal sector because it will accept small amounts, provide doorstep
service, and ensure ease of enrolment.
Rural customers need loans not only for productive purposes but also
for consumption needs (Following Table). A part from agricultural
support, rural customers need micro credit for consumption, education
and emergencies. Though banks offer purpose free loans (personal
loans and credit cards) in urban areas quite liberally, in rural areas
sanction of such loans is significantly restricted. Therefore, the poor
raise these loans through the informal financial system (it is worth
noting that these loans taken from the informal system are almost
always repaid or renewed12). In addition, larger households need
occasional high value micro-enterprise loans for small capital
investment. Though banks offer these loans, they require excessive
Purpose of Borrowing
Rural Household Borrowing
Other business
Other business
expenditure, 14% expenditure
Agriculture
Household
expenditure, 38% expenditure
Agriculture
expenditure
Household
expenditure, 48%
Personel Loans
Other Business Loan, Agriculture Loan
52% Agriculture Loan, 36% Other Business Loan
A significant percentage of borrowing is toward consumption and other household expenditure, whereas
formal financial institutions in rural India provide loans primarily for productive purposes.
Source: AIDIS—2008, National Sample Survey Organization (NSSO);
Diamond analysis.
many rural areas, leading the poor to rely on the informal financial
system.
Address
Access Needs
Of Rural
Improve Customers
Access
For Rural
Customers Ensure
Channel
Profitability
Convert
Potentially
Bankable
Address
Usage Needs
Of Rural
Encourage Customers
Usage of
Services
Bank
Initiatives
To Improve
Usage
Source: Diamond analysis
ATMs are an effective channel which can deliver many of the services
frequently used by a branch customer. However, ATMs, in their current
form, are not suitable for rural areas as the literacy level and
transaction ticket amount is too low. ATMs can, however, be designed
to meet the needs of rural customers. For example, ICICI Bank is
working with IIT Chennai to develop an ATM that has a biometric
While this list is not exhaustive, it highlights the need for creative
solutions that apply the right channel to the right market and
transaction. In South Africa, Capitec has combined convenient
branches along transportation routes (for example, train and bus
stations, and taxi stops). In addition, it has rolled-out debit cards and
automatic teller machines across 200 of these branches to stimulate
savings among low-income earners. Between February and August
2007, the number of customers jumped from around 30,000 to more
than 90,000.
CONCLUSION
There are 185 million bankable adults in rural India who are unbanked
because of access and usage issues. This presents a significant
opportunity for commercial banks.
Furthermore, banks should tailor their product and service mix to meet
rural
BIBLIOGRAPHY
1. World Bank 2008
2. Reserve Bank of India 2008
3. www.cia.gov
4. National Sample Survey Organization (NSSO), Household Consumer
Expenditure in India (2006)
5. Census 2006
6. Access to and Usage of Financial Services, World Bank 2008
7. RFAS, 2008, World Bank & NCAER
8. Reserve Bank of India, www.rbi.org.in
9. Access to Financial Services by Stijin Claessens, World Bank 2005
10. Rutherford Stuart, “The Poor and their Money,” January 2000
11. www.microsave-africa.com
12. RFAS 2008, World Bank
ANNEXURE
(Amount
Rs. crore)
Agency During Total Bank Loan outstanding Per Out of Total :
the against SHGbank Bank
year SHGs as on 31 March 2008 loan loan outstanding
Outstanding against SHGs
(Rupees) under
SGSY
(Public Sector )