PROJECT REPORT

(Submitted for the Degree of B.Com Honours in Accounting & Fianance under
the University of Calcutta)

Title of the Project

RURAL BANKING

Submitted by

Name of the Candidate : PIYUSH AGARWAL

Registration No :

Name of the College : THE BHAWANIPUR EDUCATION SOCIETY COLLEGE

Roll No. : 191017-21-1019

College UID : 01011916778

Supervised by

Name of the Supervisor :

Name of the College : THE BHAWANIPUR EDUCATION SOCIETY

COLLEGE

Month & Year of Submission :

 Annexure-IA

Supervisor's Certificate

This is to certify that Mr. PIYUSH AGARWAL a student

of B.Com Honours in Accounts & Finance of The
Bhawanipur Education Society College under the
University of Calcutta has worked under my supervision
and guidance for his Project Work and prepared a Project
Report with the title RURAL BANKING which he is
submitting, is his genuine and original work to the best
of my knowledge.
 Annexure-IB

Student's Declaration

I hereby declare that the Project Work with the title

RURAL BANKING submitted by me for the partial fulfillment
of the degree of B.Com. Honours in ACCOUNTS & FINANCE
under the University of Calcutta is my original work and has not
been submitted earlier to any other University/Institution for the
fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in

part has been incorporated in this report from any earlier work
done by others or by me. However, extracts of any literature
which has been used for this report has been duly acknowledged
providing details of such literature in the references.
 ACKNOWLEDGEMENT

The Project Report entitled “RURAL BANKING” has been prepared by me and
I had undertaken project survey under the supervision of Professor
and Dean of our college Professor Dilip Shah.

I am immensely grateful to my guide and to all my faculties

for their constant encouragement and guidance throughout this
period.

I also express my sincere thanks to The Bhawanipur

Education Society College and for their valuable support towards
the completion of this work.

I would like to take this opportunity to thank all my friends

who have assisted me in completing this project. Last, but certainly
not the least, I am indebted to my parents and almighty. Without
their blessings or grace, I couldn’t have finished this project under
stipulated time and with focused vision.
 TABLE OF CONTENT
1. SYNOPSIS
Introduction…............................................................................................................... 1
Need and Importance.................................................................................................... 1
Objectives..................................................................................................................... 2
Modus Operandi........................................................................................................... 2
Duration........................................................................................................................ 2
Conclusion.................................................................................................................... 3
2. INTRODUCTION TO THE STUDY.................................................................................4
3. SCOPE OF THE STUDY.................................................................................................. 5
4. FUNCTIONS OF RRB…................................................................................................ ,,5
5. METHODOLOGY............................................................................................................. 6
SOURCE OF DATA...............................................................................................................13
6. LIMITATIONS OF THE STUDY...........................................................................................7

7. RURAL BANKING...................................................................................................................8
8. NEED FOR RURAL FINANCE........................................................................................10
9. RURAL FINANCE SERVICE PROVIDERS...................................................................21
10................................................................................................BANK DETAILS 25

11.................REASONS FOR UNPROFITABILITY OF RURAL BANKING IN INDIA… 36

12. NEED FOR FINANCIAL LITERACY...............................................................................37
13. FINDINGS FROM THE STUDY.............................................................................................39

14................................................................... ANALYSIS AND INTERPRETATION 40

15. SUGGESTIONS.................................................................................................................. 41
16. CONCLUSIONS................................................................................................................. 41

17...................................................................................................REFERENCES i

18......................................................................................................ANNEXURE
 Introduction

The villages are the backbone of any country. As far as India is concerned, it is populated highly
with rural mass that undertakes the agriculture and its allied activities at larger level. The income
from these activities occupies more in the Gross Domestic Product of India. It is well known that
the banking system is the heart of any Countries’ economy, striving to achieve growth and that
remain a permanent and dominating factor in the global competitive business environment. They
are having a favourable growth, asset quality and profitability. To improve the rural credit
mechanism cooperative banking sector were also introduced earlier and that was also not in a
position to satisfy the rural needs in terms of money. This inadequate situation led the
Government of India to form a committee to find feasible solution to enable easy rural credit
satisfying mechanism. The committee that headed by Shri. M. Narshimam in the year 1975 came
out with its recommendation to form Regional Rural Banks. In particular, the regional rural bank
of India mainly focuses on supply of credit to the rural people. This paper attempts to study that
the Regional Rural Banks of India satisfies the rural people for their agriculture and agro-based
business financial needs and in turn they earn profit for their activities through their banking
activity.

Need for the study

So far, studies have been conducted on Regional Rural Banks based on its profitability and
financial performance as individual, district-wise and state-wise and comparison of Regional
Rural Banks. It is felt to have a study as a whole by considering the banking activities from
bankers’ point of view and customers’ point of view of Regional Rural Banks and how far it
satisfies the either side.
Objectives of the study

The following are the objectives of the study:

2. To trace the origin and growth of Regional Rural Banks of India

4. To study the physical performance of the Regional Rural Banks of India

5. To study the business performance of the Regional Rural Banks of India

4. To offer suggestions for further development of Regional Rural Banks of India.

Modus operandi

(d) We will spend 4 full days each in 2-3 rural banks to carry out our immersion program.

(e) This would be done through a schedule (set of detailed questions), interactions and
video interviews with the employees of those branches.

(f) We will be submitting a project report at the end of this immersion program based on the
findings obtained from the above mentioned sources.

Duration

(c) Field period: 13th & 14th of September and 12th & 13th of October, 2017 (c) I will go to a
few villages for a period of two days each. During this period, I will complete the Immersion
Program by interactions with personnel.
INTRODUCTION TO THE STUDY

Rural banking in India has been the subject of study Survey Committee Report in 1954, literally
thousands of reports have examined and investigated the problems relating to the credit delivery for
agriculture and rural area. Latest magnum opus on the subject is the National Agriculture Credit
Review report 2000. The Expert Committee on Rural Credit submitted its report in 2002.One more
High Power Committee headed by Professor Vyas set up by the Reserve Bank of India recently to
review and advice on improving credit delivery to agriculture has also given its report.

As the majority of the Indian population lives in rural areas, there is an urgent need to deliver
citizen services to them in a cost effective way with assured quality. This involves mainly the
following:

7. Enabling the ready access at the place of the villagers.

8. Reducing transaction cost to make the services affordable.

9. Reduction in delays.

10. Improving the quality of services available.

The criticality of this need may be seen from the fact that even with concerned and extensive
attempts to meet the credit needs of the farmers for agricultural operations etc., informal agencies
including money lenders are currently providing substantial portion of the total credit to this
sector. Besides, the agricultural credit flows themselves are inadequate and the gross capital
formation can be improved only if substantial amount of investment funds flow to the rural areas
in the form of credit. Likewise, there is also a need to provide market information, extension
services, marketing support and government and other public services to the people in a cost-
effective manner.
SCOPE OF THE STUDY

Scope of the study is to understand the concept of rural banking and what are the challenges
faced in case of rural banking and our scope of the study is limited to few banks and rural areas.
This study is undertaken to analyze the drawback from their important functions of Regional
Rural banks being rendered to the public at present. Here Rural Banks mean all the banks which
are located in the Rural Villages. The total shares are wholly hold by Government. All Banks
functioning as Regional Rural Banks are taken in to considerations for these studies. The recent
performance of RRB‟s have analyzed and bring out the drawbacks in the findings and
recommendations chapters for providing the better services by RRB‟S in our country

OBJECTIVE OF THE STUDY

The study defines the following objectives:

1. To study the important Role of Regional Rural Banks in the growth of Indian economy.
2. To analyze the Performance and Functions of Regional Rural Banks.
3. To analyze the developments in Regional Rural Banking in India.
4. To study the rural banking in detail and its current status.
5. To study the challenges faced in rural banking.
6. To study the role of RBI in rural credit.

FUNCTIONS OF REGIONAL RURAL BANKS:

2. To provide cheap and liberal credit facilities to small and marginal farmers,
agricultural laborers, artisans, small entrepreneurs and other weaker sections.
3. To save the rural poor from the money lenders.
4. To act as a catalyst element and thereby accelerate the economic growth in the
particular region.
5. To cultivate the banking habits among the rural people and mobilize savings for the
economic development of rural areas.
 5. To increase employment opportunity by encouraging trade and commerce in rural areas.
6. To encourage entrepreneurship in rural areas.
7. To cater to the needs of the backward areas which are not covered by the other efforts of
the Government.

METHODOLOGY

a) I spent 4 full days each in various rural banks in Bangalore, Karnataka to carry

out the Immersion program successfully.

b) During the study, I had face- to- face interactions and interviews with the

branch Personnel of different designations in different branches.

c) The data were collected only from two rural branches in Bangalore, Karnataka and

hence the area covered is limited. The data collected is relevant and reliable to the

best of my knowledge.

d) The findings of my project report at the end of the immersion program are based on

the outcome of my field study outlined above.

e) The data is analyzed through manual observations and also through observations

of the branch personnel.

The study was conducted through interviews with the Branch Managers and a couple of

the employees in the rural branches of various banks. I asked a series of planned questions

and the responses to these enabled me to know more about the rural branches and also to

know the importance of those branches in the banking arena.

SOURCES OF DATA

The data that I succeeded in collecting during the course of this project has many
different sources which can be classified as follows:
Primary data:

The Primary sources for the data I collected are the interviews I conducted with the
personnel of the rural branches. The personnel I interviewed were either the Branch
Managers or the Assistant Managers. The questions asked in the interview were such that
it helped me in attaining my objectives for this study, mainly to know the relevance of a
rural branch and the assets and liabilities of the bank and the products and services
offered by these banks, etc.

Secondary data:

The secondary data which I collected are from various websites, articles, journals, and
several other banking related materials published online. These data helped me a lot
in completing my project.

LIMITATIONS OF THE STUDY

There are many limitations to doing a field study, most relevant of which is that people
who have time constraints and are in a hurry when you approach them are less likely
to spend time to talk or interact with you. Also since the respondents are limited to
answering the questions which have been asked, the range of responses are limited.
Although we had face- to- face interviews, some employees were still reluctant to talk
citing security issues and only gave general information. Also since the areas where the
field studies were conducted were limited to seven rural branches, the range of responses
are also limited to a very large extent since the sample is very small.
RURAL BANKING

Rural development occupies a significant place in the overall economic development of the country.
Ghandiji Said ―India lives in Villages‖. He stressed a rural character of economy and the need for
re-generation of rural life. Since independence, it has been constant endower of our policy maker to
give adequate trust to rural development as the sector is directly related to agriculture.

Rural banking in India started since the establishment of banking sector in India. Rural Banks in
those days mainly focused upon the agro sector. Regional rural banks in India penetrated every
corner of the country and extended a helping hand in the growth process of the country. 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.

Regional Rural Banks (RRB) were established under the provisions of an ordinance
promulgated on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure
sufficient institutional credit for agriculture and other rural sectors. The RRBs mobilize financial
resources from rural / semi-urban areas and grant loans and advances mostly to small and
marginal farmers, agricultural laborers and rural artisans. The area of operation of RRBs is
limited to the area as notified by Government of India (GoI) covering one or more districts in the
State. RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27
scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is
shared by the owners in the proportion of 50%, 15% and 35%respectively.

THE RURAL BANKING STRUCTURE IN INDIA

The rural banking structure comprises of three banking institutions providing finance at the
grass root level viz. Co-operatives, C3s and RRBs. Chart I presents the rural banking
structure in India. The co-operative credit structure consists of two types, the one engaged in
short term and medium term credit and the other in a long terra credit. The short term credit
structure is federal in character, based on 3 tier pattern with the apex banks at the state level,
Central Co-operative Banks at the district level and co-operative credit societies
at the village level. The State Co-operative Banks are the apex level institutions which
finance the DCCBs.

NABARD

STATE STATE LAND

COMMERCIAL
RRB COOPERATIVE DEVELOPMENT
BANKS
BANKS BANKS

DISTRICT CENRAL
PUBLIC SECTOR PRIVATE SECTOR COOPERATIVE PLDB'S CENTRAL LDB'S
BANKS

SBI ITS NATIONALISED

ASSOCIATES BANKS PACS FSS LAMPS

DCCBs in turn finance the co-operative credit societies at the primary level. The long term credit
structure is either Federal or unitary in character with State Co-operative Land Development
Banks (SLDBs) as the apex institutions at the State Level and Primary Land Development Banks
(PLDBs) or branches of SLDBs at the Taluka/block level. The GSLDB have unitary structure
with branches located at the taluka level. Thus, the field level co-operative institutions which
provide credit to individual borrowers consists of (i) PACS, Providing both short term and
medium term credit to their members and (ii) PLDBs or branches of SLDBs dispensing long
term credit to their members.

The commercial banking structure comprises of the rural branches of both public and private sector
banks. SBI and its associates and nationalised banks constitute the Public Sector banks. The CBs
provides both short-term and long-term loans to fanners and also finance allied activities like
marketing. Processing, storage etc. in rural areas through their rural branch network. Prior to 1969,
most of the CBs branches were concentrated in urban areas, hence to increase the branch network in
rural areas, RBI evolved a specific branch licensing policy. As a result, in 1989, the 57 per cent of
commercial bank branches were located in rural areas as against only 22 per cent in 1969.
RRBs as new institutional agency was established in 1975, so as to meet the credit requirements
of rural poor, which were neglected hither-to both by co-operatives and CBs. They combine the
features of both co-operatives & CBs. RR3s are mainly located in rural areas. The share capital
of an RRB (Rs. 1 crores authorized and Rs. 25 lakhs issued) is contributed by GOI, concerned
state Governments and sponsoring bank in the ratio of 50:15:35.

These are scheduled commercial banks but differ from the CBs in the following way : Firstly,
the area of operation of an RRB is limited to a particular region comprising one or two districts.

Secondly, RRBs grant loans and advances only to the rural poor peopla and,

Lastly, the lending rates of interest of an RRB is similar to the prevailing lending rates of interest
of co-operative societies in the area of operation.

At the end of March 1990, there were 196 RRBS covering total of 372 districts in the country.
Out of 196 RRBs, 192 have been sponsored by 26 public sector banks 4 3 by 2 private sector
banks, and 1 by a Co-operative bank . At the all-India level, the state wise presence of all the 3
constituents of rural banking system is found to be existing in 18 states.

NEED FOR 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 landless. 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 Bankcard 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 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 households 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.

RURAL FINANCE SERVICE PROVIDERS

India has a range of rural financial service providers, including formal sector financial
institutions at one end of the spectrum, informal providers (mostly moneylenders) at the other
end, and between these two extremes a number of semi-formal/microfinance providers.

Formal Providers:

In terms of their sheer size and spread of operations, formal-sector financial institutions dominate the
rural finance landscape: Commercial banks, mostly public sector banks (but also some private-sector
banks) and regional rural banks (RRBs) together have more than 32,000 rural branches India also has
a vast network of rural cooperative banks, with a three tiered structure at the state, district, and
village levels. There are some 14,000 branches of rural cooperative banks and more that 98,000
grassroots retail outlets of Primary Agricultural Credit Societies (PACS), which are used by the
cooperative system as channels for fund flows. The post office system adds to the physical service
point network of the country with more than 154,000 post office branches handling more than 110
million money orders and administering 114 million savings accounts Formal financial
institutions are regulated by the Reserve Bank of India (RBI), although it has delegated the task
of supervising rural cooperative banks and RRBs to the National Bank for Agriculture and Rural
Development (NABARD). Fourteen Development banks such as NABARD and the Small
Industries Development Bank of India (SIDBI) provide support to both formal and semi-formal
segments through funding refinancing arrangements. NABARD provides refinancing to
banks‘lending in rural areas and SIDBI funds and supports MFIs.

The semi-formal/microfinance sector:

While India is home to many microfinance innovations, in terms of people reached and the scale
of financing, microfinance in India is still a drop in the ocean. It reaches between 5 and 6 percent
of the country‘s poor rural households, or about 30 percent of the rural poor, either directly or
indirectly. Dominant among the microfinance models is Self-Help Group (SHG) – Bank linkage,
whereby women‘s SHGs are linked to the rural branches of commercial banks, RRBs, or
cooperative banks, which often benefit from refinancing by NABARD. SHG-Bank linkage has
reached out to around 12 million family‘s interns of savings accounts.

The other model is specialized Microfinance institutions (MFIs), which reach around 1 million
clients. The total branches of MFIs are estimated to be in the range of a few thousand, compared
to the vast numbers of bank branches.

Recent developments have led to other inter linkages between the formal both public- and
private sector banks and semi-formal sector initiatives, particularly in the context of SHG–Bank
linkage, as well as through lending by SIDBI and commercial banks to MFIs. Moreover, a few
private-sector commercial banks, such as ICICI Bank, have tried innovative ways of
incorporating lessons from microfinance into their operations, and have made inroads in using
micro finance methodologies to deliver rural financial services. Informal providers, Informal
financiers include a range of actors-landlords, local shopkeepers, traders, professional
moneylenders, etc. While there are no definite estimates of the number of informal-sector
providers, these are spread very widely across the country.

Survey data indicate that poor rural households rely heavily on informal finance to meet a range
of financing needs from consumption and emergency financing to investment loans.
TWO REGIONAL RURAL BANKS RECORD OVER ₹150-CR PROFIT IN
FY17
MANGALURU, AUGUST 22:
Of the 56 regional rural banks (RRBs) in the country, two notched up net profit of over ₹150
crore each during 2016-17. These are among the 49 RRBs that recorded a profit in 2016-17.
Seven RRBs suffered losses during the period.

According to the Reserve Bank of India’s ‘Report on Trend and Progress of Banking in India’,
45 of the 56 RRBs earned profits without carrying any accumulated losses during 2015-16.

As the RBI is yet to come out with the 2016-17 edition of the report, BusinessLine put together
data from annual reports and balance sheets of 37 RRBs (wherever available) to get a picture of
their performance during the year.

As for 19 RRBs, data was taken from the figures compiled by All India Regional Rural Bank
Employees’ Association.
The three RRBs promoted by Syndicate Bank — Prathama Bank, Karnataka Vikas Grameena
Bank, and Andhra Pragathi Grameena Bank — improved their net profit over 2015-16 and
emerged in the top league of profit-making RRBs during 2016-17.

These RRBs covered 18 districts in three States with a network of 1,563 branches.

In fact, Karnataka Vikas Grameena Bank and Andhra Pragathi Grameena Bank recorded net
profit of more than ₹150 crore during 2016-17.

Baroda Rajasthan Kshetriya Gramin Bank (sponsored by Bank of Baroda), Sarva Haryana
Gramin Bank (Punjab National Bank) and Chhattisgarh Rajya Gramin Bank (State Bank of
India) crossed the ₹100-crore mark in net profit during 2016-17. Uttar Bihar Gramin Bank
(Central Bank of India), Jammu and Kashmir Grameen Bank (Jammu and Kashmir Bank), and
Sutlej Gramin Bank (Punjab and Sind Bank) recorded losses during the year.

At the end-March 2017, RRBs had 21,398 branches spread across 676 districts and 28 States.
BANK DETAILS
 UJJIVAN SMALL FINANCE BANK
 KARUR VYSYA BANK

UJJIVAN SMALL FINANCE BANK

Ujjivan Small Finance Bank Limited is a bank licensed under Section 22 (1) of the Banking
Regulation Act, 1949 to carry out small finance bank business in India. It is owned subsidiary of
Ujjivan Financial Services Limited. The bank has commenced its operations from February 1,
2017. Ujjivan Small Finance Bank received the Scheduled Bank status by Reserve Bank of India
in August 2017
Ujjivan received an in-principle approval from the RBI to set up a small finance bank. Ujjivan
received the final license from the Reserve Bank of India on 11 November 2016 to set up a Small
Finance Bank. Ujjivan is present across 24 states and union territories, and 209 districts in India,
catering to over 3.7 million customers.

BRANCH DETAILS:

ADDRESS No. 10/5, Ground & First Floor, Melinapete,,

Therubeedi Road, Hosakote Town, Bangalore
RuralDistrict,Karnataka,Bengaluru,
Karnataka 562114
LOCATION BANGALORE RURAL
CITY BANGALORE
DISTRICT BANGALORE RURAL
STATE KARNATAKA
BRANCH MANAGER UPPALA MANOHAR
OPERATION MANAGER KIRAN
BRANCH CODE 001633
IFSC CODE UJVN0001633
MICR CODE 560761015
PRODUCTS

Ujjivan SFB provides a range of products and services such as:

 Savings account
 Current account
 Fixed deposits (FD)
 Recurring deposits (RD)
 Micro Loans
 Home Loans & Small Business Loans.

The bank also offers:

 Internet banking
 Phone banking and
 mobile banking facilities

Ujjivan SFB ATM is biometric enabled thereby enabling customers to withdraw money through
biometric authentication. Customers can open their bank account in 5–7 minutes on a hand-held
device through Aadhaar enabled KYC.
 SAVINGS ACCOUNT

Our range of Savings Accounts has something for everyone! Choose one that best suits your needs.
1. REGULAR SAVINGS ACCOUNT

Features:

 No Average Monthly Balance criteria

 No charges on non-maintenance of minimum balance

Rate of Interest:
 4% per annum
 Interest calculation on daily end of day balances
 Interest credited quarterly

2. MINOR ACCOUNT
Features:
 No Average Monthly Balance criteria
 No charges on non-maintenance of minimum balance
 Account can be opened jointly with guardian only
 Operated by the parent/guardian till the minor becomes major
 Can be converted into a Regular Savings Account when the minor turns major
 Personalized RuPay Classic Debit Card for children over 10 years of age (Shall
be provided upon request)
 Same interest rate facility as given in regular savings account.

3. BSBDA Account - Basic Savings Bank Deposit Account

Features:
 No Average Monthly Balance criteria
 No charges on non-maintenance of minimum balance
 Open account as a single or joint account.
  Same interest rate facility as given in regular savings account.

4.BSBDA Small Account

Features:
 No Average Monthly Balance criteria
 No charges on non-maintenance of minimum balance
 No KYC requirements
 Valid for a period of 12 months
 Same interest rate facility as given in regular savings account.
 Balance should not exceed `50,000,total withdrawals (cash or transfer) should not exceed
`10,000, deposits should not exceed `1,00,000 in a year.

CURRENT ACCOUNT

1. Regular Current Account

Transaction facilities:
 Initial deposit for account opening – `1,000
 Monthly Average Balance – `5,000
 50 free cash withdrawals at branch per month
 Free cash deposit facility at branch up to `75,000 per month

2. Premium Current Account

Transaction facilities:
 Initial deposit amount for account opening – `1,000/-
 Monthly Average Balance – `10,000/-
 100 free cash withdrawals at branch per month
 Free cash deposit facility at branch up to 10 times the monthly average balance
maintained in the previous month
INSTITUTIONAL SEGMENT (TASC)

1. Saving Account
Features:

 No Average Balance criteria

 No initial deposit for account opening
 at par Cheque Book (25 leaves per month) free
 100 free Electronic Fund Transfers
2. Current Account

Features:

 6 at par Cheque Books (150 leaves) per Quarter free

 Free cash deposit facility at branch up to 15 times the monthly average balance
maintained in the previous month
 100 free Electronic Fund Transfers

DEPOSITS

Fixed Deposits

 Minimum amount- `1,000 and in multiples of `100 thereof

 Fixed Deposits can be opened for a minimum period of 7 days to a maximum of 10 years
 Interest payment options - monthly, quarterly, half yearly, annually and at Maturity
 Premature Closure and Partial Withdrawal facility allowed
  Can be opened at Centre meetings (upto `5,000), branch, mobile banking and Net Banking
 The rate of interest paid for fixed deposits will vary according to tenure and amount
 0.5% additional rate for senior citizens

Recurring Deposits

 Minimum amount- `100 and in multiples of `100 thereof

 Tenure- 6 months to 10 years
 Interest calculated quarterly and paid at Maturity only
 Premature Closure facility allowed
 Can be opened at Centre meetings (upto `5,000), branch, mobile banking and Net Banking
 Customers can fund the Recurring Deposits across any branch irrespective of
whether he/she has an account with that branch
 0.5% additional rate for senior citizens

Interest Rates for Deposits

Below mentioned are the Interest Rates with Effect from 11th May 2017
Interest Rate (pa)
TENURE
(Under Rs. 1 Crore)

7 Days to 29 Days 5.50%

30 Days to 89 Days 6.25%

90 Days to 179 Days 6.75%

180 Days to 364 Days 7.50%

1 Year to 2 Years 8.00%

2 Years and 1 Day to 3 Years 7.50%

 3 Years and 1 Day to 5 Years 7.00%

5 Years and 1 Day to 10 Years 6.50%

Additional Interest Rate for Senior Citizens 0.50%

Savings Bank Account 4%

TASC Fixed Deposits

 Minimum amount- `25,000 and in multiples of `100 thereof

 Fixed Deposits can be opened for a minimum period of 7 days to a maximum of 10 years
 Interest payment options - monthly, quarterly, half yearly, annually and at Maturity
 Premature Closure and Partial Withdrawal facility allowed
 The rate of interest paid for fixed deposits will vary according to tenure and amount
MICRO LOANS

1. Group Loan

These are purpose based loans given at moderate rates under Joint Liability Group (JLG) model.
It includes following products:

 Business Loan
 Family Loan Loan Amount: `2,000 – `50,000
 Agriculture and Allied Loan Rate of Interest: 21.25% p.a on
 Business Top-up Loan a reducing balance method
 Emergency Loan Processing Fee: 1% of loan
 Education Loan amount (excluding taxes)
 Loyalty Loan Tenure: 1 year/2 year
2. Individual Loan
Purpose based loans given on an individual basis to our customers without any group guarantee.
It includes following products:

 Individual Business Loan

LoanAmount:`51,000–
 Individual Livestock Loan
`1,50,000 Rate of Interest:
 Home Improvement Loan
23.25% p.a on a reducing
 Higher Education Loan
 Individual Agriculture Loan
balance method

 Individual Loyalty Loan Processing Fee: 1% - 2% of loan

amount (excluding taxes)

HOME LOANS

1. Construction and Purchase Loan

 Purpose: Loans for Home Construction and Home Purchase

 Loan range: `2,00,000 – 25,00,000
 Interest rate ranging from (Reducing balance): 12.75% - 15.75% p.a.
 Repayment tenure: 36-240 months
 Processing fees ranging from: 1.5% - 2% of loan amount (exclusive of taxes)
2. Home Improvement Loan

 Purpose: Loans for Home Improvement/Renovation/Extension

 Loan range: `2,00,000 – 7,00,000
 Interest rate (Reducing balance): 17.75% - 15.75% p.a.
 Repayment tenure: 36-120 months
 Processing fees ranging from: 2% of loan amount (exclusive of taxes)

3. Loan against Property

 Purpose: Debt Consolidation, Extended Refinance for building constructed or

purchased, mixed usage of loanand funding of mixed properties.
 Loan range: `3,00,000 – 10,00,000
 Interest rate (Reducing balance): 17.75% p.a.
 Repayment tenure: 36-120 months
 Processing fees: 2% of loan amount (exclusive of taxes)
 SMALL BUSINESS LOANS

1. Unsecured Business Loan

Customer segment
 Micro and Small Enterprises (defined by turnover criteria in eligibility
grid) typically with annual sales turnovers in the range of
 Manufacturing: `18,00,000 and above
 Trading: `20,00,000 and above
 Services: `15,00,000 and above

Loan amount
 Minimum `1,50,000
 Maximum `3,00,000
 Tenure
 Minimum 1 year
 Maximum 3 years
 Rate of Interest (ROI)
 24% p.a. (reducing)
UNSECURED AND SECURED ENTERPRISE LOAN

FEATURES UNSECURED SECURED

ENTERPRISE LOANS ENTERPRISE LOANS

Loan amount (given in Minimum `3,00,000 Minimum `10,00,000

multiples of `10,000 in the Maximum `5,00,000 Maximum `25,00,000
following range)

Tenure Minimum (12 months) Minimum 3 years (36

Maximum (36 months) months)
Maximum 10 years (120
months)

Rate of Interest (ROI) 21-23% p.a. reducing 15-17% p.a. reducing

FINANCIAL RESULT:

Half year ending September 30, 2017. Government of India has announced the implementation
of GST effective 01July, 2017. Consequently the existing service tax rate of 15 %( including
cess) shall be replaced by GST rate of 18%.
 KARUR VYSYA BANK

Karur Vysya Bank is an Indian private-sector bank, headquartered in Karur in Tamil Nadu. It was
set up in 1916 by M. A. Venkatarama Chettiar and Athi Krishna Chettiar. The bank primarily
operates in treasury, corporate/wholesale banking and retail banking segments. KVB provides
services such as personal, corporate, agricultural banking and services to NRIs and MSME.

ADDRESS NO:2560, JC CIRCLE, KR ROAD

HOSAJOTE- 562114.
CONTACT • 080 27931722 • +919538889175
LOCATION HOSAKOTE
CITY BANGALORE
DISTRICT BANGALORE RURAL
STATE KARNATAKA
SENIOR BRANCH MANAGER RAHUL THERIRI.
BRANCH CODE 001607
IFSC CODE KVBL0001607
MICR CODE 740053002
SAVINGS ACCOUNT

KVB provides a variety of Savings Accounts and Deposit Accounts to its customers having
variable interest rates. The different types of Savings Accounts are as follows:

 KVB Shakthi Account

 Jumbo Kids Savings Account
 Prestige Savings Account
The rate of interest for Savings Account
 Freedom Saving Account
is fixed at 4% per annum which is
 Student Savings Account
calculated on a daily basis.
 Regular Savings Account
 Rainbow Savings Account
 Yuvashakti SB Account
 Smart Savings Bank Account
 Basic Savings Bank Account

FIXED DEPOSIT

KVB offers a host of Deposit schemes to benefit its consumers. They are more convenient with
competitive interest rates. The list of the deposits is as follows:

 KVB Centenary Cash Certificate

 Thirimagal Thirumana Thittam
 Fixed Deposits
The interest rate for senior citizens is
 Senior Citizens Deposits
8.00% for value less than 1 crore.
 KVB Manimala
 KVB Manimala Plus
 KVB Tax-shield
 Rainbow Deposits

PERSONAL LOAN

Loan Scheme MCLR Margin Maximum Collateral Processing

Repayment Security Fee
Tenure
Bon Voyage 9.60% 25.00% 36 months Optional/ 0.30%
Discretion of
sanctioning
authority
Swarnamitra 9.60% NA 12 months NIL 0.50 per loan
(Overdraft of Rs 100
facility)
Insta Loan 9.60% NA 72 months NIL Rs 1500 for
Executive
Cadre
Rs 1000 for
Non
Executive
Cadre
Personal Loan 9.60% NA 36 months KPV/NSC/LIC 0.40% of the
Policies, Land & loan amount
Building etc
Quick Loan 9.60% NIL EMI or NIL 0.30%
Lumpsum at
the end of
validity period
IPO Funding 9.60% 50.00% 120 days NIL 1.00% of the
loan amount
HOME LOAN-

Loan Scheme Interest Rate Processing Margin Maximum

Fee Repayment
Tenure

Happy Home 9.70% (male) Rs 3750 + ST 25% New 25 years

Loans 9.60% (female) (loan up to Rs 30% Old
25 lakhs) (repayment up to
15 years)
35% Old
(repayment above
15 years)

KVB – 9.60% 0.25% 20% 25 years

Gruhapravesh
 SOME MAJOR SCHEMES OFFERD BY GOI FOR RURAL REGION:

PMEGP SCHEME:

 Government of India has approved the introduction of a new credit linked subsidy programme
called Prime Minister's Employment Generation Programme (PMEGP) by merging the two
schemes namely Prime Minister's Rojgar Yojana (PMRY) and Rural Employment Generation
Programme (REGP) .

OBJECTIVES
 To generate continuous and sustainable employment opportunities in Rural and Urban areas
of the country
 To provide continuous and sustainable employment to a large segment of traditional and
prospective artisans, rural and urban unemployed youth in the country through setting up of
micro enterprises.
 To facilitate participation of financial institutions for higher credit flow to micro sector.

ELIGIBILITY

 Individuals above 18 years of age

 VIII Std. pass required for project above Rs.10.00 lakhs in manufacturing and above Rs.
lakhs for Service Sector
 Self Help Groups and Charitable Trusts
 Institutions Registered under Societies Registration Act- 1860
 Production based Co-operative Societies
DAY NULM SCHEME

To reduce poverty and vulnerability of the urban poor households by enabling them to access
gainful self employment and skilled wage employment opportunities,resulting in an appreciable
improvement in their livelihoods on a sustainable basis,through building strong grassroots level
institutions of the poor.The mission would aim at providing shelters equipped with essential
services to the urban homeless in a phased manner.In addition,the mission would also address
livelihood concerns of the urban street vendors by facilitating access to suitable
spaces,institutional credit,social security and skills to the urban street vendors for accessing
emerging market opportunities.

The Main Features of NULM are:

i. Coverage: In the 12th Five Year Plan, NULM will be implemented in all districts
headquarter towns and all other towns with population of 1 lakh or more as per Census
2011. At present 790 cities are under NULM.
ii. Target Population: The primary target of NULM is the urban poor, including the
urban homeless.
iii. Sharing of funding: Funding will be shared between the Centre and the States in the
ratio of 75:25. For North Eastern and Special Category States (Arunachal Pradesh,
Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu & Kashmir,
Himachal Pradesh and Uttarakhand), this ratio will be 90:10.

NRLP

One of the most innovative initiatives of the poverty reduction, the National Rural Livelihood
Mission (NRLM) is all set to get a boost with the investment support by the World Bank under
National Rural Livelihoods Project (NRLP) to Ministry Of Rural Development. The Bank will
provide soft loan worth US$1 billion (approximately Rs. 4,600 crores) with a maturity period of
25 years to provide quality technical assistance and results-based financing.

NRLP will invest intensively support implementation of NRLM in 100 districts and 400 blocks
of 12 high poverty states (Bihar, Chhattisgarh, Jharkhand, Gujarat, Maharashtra, Madhya
Pradesh, Orissa, Rajasthan, Uttar Pradesh, West Bengal, Karnataka and Tamil Nadu),
accounting for 85 percent of the rural poor in the country. The aim is to create best practice sites
and to develop them as local immersion locations and generate critical pool of social capital for
catalyzing social mobilization of the poor and building quality institutions of the poor.

APY

The Atal Pension Yojana is administered by the PFRDA (Pension Fund Regulatory and
Development Authority) under the National Pension System (NPS). The scheme was launched to
encourage individuals from the weaker section to opt for pension, which would immensely
benefit them during their old age.

A fixed monthly pension amount starting from Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000 and up to
Rs. 5000 can be received by subscribers, every month after their retirement at the age of 60, until
the death of the subscriber. After the death of the account holder, the spouse will be entitled to
get the exact same pension amount as the subscriber, until the death of the spouse.

PRIME MINISTER JEEVAN JYOTI YOJNA

This scheme launched for the welfare of the needy people. The jeevan jyoti insurance scheme is
a helpful insurance scheme that will provide benefit of Rs.2lakhs which will be payable to the
family of the member in case of his death due to any reason.
SCALE OF FINANACIAL YEAR 2015-16
REASONS FOR UNPROFITABILITY OF RURAL BANKING IN INDIA

High Non-Performing Loans

Banks have higher non-performing loans in rural areas because rural households

have irregular income and expenditure patterns. The issue is compounded by the

dependence of the rural economy on monsoons, and loan waivers driven by political

agendas. NPAs from the agricultural sector are 7.7%, compared to 3.5% across non-

agriculture sectors. In order for banks to view rural India as a growth opportunity,

rather than a regulatory requirement, a combination of these issues must be

addressed. Increasing financial access to rural areas is contingent upon basic

conditions such as proper infrastructure and enabling regulatory framework, as well

as innovative thinking on the part of commercial banks.

Low Ticket Size

The average ticket size of both a deposit transaction and a credit transaction in

rural areas is small. This means that banks need more customers per branch or

channel to break even. Considering the small catchments area of a branch in rural

areas, generating a customer base with critical mass is challenging.

High cost to serve

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. 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.

Higher risk of credit

Rural households may have highly irregular and volatile income streams. Irregular

wage labor and the sale of agricultural products are the two main sources of income

for rural households. The poor rural households (landless and marginal farmers) are

particularly dependent on irregular wage employment. Rural households also have

irregular expenditure patterns. The typical expenditure profile of rural households

is small, with daily or irregular expenses incurred through the month. In short, the rural

customer is generally considered to be a risky one.

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.
NEED OF FINANCIAL LITRACY
Financial literacy is considered an important adjunct for promoting
financial inclusion and ultimately financial stability. Both developed and
developing countries, therefore, are focusing on programmes for
financial literacy/education. In India, the need for financial literacy is
even greater considering the low levels of literacy and the large section
of the population, which still remains out of the formal financial set-up.
In the context of 'financial inclusion', the scope of financial literacy is
relatively broader and it acquires greater significance since it could be an
important factor in the very access of such excluded groups to finance.
Further, the process of educating may invariably involve addressing
deep entrenched behavioural and psychological factors that could be
major barriers. In countries with diverse social and economic profile like
India, financial literacy is particularly relevant for people who are
resource-poor and who operate at the margin and are vulnerable to
persistent downward financial pressures. With no established banking
relationship, the un-banked poor are pushed towards expensive
alternatives. The challenges of household cash management under
difficult circumstances with few resources to fall back on, could be
accentuated by the lack of skills or knowledge to make well informed
financial decisions. Financial literacy can help them prepare ahead of
time for life cycle needs and deal with unexpected emergencies without
assuming unnecessary debt.
 FINDINGS FROM THE STUDY

People in rural areas have only recently started to use the banking products that
aremade available to them.

The products that are mainly used are agriculture loan, vehicle loan, savings
account, fixed deposits.

Technologies such as RTGS, NEFT, third party products such as insurance and
mutual fund are also used by customers.

Awareness has been increased after the introduction of various schemes in KVB.

Customers do visit banks for depositing, withdrawing cash as they have not been
fully dependent on technology.

Marketing strategy to retain customers is: “ good customer services”.

The number of employees in a rural branch is limited in most cases to 4- 7.


Ujjivan small finance does a marketing campaign weekly once to make the
customers reach out to different products of the bank. They receive an
approximate 30%-50% of respond from the customers.

Most of the customers depend on the various schemes rather than deposits.
 ANALYSIS AND INTERPRETATION

The people in rural areas mainly require a mechanism to keep their

limited resources safely, to get credit to meet emergencies, to get
credit for micro enterprises, a facility to receive remittances, etc.
They mostly need an access to a hassle-free medium which
provides them with required financial services. This leads them to
the obvious conclusion of banks which provides sustainable
approaches, customized products that match the needs and
capacities, reduces transaction costs and time, etc. But due to the
low level of penetration of rural branches of various banks in India,
most of these potential customers resort to borrowing from
microfinance or informal credit providers.

RRBs performance with respect to some important indicators was

certainly better than that of commercial banks or even cooperatives.
RRBs have also performed better in terms of providing loans to
small and retail traders and petty non-farm rural activities. In recent
years, they have taken a leading role in financing Self-Help Groups
(SHGs) and other micro-credit institutions and linking such groups
with the formal credit sector.
 SUGGESTION:

• The RRB may initiate certain new insurable policies like deposit-linked cattle
and other animals insurance policy, crop insurance policy or the life insurance
policy for the rural depositors.

• The RRB may be permitted to lend up to 25% of their total advances to the richer section
of the
village society.

•The State Government should also take keen interest in the growth of RRB.

• Participation of local people in the equity share capital of the RRB should be allowed
encouraged.

•Local staff may be appointed as far as possible.

• Cooperative societies may be allowed to sponsor or co-sponsor with

commercial banks in the establishment of the RRB.

•A uniform pattern of interest rate structure should be devised for the rural
financial agencies.

• The credit policy of the RRB should be based on the group approach of financing rural
activities.

• The RRB may relax their procedure for lending and make them more easy for village
borrowers.

• Co-ordination between district level development planning and district

level credit planning is also required in order to chart out the specific
role of the RRB as a development agency of the rural areas.
 CONCLUSION:

RRB is mainly established to solve the problem of the weaker

section of the society and also to settle various problems which
cooperative and business organization faces.

However, with increased mobility and connectivity, the

urban and rural integration has increased and many factors

which made the urban landscape have come to mark rural

settings as well. This has led to diversification in activities

and people have started to look at other factors of

employment too. Agricultural activities have also been

significantly
commercialised with increased role of cash crops. Thus, banks are getting a strong demand

for credit for both agricultural and non-agricultural uses. Bankers however, have to pay

attention to these little cultural cues and customer profiles and accordingly carry their

services. The staff has to identify with the rural customers who are not used to banking

procedures and need extra assistance at every step. This will help customers to avail full

benefit of banking without any hesitation. With the help of this research paper an attempt is made to
throw light on the working, problems and role of RRB in this context with some sug
ANNEXTURE
 REFERENCE:

 www.economictimes.com
 www.ujjivan.com
 www.kvb.com
 www.rbi.org