Every project is based on a theme or has some specific objectives which are given more importance. The objective of my project is to know the level of Financial Inclusion & the impact of initiatives taken by the bank in of Financial Exclusion. However, this broad objective is defined more clearly as under:• To know the measures and initiatives taken by PNB to help SHG and financially challenged people under Financial Inclusion project.

To know the level of Financial Exclusion and the progress that has been achieved by the 100% financial inclusion campaign.

To measure the reach ability & impact of student a/c’s opening campaign in the nearby areas of Gandhi Nagar.


Literature Review
Indian economy in general and banking services in particular have made rapid strides in the recent past. Developing nations, like India have immensely benefited from the globalizing economy. Wealth has been pouring into the country as investments. Wealth has been also generated by Indian companies from global trade. This has directly affected the lives of many citizens in our country. For many, there has been a dramatic increase in the disposable income. The savings, consumption and investment patterns have changed in the past few years. This has meant that there has been an increase in demand for many financial services from different financial firms. An increasing financially aware middle class have realized the importance of financial services. Banks have streamlined and rationalized themselves to meet up with the changing demands of the people. However, not all the reforms in the financial services sector have still been able to bring in the other half of India’s population who are un-banked. There are many reasons that are obvious for this kind of financial exclusion. The new surge in the economy has not yet percolated into the lower strata of the society. It is easy to blame the capitalist growth for this sort of income disparities; however, the inefficiencies and the inadequacies of the government and its policies are equally at fault for lack of reduction in poverty. Most of the un-banked or financially excluded population of India lives in rural areas; nevertheless there is also a significant amount of the urban population of India who face the same situation even with easy access to banks. Many of the financially excluded in these areas are illiterates earning a meagre income just enough to sustain their daily needs. For such people, banking still remains an unknown phenomena or an elitist affair. It is easier for them to keep their money at their house or with some money lenders and easily make immediate purchases (which make up most of their expenditure) rather than to follow the cumbersome process at banks. By making them financially inclusive we are making their financial position less volatile. At the same time, we are treating them on an equal par with other members of the population so that they wouldn’t be denied of access to a basic service such as banking.


Financial Exclusion
Financial Exclusion refers to a certain section of the population or a certain group of individuals that has denied the access to basic financial services. The term came to prominence in the early 90s in Europe where the geographers found that a certain pockets or regions of a particular country were behind the others in utilizing financial services. It was also found that these pockets or regions were poorer compared to regions which utilized more of financial services. The term attained a wider connotation in the late 90s when it was expanded to refer to individuals who were denied access to financial inclusion rather than geographical areas. Financial Exclusion could be a hindrance to growth of economy. Without a formal and a legally recognized financial system in which all sections of the population are a part of, it would be impossible even for the most efficient of the governments to reach out to all sections of the people. A stable and healthy financial service sector creates trust among the people about the economy and only with this trust (which has legal validity) could a strong, stable and an inclusive economy be created. Financial exclusion is individuals’ limited access to or use of formal financial services is a problem of epic proportions. More than 3 billion people are financially excluded around the world.

With barely 34 percent of its population engaged in formal banking, India has the second-highest number of financially excluded households in the world—about 135 million.

Among those who are financially excluded is a distinct and huge group of consumer, whose potential to become viable banking customers has been greatly under-estimated. Categorized by income, this segment sits just above the poorest of the poor and just below consumers who are currently targeted by most banks. It is served primarily by the informal financial sector.


Type of Financial Inclusion
1. Transaction accounts 2. Time Deposits 3. Financial Advice 4. Appropriate small credit 5. Insurance 6. Mortgage Loans 7. Superannuation 8. Enterprise based loan

Who is Financially Excluded?
1. Poor 2. Socially under-privileged privileged 3. Disabled 4. Old as well as children 5. Women 6. Uneducated 7. Ethnic Minorities 8. Un-employed

India has 91 million households that fit the profile of future customers. A typical household in this segment in a large metropolitan area earns between Rs (rupees) 60,000 and Rs 180,000 annually. In smaller towns and villages, where the cost of living is lower, the income floor falls to Rs 45,000. Indian government has made some headway in alleviating financial exclusion, mainly by requiring the formal sector to provide services to low-income households or to certain sectors of the economy.

Causes of financial exclusion
1. LACK OF FINANCIAL AWARENESS: The lack of financial awareness about the benefits of the banking and also illiteracy act as stumbling blocks to financial inclusion. The lack of financial awareness maybe the single most risk in financial inclusion as those who are newly included in the financial sector have to maintained within the formal financial sector. 2. EASY ACCESS TO ALTERNATIVE CREDIT: For a good amount of low income people, the alternative credit provided by the money lenders and pawn shop owners are far more attractive and hassle free compared to getting a loan from a commercial bank. Some of the poor that do not have property find it impossible to get credit without the collateral. 4

3. LOW INCOME: Most of the poor are low wage earners, for them opening an account and withdrawing money is seemingly unviable. Most of the poor do not have high spending that would require borrowing of credit from a formal agency like banks. They would rather keep their daily income at their homes rather than in a bank.

Income and Exclusion are Closely Linked

Source – BCG Survey, 2007 4. LACK OF UNDERSTANDING OF PROPERTY RIGHTS: The concept of property rights are still not clearly understood in most parts of India. In most of the developing nations, the poor and the weaker sections of the society have little or no knowledge of property rights since most are uneducated. 5. LACK OF INTEREST FROM COMMERCIAL BANKS: There is a lot of criticism on the commercial banks because of their inherent tendency to think that poor people and not worthy of being banked on. Banks are in business to make profit and would like to only indulge in activities that give them profit. Unless banks see any incentive in banking with the weaker sections of the society, they would not be willing to do so.

Magnitude and Spread of Financial Exclusion


Reserve Bank of India data shows that as many as 139 districts suffer from massive financial exclusion, with the adult population per branch in these districts being above 20,000 and only 3 percent with borrowings from banks. On the assumption that each adult has only one bank account (which does not hold good in practice, so that actual coverage is likely to be worse) on an all India basis, 59 percent of the adult population in the country has bank accounts. 41 percent of the population is, therefore, unbanked. In rural areas the coverage is 39 percent against 60 percent in urban areas. The unbanked population is higher in the poorer regions of the country, and is the worst in the NorthEastern and Eastern regions. Credit markets have much more exclusion, as the number of loan accounts constituted only 14 per cent of adult population. In rural areas, the coverage is 9.5 per cent against 14 per cent in urban areas. Regional differences are significant with the credit coverage at 25 per cent for the Southern region and as low as 7, 8 and 9 per cent respectively in North Eastern, Eastern and Central regions. The extent of exclusion from credit markets can be observed from a different perspective as well. Out of 203 million households in the country, 147 million are in rural areas 89 million are farmer households. 51.4 per cent of farm households have no access to formal or informal sources of credit while 73 per cent have no access to formal sources of credit. As per NSS only 37 percent of the urban self-employed have access to credit.

Financial Inclusion – Banking the Unbanked

Financial inclusion is aimed at providing banking / financial services to all people in a fair, transparent and equitable manner at affordable cost. Households with low income often lack access to bank account and have to spend time and money for multiple visits to avail the banking services, be it opening a savings bank account or availing a loan. These families find it more difficult to save and to plan financially for the future. Thus, the unbanked public is largely cut off from the Banking products/services. It is the endeavor of the Bank to provide the basic banking facility of SB a/c’s to all the unbanked. Towards this initiative the Banks has taken the lead and evolved two different models i.e. Rural and Urban Financial Inclusion Model to take care of the requirement of the people in rural and urban areas which differ from each other. Financial Inclusion is “delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. Unrestrained access to public goods and services is the sine qua non of an open and efficient society”. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy.
---Shri V.Leeladhar, Former Deputy Governor RBI (Dec, 2005)

Scope of Financial Inclusion
In India the focus of the financial inclusion at present is confined to ensuring a bare minimum access to a savings bank account without frills, to all. Internationally, the financial exclusion has been viewed in a much wider perspective. Having a current account / savings account on its own, is not regarded as an accurate indicator of financial inclusion. There could be multiple levels of financial inclusion and exclusion. At one extreme, it is possible to identify the ‘super-included’, i.e., those customers who are actively and persistently courted by the financial services industry, and who have at their disposal a wide range of financial services and products. At the other extreme, we may have the financially excluded, who are denied access to even the most basic of financial products. In between are those who use the banking services only for deposits and


withdrawals of money. But these persons may have only restricted access to the financial system, and may not enjoy the flexibility of access offered to more affluent customers.

Middle-Income Households will lead India’s Population Growth

From the above report by NCAER it is outlined that there will be increased number of middle class income groups in the total population by 2010 i.e. the figure currently is 70 millions (approx) which will be extended to 80 million by 2010. So, it would be profitable for bank to target such a mass group.

Microfinance and Financial Inclusion

Financial Inclusion is a paradigm shift from microfinance to inclusive finance. Financial Inclusion acquires a broader definition since it is not limited to micro-finance institutions. Financial Inclusion aims at bringing into the mainstream those people who hadn’t had the chance of being financially included while at the same time looking at the comparative advantages for the banks. Although the terms Micro-finance and Financial Inclusion are closely inter-related, there is some difference between the two. Till now, through microfinance we have only allowed the people access to micro-financial services provided mostly by small agencies. Financial Inclusion aims at bringing the un-banked citizens into the financial mainstream. With initiatives the previously excluded section of the population could have access to financial facilities. They should be made aware of the advantages of remaining with a formal financial agency. The Financial Inclusion is therefore a step by step process involving the people as well as the respective agencies. Financial inclusion takes the process of micro-finance a step further by not just treating them as different or poor but by considering them as credit-worthy citizens and bankable consumers. Financial Inclusion aims to bring into contact the poorest of the poor with the big banks who have so far been hesitant to deal with them. The valuable experience of microfinance has shown that the doubts of poor consumers defaulting payment of credit might not be valid after all. Microfinance Institutions have been a big success because they have been able to come up with financial products that the population in the lower economic strata wants. However there still remains to be seen how the transaction costs on the large number of small credit can be lowered.

RBI and Financial Inclusion
As the central bank of the country, the Reserve bank of India has taken steps to ensure

financial inclusion in the country. It has tried to make banking more attractive to citizens by allowing for easier transactions with banks. In 2004 RBI appointed an internal group to look into ways to improve Financial Inclusion in the country. It came out with a report in 2005 (Khan Committee) and subsequently RBI issued a circular in 2006 allowing the use of intermediaries for providing banking and financial services. Through such policies the RBI has tried to improve Financial Inclusion. Financial Inclusion offers immense potential not only for banks but for other businesses. Through an integrated approach the businesses, the NGOs, the government agencies as well as the banks can be partners in growth. RBI has realized that a push is needed to kick start the financial inclusion process. Some of the steps taken by RBI include the directive to banks to offer No-frills account, easier KYC norms, better customer services, promoting the use of IT and intermediaries, and asking SLBCs and UTLBCs to start a campaign to promote financial inclusion on a pilot basis. So far the campaign for 100% financial inclusion has been said to be a success with many states now reaching near-total financial inclusion.

International Scenario

An interesting feature which emerges from the international practice is that the more developed the society is, the greater the thrust on empowerment of the common person and low income groups. It may be worthwhile to have a look at the international experience in tackling the problem of financial exclusion so that we can learn from the international experience.
India Has the Second-Highest Number of Financially Excluded Households in the World, After China

Source: - The Economist Intelligence Unit; World Bank reports

The Financial Inclusion Task Force in UK has identified three priority areas for the purpose of financial inclusion, viz., access to banking, access to affordable credit and access to free face-to-face money advice. UK has established a Financial Inclusion Fund to promote financial inclusion and assigned responsibility to banks and credit unions in removing financial exclusion. Basic bank no frills accounts have been introduced. An enhanced legislative environment for credit unions has been established, accompanied by tighter regulations to ensure greater protection for investors. A Post Office Card Account (POCA) has been created for those who are unable or unwilling to access a basic bank account. The concept of a Savings Gateway has been piloted. This offers those on lowincome employments £1 from the state for every £1 they invest, up to a maximum of £25 per month. In addition the Community Finance Learning Initiatives (CFLIs) were also

introduced with a view to promoting basic financial literacy among housing association tenants.

A civil rights law, namely Community Reinvestment Act (CRA) in the United States prohibits discrimination by banks against low and moderate income neighborhoods. The CRA imposes an affirmative and continuing obligation on banks to serve the needs for credit and banking services of all the communities in which they are chartered. In fact, numerous studies conducted by Federal Reserve and Harvard University demonstrated that CRA lending is a win-win proposition and profitable to banks. In this context, it is also interesting to know the other initiative taken by a state in the United States. Apart from the CRA experiment, armed with the sanction of Banking Law, the State of New York Banking Department, with the objective of making available the low cost banking services to consumers, made mandatory that each banking institution shall offer basic banking account and in case of credit unions the basic share draft account, which is in the nature of low cost account with minimum facilities.

Research Methodology

The area of study
As a part of the financial inclusion in urban areas, a survey was conducted in the areas of East Delhi to know the level of financial exclusion and the progress that has been achieved by the 100% financial inclusion campaign. The survey was conducted in a random manner in Gandhi Nagar and nearby areas. Around 150 random houses were included in the study, of which 100 were in the Gandhi Nagar area & rest from Geeta Colony and Kailash Nagar. Our bank has taken up the assignment of opening of saving funds accounts of students studying in Govt. Senior Secondary Schools in NCT of Delhi. Authorities have decided to allocate the following schools to us for 100% inclusion by way of opening the student accounts by our branch.

S.N. Name of School O
1. 2. 3. 7.

S.N. O

Name of School
Gandhi Nagar-RPVV Shankar Nagar-SKV Jheel Khurenja, No.1 SBV

Gandhi Gandhi SKV Gandhi GGSSS Gandhi GGSSS

Nagar-SBV 4. Nagar, No.1- 5. Nagar, No.2- 6. Nagar, No.3-

Our task was to personally meet the principals of these schools and chalk out the strategy for opening accounts of students.

Each Student is covered under this mission and all accounts are to be opened zero balance.

Gandhi Nagar is a Commercial area however; there are still a lot of people not using any kind of financial services offered by banks. The sampling of the area was done to have a wider perspective of financial inclusion.

The scope of the survey is to see the level of financial inclusion and the awareness of the people about financial inclusion and the use of financial services.


The study about the level of financial inclusion is exploratory study in nature which requires the field work and hence, a survey is done on the basis of a set of open ended and closed ended questions. In order to build relevant questions, these have been pre-tested on the basis of discussion over the objective of topic with some of my friends, peer group and some faculty members.

Data Collection
The survey is done in the Delhi city itself, so the outcomes might vary when it will be compared with any other part of India. • • • • • The sample size taken is 150 households. The sampling method is random sampling. Only the criterions for the selection are that respondents should be above 25 years of age and should be from study concerned areas. Data collection through questions asked has resulted in availability of the desired information but these were useless until there were analyzed. The data collected was analyzed, interpreted with the help of bar chart and pie chart.

Scope of Study

The following Questions were asked to respondents in our survey. • The occupation of the respondent, educational qualification, the source of income

for the family and whether the respondent had an account, if so the type of the bank. • About the awareness of new measures for financial inclusion like no-frills account

and relaxation of KYC norms for accounts. • The reason for not opening the account and if aware about measures for Financial

Inclusion, the reason for not opening an account. • The spending patterns of the respondents and what constitutes the maximum

expenditure over a particular period of time. • The credit requirements and whether they were interested in availing credit from

banks and for what particular reason. • The use of financial services and instruments and also the frequency of them

going to banks to measure financial awareness. • Impact of student account opening and Financial Inclusion campaign of P.N.B.

• The survey was limited to three areas & therefore cannot give a complete picture of the level of financial inclusion of the city. • The study is concentrated on the poor people of the city, since the poor are the majority who make up the financially excluded. • The study is also limited by the number of individuals.

(The name you Bank Company Profile – Punjab Nationalcan bank upon)

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalized in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present.
• • • • • • • A professionally managed bank with a successful track record of over 110 years. Largest branch network in India - 4668 Offices including 432 Extension Counters spread throughout the country. Strategic business area covers the large Indo-Gangetic belt and the metropolitan centers. Ranked as 248th biggest bank in the world by Bankers Almanac, London. Strong correspondent banking relationships with more than 217 international banks of the world. More than 50 renowned international banks maintain their Rupee Accounts with PNB. Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centers all over the globe.

PNB Profile
With its presence virtually in all the important centers of the country, Punjab National Bank offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies. The large presence and vast resource base have helped the Bank to build strong links with trade and industry. With over 38 million satisfied customers and 4668 offices, PNB has continued to retain its leadership position among the nationalized banks. The bank enjoys strong

fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking. Apart from offering banking products, the bank has also entered the credit card & debit card business; bullion business; life and non-life insurance business;sGoldscoinss&sassetsmanagementsbusiness,setc. Since its humble beginning in 1895 with the distinction of being the first Indian bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today, with assets of more than Rs 2, 46,900 crore, PNB is ranked as the 3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd largest network of branches (including three overseas offices). PNB has always looked at technology as a key facilitator to provide better customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at “Best Fit”. The bank has made rapid strides & along with the achievement of 100% branch computerization, one of the major achievements of the Bank is covering all the branches of the Bank under Core Banking Solution (CBS), thus covering 100% of its business and providing ‘Anytime Anywhere’ banking facility to all customers including customers of more than 2000 rural branches. The bank has also been offering Internet banking services to the customers of CBS branches like booking of tickets, payment of bills of utilities, purchase of airline tickets etc. The bank with more than 2150 ATMs has the largest ATM network amongst Nationalized Banks. With the help of advanced technology, the Bank has been a frontrunner in the industry so far as the initiatives for Financial Inclusion is concerned. With its policy of inclusive growth in the Indo-Gangetic belt. The Bank has launched a drive for biometric smart card based technology enabled Financial Inclusion with the help of Business Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile customer. The BC/BF will address the outreach issue while technology will provide cost effective and transparent services. The Bank has started several innovative initiatives for marginal groups like rickshaw pullers, vegetable vendors, dairy farmers, construction workers, etc. The Bank has already achieved 100% financial inclusion in 21,408svillages.


Backed by strong domestic performance, the bank is planning to realize its global aspirations. In order to increase its international presence, the Bank continues its selective foray in international markets with presence in Hongkong, Dubai, Kazakhstan, UK, Shanghai, Singapore, Kabul and Norway. A second branch in Hongkong at Kowloon was opened in the first week of April’09. Bank is also in the process of establishing its presence in China, Bhutan, DIFC Dubai, Canada and Singapore. The bank also has a joint venture with Everest Bank Ltd. (EBL), Nepal. Under the long term vision, Bank proposes to start its operation in Fiji Island, Australia and Indonesia. Bank continues with its goal to become a household brand with global expertise. Amongst Top 1000 Banks in the World, ‘The Banker’ listed PNB at 250th place. Further, PNB is at the 1166th position among 48 Indian firms making it to a list of the world’s biggest companiesscompiledsbysthesUSsmagazines‘Forbes’.

Punjab National Bank continues to maintain its frontline position in the Indian banking industry. In particular, the bank has retained its NUMBER ONE position among the nationalized banks in terms of number of branches, Deposit, Advances, total Business, operating and net profit in the year 2008-09. The impressive operational and financial performance has been brought about by Bank’s focus on customer based business with thrust on SME, Agriculture, more inclusive approach to banking; better asset liability management; improved margin management, thrust on recovery and increased efficiency in core operations of the Bank.

Performance Comparison over the years


Punjab National Bank (Performance Chart) (Amount in Rs) Crores)
All Banks Average

During the FY 2008-09, the bank achieved a net profit of Rs 3,091 crore, maintaining its number ONE position amongst nationalized banks. Bank has a strong capital base with capital adequacy ratio at 14.03% as on March’09. As on March’09, the Bank has the Gross and Net NPA ratio of 1.77% and 0.17% respectively. During the FY 2008-09, its’ ratio of priority sector credit to adjusted net bank credit at 41.53% & agriculture credit to adjusted net bank credit at 19.72% was also higher than the respective national goals of 40% & 18%.

PNB’s Contribution to Financial Inclusion


PNB endeavors to give a major thrust to financial inclusion and hoped to enhance its customer base to 10 crore by 2010. Bank is committed to make its services easily accessible to common man at national level and more particularly in the Indo-Gangetic belt, where bank has dominant presence. PNB is celebrating 2009 as "Year of Financial Inclusion'. PNB has already achieved 100% financial inclusion in more than 11000 villages, covering 198 identified districts. Under financial inclusion mission Bank plans to cover 30000 villages by 2010 by making use of Business Facilitators and Business Correspondents. By engaging Technological Solution Provider, FINO, Bank is issuing Biometric enabled Multi-Application Smart Cards to people. These Smart Cards are unique full proof IDs for the customers. This card contains customer's demographic data, relationships and fingerprint. This card allows customer identification without any requirement for a PIN/password, as in traditional channel delivery system, for operation of accounts. This technology also ensures that that there will be no duplicate identity created for the same customer. PNB General Manager (Delhi Circle) R K dubey said the Bank has very strong foothold in the nationals capitals withs as customers bases of 35s lakh. To give financial assistance to the urban poor, the bank has recently opened over 67,000 'No Frill Accounts' under its financialsinclusionsinitiativesatsvariousslocationssinsDelhi. India's first Micro Finance Branch has been opened in Mukandpur, Delhi with an objective of Financial Inclusion of the entire area. The Branch was opened with 11,000 No Frill Accounts and about 100 borrowers under Self Help Groups. As on date, the total number of accounts in the branch is 13,045. The Bank has also been financing the poorest section of the society under 'The DRI Scheme' and 'Scheme for Scavengers'. Mangat Ram Singhal, Minister for Industry, Labour & Employment, Govt. of Delhi, during his address, praised Bank's Management & Delhi Circle of PNB on the launching


of Pilot Project of Financial Inclusion and celebrating 2009 as "Year of Financial Inclusion".

Pilot Projects undertaken
Public sector lender Punjab National Bank launched its first pilot project to bring the urban poor into the banking fold at Ludhiana, with the opening of 12,000 'No Frills Deposit' accounts. Under the financial inclusion project, the bank plans to utilise the services of business correspondents/facilitators for opening zero balance accounts of the rural poor. Punjab National Bank (PNB), began a pilot project on 3 October, 2008 in Rajasthan to give “no-frill accounts” to people residing in rural areas as part of a new financial inclusion programme that could help grow its total customer base. • Financial inclusion, or making mainstream financial services available in a fair and transparent manner to people who currently do not have access to them is an area of focus for the bank. • PNB will issue smart cards to rural customers to carry out the transactions. Though it believes that the project will be financially viable, the bank is hopeful of getting a subsidy from the Reserve Bank of India.

PNB opened one million no-frill accounts till March 2008 it proposes to extend the scheme to 15 million households by 2010.

Jan. 3, 2009 Punjab National Bank has launched another pilot project on financial inclusion in Saharanpur district of Uttar Pradesh. The bank had earlier launched similar projects in Bihar and other states. A table below shows the different Financial Inclusion projects undertaken by PNB in India as a whole, the date of commencements of these projects.


Also the number of Smart Cards issued till 31 March, 2008 and the extent, to which it has increased in a year as on 31 March, 2009. The figure has drastically changed to 111203 cards from 4202. This shows the level of progress made by the bank in 100% Financial Inclusion Objective.

Progress under Pilot Projects (India)

10107 1


Promoting Self Helping Groups
The bank reported 13235 SHG in the period 2007-2008. The bank had also disbursed the loans to SHG of amount 59.51 lakh & there was 100% recovery. Out of this total loan amount disbursed the exclusive loan to women amounts to 28.46 lakh from 7962 SHG.

No of SHG 13235 127009

Total Loans Disbursed
Amount (lakh) 59.51 55.90 No of SHG 7962 71387

Out of total
Amount (lakh) 28.46 31.07

Bank loan disbursed to SHG Savings of SHG Recovery

100% Recovery

Most Successful Projects undertaken in Delhi
There are three Pilot projects currently running in Delhi. We are giving below the details of progress of these projects: - Okhla Mandi and R K Puram Pilot projects which are managed by BC M/s Grameen Pragati Foundation with Technological support service provider M/s Cranes Software International Ltd. and Mandi Azadpur Pilot project which is managed by BC FINO:

Particular s
Number of Identified Villages Number of accounts opened Number of Smart Cards Issued

Okhla (wef01.07.08) 5 4300 4300

Pilot Projects At R K Puram (wef15.04.09) 5 335 335

Mandi Azadpur (wef16.09.08) N/A 12250 12250


Number of Transactions Since Launch




Findings & Analysis
The survey is done as per the given objective, to find out the level of financial inclusion amongst people, and the factors which influence the mind set of people while taking financial services. So the outcome of survey and its interpretation is done through Excel tools as given below.

---Finding is comprised of three parts:
---Question. ---Outcome from survey i.e. data interpretation. ---Analysis of outcome.


1.Occupational Distribution
The survey found that a major share of the respondents or the earning members of the family were either Manual Laborers or self employed. The respondents belong to the working age from 30 to 55 and the average family size is around five i.e. total sample sizes 750. 90 people were unemployed and 210 were self-employed.

• It was noticed here that Government employees included mainly those who are working in the Municipal Corporation and the Housing Board that built the colony. • Self employed are mainly working as auto rickshaw drivers, fruit & vegetable vendors and owning small businesses.


2.Educational Qualification
Following were the responses from respondents when asked about Educational Qualification:-

• Most of people were either illiterate or have only done primary schooling. And 50% people have done either S.S.C or H.S.C. • And it was not surprising to know that only a small segment i.e. 9% of total sample size were graduate or above. • It was found that less the educational qualification of the respondents lesser they were aware about financial inclusion.


3.Level of Financial Inclusion
The survey has found that a greater share of the households do not have access to banking facility. 47% of the households in the areas had access to banking facilities and around 398 households had no account. It should be noted here that some of the respondents said that they had stopped using the accounts.

Level of Financial Inclusion

• It can be interpreted from the above chart that most of the respondents do not have access to financial services offered by banks so it would be beneficial for society if bank cater to these segments.

Only one third of manual labors have bank accounts. The reasons for this maybe due to the fact that they get daily wages and spend most of what they earn on household items. There is a need to make them aware of the uses of banking.


Out of 12% unemployed, 10% don’t have bank a/c’s but as survey shows the majority of people are employed hence there is good chance of these people getting employment in future also here some students are present.

Inclusion of this segment will increase the customer base of bank which can lead to profitability in long-run.

4.Major Reasons cited for Financial Exclusion.
Following were the responses from respondents when asked about reasons for Financial Exclusion:-

• The results were close to each other. All three reasons emerged as the major problem for financial inclusion.

It was quiet surprising to know that Easy access to alternate credit also carried a high weightage.


On enquiring further about this reason we came to know that these people have access to easy credit form private money lenders and they do not like the slow & paper involving process of commercial banks.

5.Distribution of Bank accounts
It is necessary as an indicator to find out the kind of banks in which the people bank in, but it is not directly related in the context of Financial Inclusion. An overwhelming 82% of the accounts were in public sector banks which were the Punjab National Bank, State Bank of India, Canra Bank. The Urban and Rural cooperative banks could cater to populations that are generally neglected by the commercial banks. Their position allows them to reach out to the people far easier.

Distribution of bank account


The PSU’s have a high % of customers because of the reason that a section of people are government or retired employees (who receive regular pensions), thus every one of them maintains account with PSU.

The number of private banks having branches in urban areas is high, yet they have not had a major impact among the poor in the city.

The account opening charges/ penalty/maintenance charges of most of private banks are quiet high therefore the people prefer Public Sector Banks.

6.Credit Requirements and type
Most of respondents responded positively about their need for credit and the rest of them were in dilemma. The requirement of credit for housing was in demand more than any other types of credit. A small section of people are willing to have the credit facility for education purposes.

65% Credit




When asked about the credit requirements 35% of the households responded that they wouldn’t want to have any long-term or short-term credit fearing that they might default.

• •

Only a small minority responded that banks would not give any credit to them. The highest demanded is for housing, which for many living in sub-standard housing looking for a house of their own is not an unexpected answer.

The second highest preference was for self-employment credit facility, as some people are unemployed and desperately want credit for self-employment and rests of them want the credit for betterment of their existing mode of earning.


Amount & time period for Credit requirement

Most of people who require loan for period of 6 to 18 months fall in credit range b/w Rs 25000 to 65000. 25% people are from segment that need credit facilities for comparatively high period for the purpose of educational requirements & housing.




• 35% people require loans for automotive and self-employment purposes and the repayment is expected in short period of less than six months. • Lying in medium range are people, who need credit for housing and family purpose and the requirement of credit was for a considerable amount of time.

8.Awareness about measures of R.B.I
The survey has shown a dismal performance by banks in reaching out to the people and making them aware about the new initiatives taken for financial inclusion. It was found that only in 8 out of the total 150 households the people had any knowledge about the new measures of RBI.


Those who knew had some idea about no-frills account but not about the relaxation of the KYC norms. 5% people who responded positively were those people who were aware of PNB student account opening campaign and majority of people were thinking that this initiative is taken by school and not


by bank.


• The low awareness about the steps taken by RBI and the financial institutions shows that there is an urgent need to reach out to them and to spread the awareness about the initiatives • It seems that merely displaying posters informing consumers about no-frills account will not by itself increase the awareness about the new measures.







Following were the results when we asked people about the reach ability of student a/c opening campaign:• 92% people responded that this campaign has reached to their homes out of them majority of people were those whose children are studying in nearby schools. • Respondents also say that this campaign has generated a lot of confidence in them for using banking services.



• This proved to be a good decision for bank to go for this student account campaign for Financial Inclusion. • So, from this survey we can interpret that this campaign has achieved 100% Financial Inclusion as far as opening of student bank account is concerned.

10. Impact of Financial Inclusion campaign
As bank has taken so many measures to make this financial Inclusion Campaign successful, we asked about impact to know level of satisfaction among the people and level of success of this campaign. Following are the results:-



Impact of Financial Inclusion campaign



• As it was very much expected, majority of respondent i.e. 78% responded ‘yes’ when asked about positive impact of financial inclusion. • A very small segment feels that this campaign is like any other ordinary campaign and it will not have any positive impact on their life or way of living. • Few respondents were not aware of financial inclusion campaign so they could not give their judgment when asked about the importance of this campaign.



Financial Inclusion has been a catch phrase for the past few years. Delivering financial services to all sections of the population will remain a challenge that banks around the world will face over the next few years. Increasing educational level means more financial inclusion; therefore a literate population must be created in order to create a meaningful financially included population. Not only should people have access to basic financial services but should also actively use them. A modern and a globalized economy cannot be successful unless it is inclusive. With enthusiasm and foresight this challenge would be overcome rather simply. It may appear in the first instance that taking banking to the sections constituting “the bottom of the pyramid”, may not be profitable but it should always be remembered that even the relatively low margins on high volumes can be a very profitable proposition. The banks would have to evolve specific strategies to expand the outreach of their services in order to promote financial inclusion. Technology can be a very valuable tool in providing access to banking products in remote areas. Financial inclusion can emerge as commercial profitable business. Only the banks should be prepared to think outside the box!

Suggestions & Recommendations

It is becoming increasingly apparent that addressing financial exclusion will require a holistic approach on the part of the banks in creating awareness about financial products, education, and advice on money management, debt counseling, savings and affordable credit. The banks would have to evolve specific strategies to expand the outreach of their services in order to promote financial inclusion. 1. Strengthening financial literacy: With already 47% financial inclusion in the area, the rest 53% need to be brought into mainstream. This would require giving the occupants of the area a simple bank account and thereby become financially included. 2. Decentralized banking system: Banks should be given more freedom to deal in the manner in which they would want to deal with the public. Flexibility and independence are needed to make small banking viable. 3. Excluded segment specific products and services: The credit needs and amount of credit needed by the poor or the financially excluded differs from the middle class and the upper class needs hence require adoption of new strategies. Most of the self-employed and the daily wage earners find it cumbersome to go to banks and cash their money; therefore, the use of Business Correspondents (BC) could bring in such occupational groups who have little time for the conventional system of banking. It would require person-to-person interactions to make banking and the use of financial services a part of their lifestyle. 4. Need to adopt a professional approach: - There is a need for increasing professionalism among banks and related agencies. There is no doubt that these organizations have helped the poor tremendously but just as in the case of many cooperative banks, NGO’s and PSU’s, they remain prone to lack of professionalism and negligence. The commercial banks and other agencies can play their part by training individuals and organizations that help to reach out to the poor. 5. Private Public Collaboration: -Financial inclusion would become meaningless if the burden of it falls wholly on the government. The Corporate, the large commercial banks and NBFCs should be made aware of the advantages of Financial Inclusion and the business opportunities it offers to them. Private partnership will ensure that there would

be financial products which are more in tune with the needs of the customers, big and small. The partnership of private financial institutions would ensure a healthy competition leading to on-time delivery of services at affordable rates. Small private banks can be encouraged to practice targeted banking aimed at delivering services to certain communities rather than the society as a whole. This would not only ensure a steady number of banking customers for the small banks but also a chance to do business in a market dominated by large commercial banks. By doing so, the chances of financial exclusion are reduced as small banks would try to bring in as much customers as possible. 6. Retired bank employees as Business Correspondents: - looking at retired bank employees as Business correspondents for branchless banking can be a good option. Retired bank employees with their experience in banking are far more likely to be professional in their dealings and more accustomed to new methods of banking. They could provide an essential middle link between the banks and the thousands of customers that they intend to serve. 7. Separate department & highly trained employee: - There is need to have a dedicated department with highly trained employee to deal with this segment to achieve 100% financial inclusion.


1 “The Next Billion Customers: A road map for expanding Financial Inclusion in India”, Sinha J. and A. Subramanian – Boston Consulting Group, 2007
2 3 4 5
Report of C. Rangarajan Committee on Financial Inclusion, 2008

Press Release of PNB for the Year ended 31st March 2009
Draft Report of the Committee on Financial Sector Reforms (CFSR), ch.3, Planning Commission, 2008


Commemorative Lecture by Shri V.Leeladhar, Deputy Governor Reserve bank of India at the Fedbank Hormis Memorial Foundation at Ernakulam on December 2, 2005
Promoting Financial Inclusion, UK Task Force, HM Treasury, 2004 Financial Inclusion – The Indian Experience, Text of speech by Smt. Usha Thorat, Reserve Bank of India, 2007. Financial Inclusion-Reaching the Unreached, Indian Bank, 2007 Smt. Usha Thorat, Reserve Bank of India, 2007.

7 8 9

10 Financial Inclusion for Sustainable Development: Role of IT and Intermediaries, 11 Banks for everyone, Vijay Mahajan, Mint, July,2007 12 Financial inclusion and micro-credit, Column, The Economic Times, 2009 34 | Page 13 Government aims for financial inclusion in 5 years: FM - Daily News &
Analysis, 2008

14 Annual Report 2008-09, Reserve Bank of India, 2007 15 Report on Trends and Progress of Banking in India, 2008-09, Reserve Bank of
India, 2007


Abbreviations & Acronyms
SHG NSS NCAER KYC SLBC UTLBC IT POCA CLFIs CRA CBS FINO BC/BF SME PSU MFI NBFCs Self Helping Groups National Sample Survey National Council of Applied Economic Research Know Your Customer State Level Bankers' Committee Union Territory Level Bankers' Committee Information Technology Post Office Card Account Community Finance Learning Initiatives Community Reinvestment Act Core Banking Solution Financial Institutions Network & Operations Business Correspondents & Business Facilitators Small Medium Enterprises Public Sector Units Monetary Financial Institution Non-Banking Financial Company


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