Project Report

CHAPTER I
1.0 INTRODUCTION:
Financial inclusion or inclusive financing is the delivery of financial
service at affordable cost to sections of disadvantaged and low income
segments of society, in contrast to financial exclusion where those
services are not available or affordable. An estimated 2.5 billion
working-age adults globally have no access to types of formal financial
services delivered by regulated financial institutions.
The term financial inclusion was first coined in 1993 by geographers

who were concerned about bank closures and the resulting limited
physical access to banking services. This idea grew but it was not until
around 1998 that the term was first used in a broader sense to describe
people who have limited access to mainstream financial services.
The Reseve Bank of India set up the khan commission in 2004 to look
into financial inclusion and the recommendations of the commission
were incorporated into the mid-term review of the policy. In India
financial inclusion first featured in 2005, when it was introduced by
K.C.Chakrabarty, the chairman of Indian Bank.Mangalam became the
first village in India where all households were provided banking
facilities.
The United Nations defines the goal of financial inclusion as follows:
 To access at a reasonable cost for all households to a full range of

financial services.
 Sound and safe institutions governed by clear regulation and
industry performance standards.
 Financial and institutional sustainability to ensure continuity and
certainty of investment and competition to ensure choice and
affordability for clients.
Various other factors assessed in financial inclusion are as follows:
 Savings facility
 Credit and Debit card access
 Internet Banking
 All kinds of commercial loans
 Overdraft facility
 Cheque payment
 Payment and remittance service
 Low cost financial service
 Insurance
 Financial advice
1.1 IMPORTANCE OF THE STUDY:
In this study the approach to financial inclusion is based on three major

premises.One, the national agenda of securing justice enunciated in our
constitution is far from complete even after six decades of planning and
policy formulation in a democratic polity, like ours; two, inequalities of
income and opportunities have arisen mainly from imbalances in the
process of growth and have resulted in the endemic problems of poverty,
unemployment and backwardness persisting in the rural area; three,
development and growth in their true sense can be achieved only by
empowerment of rural masses and by correcting the serious anomaly
involved in the fact that agriculture on which 77 per cent of our
population depend for their livelihood, accounts for only 13.5% of
national GDP.In the light of these considerations, my enquirieshave been
directed to shed some light on local conditions of denial or deprivations
that might have contributed to backwardness or lack of development in
remote areas and to examine the role of financial inclusion to serve as an
effective tool to mitigate such conditions.This study helps in knowing the
financial awareness of people in rural area, number of people utilising the
banking services and also to create awareness about financial inclusion
scheme of RBI among rural people
1.2 STATEMENT OF THE PROBLEM:

Government had introduced the concept of financial inclusion for the
purpose of increasing the reachability of banking services to the rural
people. But it has been found that the rural people are not much aware
about making use of the benefits of financial inclusion and its impact.
The study is intended to know the utilisation of banking facilities by rural
people in Madapally and extent of awareness among rural people about
financial inclusion. Hence the study entitled “A study on effectiveness of
financial inclusion among rural people with special reference to
Madapally panchayath.”
1.3 OBJECTIVES:
The study entitled has been undertaken with following objectives:
 To assess the level of awareness and use of banking services
by rural people.
 To measure satisfaction level of people with current banking
services.
 To suggest improvements for success of financial inclusion.
1.4 HYPOTHESES:
H0: There is no significant relationship between savings of
respondents and approach for bank credit
H1: There is significant relationship between savings of

respondents and approach for bank credit.
H0: There is no significant relationship between type of

account and Services/products avail along with the account.
H1: There is significant relationship between type of account
and Services/products avail along with the account.
1.5 SCOPE OF THE STUDY:
The scope of the study is limited to residence of Madapally region .In

present scenario this study is very relevant because financial inclusion is
a newly adopted scheme of RBI.Financial inclusion is a flagship
programme of the Reserve Bank. To push towards universal financial
inclusion, the Reserve Bank has taken several initiatives. The objective
isto sensitise financially illiterate people, financial literacy programmes
have been initiated by the Reserve Bank in collaboration with commercial
banks. This study is aimed at knowing the effect of financial inclusion
among people at Madapally and ways to make the government efforts
more fruitful.
1.6 PERIOD OF STUDY:
The period of study range from 1st January 2014 to 31st March 2014. The
period extended over three months. The study was done and
interpretation was made by comparing various data within the above
period.
1.7 DATA AND METHODOLOGY:
The research is an exploratory study on financial inclusion based on both

primary and secondary data.
1.7.1 Primary data:
The primary data were collected through questionnaire method and direct
interview method. A structured questionnaire wasused for this purpose
and it was prepared with utmost care and attention.
POPULATION: The entire rural people residing in Madapally Panchayath.
SAMPLE UNIT: A person of age18 and above residing in rural area of
Madapally panchayath.
SAMPLE SIZE: A sample of 65 people residing in rural area of Madapally
panchayath.
SAMPLING TECHNIQUE: Sample size of people is taken by convenience
sampling.
1.7.2 Secondary Data:
The secondary data are collected from various books, journals, websites
and other official publications.
1.7.3 METHODOLOGY:
The data collected is represented in the form oftables, charts and pie
diagrams. These are analysed by using various mathematical techniques
and statistical tools like percentage method and chi square.
1.8 LIMITATION OR CHALLENGES OF THE STUDY:
The required data gathered from the respondents through convenience

sampling. Therefore, there is a possibility of unbiased errors, inherent in
sampling technique. Even though the respondents were willing, they
would not find adequate time to spend with the researcher with their busy
schedule, to supply relevant details. Therefore, there is also a chance of
hiding the real information, which could have been relevant to the study.
Other limitation of the study is:
 Financial literacy and financial education need to be taken up on

large scale.
 Respondents were reluctant to give information.
 The data required for the study was gathered from the people
through convenient sampling.
 Study was limited to a sample of 65.
In spite of all these limitations, every effort has made to reduce bias and
analyse the result in best possible way.
1.9 Layout of the dissertation:
Chapter I Introduction
Chapter II A Theoretical Framework on Financial Inclusion
Chapter III Analysis of Data
Chapter VI Findings & Suggestions
Chapter V Conclusion
CHAPTER-II
2.0 INTRODUCTION:
Finance is the study of how people allocate their assets over time under
conditions of certainty and uncertainty. A key point in finance, which
affects decisions, is the time value of money, which states that a unit of
currency today is worth more than the same unit of currency tomorrow.
Finance aims to price assets based on their risk level, and expected rate of
return. Finance can be broken into three different sub categories: public
finance, corporate financeand personal finance.
“Finance is a simple task of providing the necessary funds required by the

business of entities like companies, firms, individuals and others on the
terms that are most favourable to achieve their economic objectives”
Inclusive and exclusive growth is the new mantra promoted by central

government, through which new methods and schemes area adopted to
bring the disadvantages and other excluded people into the fold of
finance. Thus, financial inclusion is a new concept that aims at social
justice and human development. It is the biggest problem in front of the
financial system today in rural India and infrastructural bottlenecks are
worsening situation. Banking and other financial services were
acknowledged as the ultimate growth drivers in rural India at time of
independence. In seeking to understand the challenge of financial
inclusion and the measures needed to promote it, the government has
sought to concentrate not on finding a final definition of the term, but on
understanding what is involved in being financially excluded, what can
be done to tackle such exclusion, what forms financial inclusion can take
and what benefits flow from financial inclusion.
2.1 MEANING:
Financial inclusion or inclusive financing is the delivery of financial

services, at affordable costs, to sections of disadvantaged and low income
segments of society. Unrestrained access to public goods and services is
the sine qua non of an open and efficient society. It is argued that as
banking services are in the nature of public good; the availability of
banking and payment services to the entire population without
discrimination is the prime objective of this public policy. The term
"financial inclusion" has gained importance since the early 2000s, and is
a result of findings about financial exclusion and its direct correlation to
poverty.
Financial inclusion is the process of ensuring access to appropriate

financial products and services needed by vulnerable groups such as
weaker sections and low income groups at an affordable cost. Access to
financial products is constrained by several factors which include: lack of
awareness about the financial products, unaffordable products, high
transaction costs, and products which are not convenient, inflexible, not
customized and of low quality.
The Reserve Bank of India (RBI) today said that financial inclusion is not
restricted merely to opening of bank accounts and should imply provision
of all financial services like credit, remittance and overdraft facilities for
the rural poor.
“The accounts must be operational to provide benefits beyond deposit of

money like availability of credit, remittance facility and overdraft among
others”, Subbarao, Governor of RBI said here.
Financial inclusion means providing sound and affordable financial
services to the "unbanked”, those who do not have access to the formal
financial system. Financial inclusion is more than an economic issue - it
is a legal and regulatory reform process. IDLO’s Micro Finance Law and
Regulation activities contribute to the removal of barriers to financial
inclusion through innovative legal constructions in order to afford the
”unbanked” opportunity for sound and affordable financial services.
“Financial inclusion is the process of ensuring access to financial services

and timely and adequate credit where needed by vulnerable groups such
as weaker sections and low income groups at an affordable cost”
(The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan,

2008))
Financial Inclusion does not merely mean access to credit for the poor,
but also other financial services such as Insurance. Financial Inclusion
allows the state to have an easier access to its citizens, with an inclusive
population, for e.g.: the government could reduce the transaction cost of
payments like pensions, or unemployment benefits.
It could prove to be a boon in a situation like a natural disaster, a

financially included population means the government will have much
less headaches in ensuring that all the people get the benefits. It allows
for more transparency leading to curtailing corruption and bureaucratic
barriers in reaching out to the poor and weaker sections. An intelligent
banking population could go a long way by effectively securing
themselves a safer future.
2.2 OBJECTIVES OF FINANCIAL INCLUSION:
 The main objective is to provide the benefit of vast formal

financial market, & protect them from exploitation of informal
credit market, so that they can be brought into the mainstream.
 The access to various mainstream financial services e.g. saving

bank account, credit, insurance, payments and remittance and
financial and credit advisory services.
 To take banking services to everybody to meet their entire savings,

credit and remittance needs initially, and needs for all other
financial products and services subsequently.
 To provide banking services to the entire population residing in

Urban and Metro Centres
2.3 VISION:
To empower jurists in developing countries to take an active role in
advocating for the improvement of the financial services industry and the
rights of their consumers.
 Consumer protection
 Regulation & supervision
 Credit information sharing
 Branchless banking
 Social business
2.4 MAINSTREAMFINANCIAL SERVICES NECESSARY FOR
FINANCIAL INCLUSION OF HOUSEHOLD:
 Basic saving bank account- an account with all basic feature of

saving account.
 Payment and remittances services.
 Immediate credit – in case of contingencies like accidents, medical
treatment etc., they should be provided immediate credit.
 Entrepreneurial credit – this means, to run/expand small scale
business/shop or any economic activity, easy credit should be
provided, so that financial dependence can be created amongst
households.
 Housing finance- funding for purchasing new residential or
reconstruction.
 Insurance – life\healthcare- to plan future better.
 Financial education\credit counselling centres – to guide them
which product suits them better, where to go credit needs, what are
various services available to better.
MAIN STREAM FINANCIAL SERVICES:
 Basic saving bank account

 Immediate credit
 Entrepreneurial credit
 Housing finance
 Payment & remittances services
 Insurance – life/healthcare
 Financial education/credit counselling
Financial Inclusion therefore, is delivery of not only banking, but also

other financial services like insurance, pension, remittance, mutual funds,
etc. delivered at affordable, though market driven costs. Opening a no-
frills account is just a beginning to a continuous process of providing
banking and financial services.
Once the first step of safety of savings is achieved, the poor require
access to schemes and products which allow their savings to grow at rates
which provide them growth beyond mere inflation protection.
TYPE OF PRODUCT OR SERVICES REQUIRED FOR

CUSTOMERS:
1. A bank account, where he/she can save small amounts at regular

intervals ideally with savings being collected at their place of work or a
specified point of transaction (SPOT) in the locality
2. Micro-Credit for working capital to increase stock and business. This

credit can be short term and repayment to be configured at regular
intervals. Savings history and credibility checks to be used as a proxy for
collateral.
3. Insurance for life
4. Health Insurance for minor illnesses and hospitalization
5. Investment plan for child's education
6. Pension for old age
Working or operational definitions of financial exclusion generally focus

on ownership or access to particular financial products and services. The
focus narrows down mainly to the products and services provided by the
mainstream financial service providers. Such financial products may
include money transmission, home insurance, short and long-term credit
and savings. Furthermore, the operational definitions have also evolved
from the underlying public policy concerns that many people, particularly
those living on low income, cannot access mainstream financial products
such as bank accounts and low cost loans, which, in turn, imposes real
costs on them - often the most vulnerable people.
More importantly, Financial Inclusion is imperative for creating an

inclusive economy at all fronts. This attains special importance at this
stage of rising food and oil prices, without an inclusive economy the
country’s development will suffer. In the recently concluded G8 meeting
in Hokkaido, Japan, the World Bank chief Robert Zoellick reiterated the
importance of creating an inclusive economy in an increasingly
globalized World.
2.5 FACTORS AFFECTING ACCESS TO FINANCIAL

SERVICES:
Some of the major factors affecting access to financial services are:-
Psychological and cultural barriers:
Many people willingly excluded themselves due to psychological barriers

and think that they are excluded from accessing financial services. A very
general psychological barrier can be easily noticed when older people
find it difficult to use ATMs which is the most convenient form of
banking today.
Legal identity:
Lack of legal identity like voter Id, driving license, birth certificates,
employment identity card etc. is also a major factor affecting access to
financial services.
Level of income:
Low income people generally have the attitude of thinking that banks are
only for the rich people.
Various terms and conditions:

Since banks are profit making organizations they discourage the non
Profitable customers (poor) by the minimum balance requirements. While
getting loans or at the time of opening accounts, banks place many
conditions, so the uneducated and poor people find it very difficult to
access financial services.
Structural procedural formalities:

It is very difficult for people to read terms and conditions and account
-filling forms due to lack of basic education.
Limited literacy:
Lack of financial literacy and basic education prevent people to have

access to financial services. Financial literacy involves encouraging
people to use various financial products through various economic agents
like NGOs (Non-Profit Organizations), MFIs and Business
Correspondents etc. People do not know the importance of various
financial products like insurance, finance bank accounts, cheque facility
etc.
Place of living:
Commercial banks operate only in profitable areas. Banks set their
branches and offices only in the commercial areas. Therefore, people
living in under-developed areas find it very difficult to go for any bank
transaction in other areas again and again. Hence, they do not go for any
banking services.
Social security payments:

In those countries, where the social security payment system is not linked
to the banking system, banking exclusion has been higher.
Types of occupation:
Many banks have not developed the capacity to evaluate loan application
of small borrowers and unorganized enterprises and hence tend to deny
such Loan requests.
Attractiveness of the product:

Both the financial services/products (savings accounts, credit products,
Payment services and insurance) and how their availability is marketed
are crucial in financial inclusion.
2.6 HISTORY:
The history of financial inclusion in India is actually much older than the
formal adoption of the objective. The nationalization of banks, Lead Bank
Scheme, incorporation of Regional Rural Banks, Service Area Approach
and formation of Self-Help Groups - all these were initiatives aimed at
taking banking services to the masses. The brick and mortar infrastructure
expanded; the number of bank branches multiplied ten-fold - from 8,000+
in 1969, when the first set of banks were nationalized, to 99,000+ today.
Despite this wide network of bank branches spread across the length and
breadth of the country, banking has still not reached a large section of the
population. The extent of financial exclusion is staggering. Out of the
600,000 habitations in the country, only about 36,000+ had a commercial
bank branch. Just about 40 per cent of the population across the country
has bank accounts. The proportion of people having any kind of life
insurance cover is as low as 10 per cent and proportion having non-life
insurance is abysmally low at 0.6 per cent. People having debit cards
comprise only 13 per cent and those having credit cards only a marginal 2
per cent of the population.
The National Sample Survey data (2002-03) revealed that nearly 51 per
cent of farmer households in the country did not seek credit from either
institutional or non-institutional sources of any kind. A number of rural
households are still not covered by banks. They are deprived of basic
banking services like a savings account or minimal credit facilities. The
proportion of rural residents who lack access to bank accounts is nearly
40 per cent, and the figure rises to over three-fifths in the eastern and
north-eastern regions of India. Accordingly, the primary objective is to
take banking to all excluded sections of the society, rural and urban.
A more focused and structured approach towards financial inclusion has

been followed since the year 2005 when Reserve Bank of India decided
to implement policies to promote financial inclusion and urged the
banking system to focus on this goal. Our focus has, specifically, been on
providing banking services to all the 600 thousand villages and meeting
their financial needs through basic financial products like savings, credit
and remittance. The objectives of financial inclusion, in the wider context
of the agenda for inclusive growth, have been pursued through a multi-
agency approach. In 2006, the Government of India constituted a
Committee on Financial Inclusion, which made a wide range of
recommendations on the strategies for building an inclusive financial
sector and gave a national rural financial inclusion plan. Government of
India has set up the Financial Stability and Development Council
(FSDC), which is mandated, inter alia, to focus on Financial Inclusion
and Financial Literacy issues. In order to further strengthen the on-going
financial inclusion agenda in India, a high level Financial Inclusion
Advisory Committee has been constituted by RBI. The Committee would
pave the way for developing a viable and sustainable banking services
delivery model focussing on accessible and affordable financial services,
developing products and processes for rural and urban consumers
presently outside the banking network and for suggesting appropriate
regulatory framework to ensure that financial inclusion and financial
stability move in tandem. Financial sector regulators including RBI are
fully committed to the Financial Inclusion Mission. I will cover this in
more detail in a subsequent section.
The dynamic country, India, is projected to grow at a rate of 8.4 per cent
during 2010-11. Its financial assets amount to about $2 trillion or about
160 per cent of its GDP. India has also a large network of commercial
bank branches- 80,000- of which almost half are in rural areas. But the
uneven and deep financial system is mostly focused on the urban areas
and has been relatively unsuccessful in bringing the poor and rural
households into the growth trajectory by providing them with easy and
ready access to the various financial services. Limited access to
affordable financial services such as savings, loan, remittance and
insurance services by the vast majority of the population in the rural areas
and unorganised sector is acting as a constraint to the growth impetus in
these sectors. Access to affordable financial services – especially credit
and insurance – enlarges livelihood opportunities and empowers the poor
to take charge of their lives. Such empowerment aids social and political
stability.
2.7 FINANCIAL INCLUSION IN INDIA:
Policy development in India for financial inclusion can be seen in three

stages:
1969-1991
•Nationalisation of banks
•prescription of priority sector target
•lead bank scheme
Annual Policy 2005-2006
•No Frill bank account
•simple KYC norms
•NGOs, SHGs, MFIs etc. Were allowed
•easier credit facilities
Rangrajan Committee Report
•Determining new model for effective reach
•Leveraging on technology based solutions
•Improvements in Credit absorption capability
•Existing formal credit delivery system
I. FIRST PHASE DEVELOPMENTS (1969-1981)
In 1969, the banks were nationalised in order to spread bank’s branch

network in order to develop strong banking system which can mobilise
resources/deposits and channel them into productive/needy sections of
society and also government wanted to use it as an important agent of
change. So, the planning strategy recognized the critical role of the
availability of credit and financial services to the public at large in the
holistic development of the country with the benefits of economic growth
being distributed in a democratic manner. In recognition of this role, the
authorities modified the policy framework from time to time to ensure
that the financial services needs of various segments of the society were
met satisfactorily
Before 1990, several initiatives were undertaken for enhancing the use of
the banking system for sustainable and equitable growth. These included
I. Nationalization of private sector banks

II. Introduction of priority sector lending norms
III. The Lead Bank Scheme
IV. Branch licensing norms with focus on rural/semi-urban
branches
V. Interest rate ceilings for credit to the weaker sections and
VI. Creation of specialised financial institutions to cater to the
requirement of the agriculture and the rural sectors having bulk
of the poor population.
SOCIAL NETWORKING APPROACH:
The announcement of the policy of social control over banks was made in
December 1967 with a view to securing a better alignment of the banking
system with the needs of economic policy. The National Credit Council
was set up in February 1968 mainly to assess periodically the demand for
bank credit from various sectors of the economy and to determine the
priorities for grant of loans and advances. Social control of banking
policy was soon followed by the nationalisation of major Indian banks in
1969. The immediate tasks set for the nationalised banks were
mobilisation of deposits on a massive scale and lending of funds for all
productive activities. A special emphasis was laid on providing credit
facilities to the weaker sections of the economy.
THE PRIORITY SECTOR APPROACH:
The administrative framework for rural lending in India was provided by

the Lead Bank Scheme introduced in 1969, which was an important step
towards implementation of the two-fold objectives of deposit
mobilisation on an extensive scale and stepping up of lending to weaker
sections of the economy. Realising that the flow of credit to employment
oriented sectors was inadequate; the priority sector guidelines were issued
to the banks by the Reserve Bank in the late 1960s to step up the flow of
bank credit to agriculture, small- scale industry, self-employed, small
business and the weaker sections within these sectors.
The target for priority sector lending was gradually increased to 40 per
cent of advances in the case of domestic banks (32 per cent, inclusive of
export credit, in the case of foreign banks) for specified priority sectors.
Sub targets under the priority sector, along with other guidelines
including those relating to Government sponsored programmes, were
used to encourage the flow of credit to the identified vulnerable sections
of the population such as scheduled castes, religious minorities and
scheduled tribes. The Differential Rate of Interest (DRI) Scheme was
instituted in 1972 to provide credit at concessional rate to low income
groups in the country
LEAD BANK SCHEME APPROACH:
The promotional aspects of banking policy have come into greater

prominence. The major emphasis of the branch licensing policy during
the 1970s and the 1980s was on expansion of commercial bank branches
in rural areas, resulting in a significant expansion of bank branches and
decline in population per branch. The branch expansion policy was
designed, inter alia, as a tool for reducing inter-regional disparities in
banking development, deployment of credit and urban-rural pattern of
credit distribution. In order to encourage commercial banks and other
institutions to grant loans to various categories of small borrowers, the
Reserve Bank promoted the establishment of the Credit Guarantee
Corporation of India in 1971 for providing guarantees against the risk of
default in repayment. The scheme, however, was subsequently
discontinued.
II. SECOND PHASE – ANNUAL POLICY (2005-2006)
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.
With a view to enhancing the financial inclusion, as a proactive measure,

the RBI in its Annual Policy Statement for the year 2005-06, while
recognizing the concerns in regard to the banking practices that tend to
exclude rather than attract vast sections of population, urged banks to
review their existing practices to align them with the objective of
financial inclusion. In the Mid Term Review of the Policy (2005-06),
It is observed that there were legitimate concerns in regard to the banking

practices that tended to exclude rather than attract vast sections of
population, in particular pensioners, self-employed and those employed in
the unorganised sector. It also indicated that the Reserve Bank would
1. Implement policies to encourage banks which provide extensive
services, while dis- incentivising those which were not responsive to the
banking needs of the community, including the underprivileged.
2. The nature, scope and cost of services would be monitored to assess

whether there was any denial, implicit or explicit, of basic banking
services to the common person.
3. Banks urged to review their existing practices to align them with the
objective of financial inclusion.
RBI exhorted the banks, with a view to achieving greater financial

inclusion, to make available a basic banking ‘no frills’ account either
with nil or very minimum balances as well as charges that would make
such accounts accessible to vast sections of the population. The nature
and number of transactions in such accounts would be restricted and
made known to customers in advance in a transparent manner. All banks
are urged to give wide publicity to the facility of such no frills account so
as to ensure greater financial inclusion.
RBI 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, offering GCC cards to the poor, 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.
Brief glimpses of main initiative are followings:-
a) No-Frill Accounts:
It is a basic saving fund account having all the features of a normal

saving fund account which it differs in the following aspects:
1. The holder is not required to maintain any minimum balance

requirement and also nothing is charged for opening this type of account.
2. KYC norms have been simplified so that everyone can have this
account.
3. Transaction is limited to 5-10 free transactions per month.
4. ATM facility is provided free of cost.
5. There is no account maintenance cost.
Similar types of accounts, though with different names, have also been
extended by banks in various other countries with a view to make
financial services accessible to the common man either at the behest of
banks themselves or the respective Governments
b) Overdraft in Saving Bank Accounts
Bank were advised to give credit in form of overdraft on saving bank

account to its customer so that in case of small credit need like medical
bill, any accidental charges etc. can be met in.
c) KYC norms
The Know Your Customer (KYC) norms were revised in order to make it
easy for people to avail financial services on February 18, 2008. These
guidelines include
1. In case of close relatives who find it difficult to furnish documents

relating to place of residence while opening accounts, banks can obtain an
identity document and a utility bill of the relative with whom the
prospective customer is living, along with a declaration from the relative
that the said person (prospective customer) wanting to open an account is
a relative and is staying with him/her. Banks can also use any
supplementary evidence such as a letter received through post for further
verification of the address;
2. Banks have been advised to keep in mind the spirit of the instructions
and avoid undue hardships to individuals who are otherwise classified as
low risk customers
3. Banks should review the risk categorization of customers at a

periodicity of not less than once in six months.
4. Further, in order to ensure that persons belonging to low income group

both in urban and rural areas do not face difficulty in opening the bank
accounts due to the procedural hassles, the KYC procedure for opening
accounts has been simplified for those persons who intend to keep
balances not exceeding rupees fifty thousand (Rs. 50,000/-) in all their
accounts taken together and the total credit in all the accounts taken
together is not expected to exceed rupees one lakh (Rs.1,00,000/-) in a
year.
d) SHG Model
A Self Help Group (SHG) is a group of about 15 to 20 people from a

homogenous class who join together to address common issues. They
involve voluntary thrift activities on a regular basis, and use of the pooled
resource to make interest-bearing loans to the members of the group. In
the course of this process, they imbibe the essentials of financial
intermediation and also the basics of account keeping. The members also
learn to handle resources of size, much beyond their individual capacities.
They begin to appreciate the fact that the resources are limited and have a
cost.
Once the group is stabilized, and shows mature financial behaviour,

which generally takes up to six months to 1 year, it is considered for
linking to banks. Banks are encouraged to provide loans to SHGs in
certain multiples of the accumulated savings of the SHGs. Loans are
given without any collateral and at interest rates as decided by banks.
Banks find it comfortable to lend money to the groups as the members
have already achieved some financial discipline through their thrift and
internal lending activities. The groups decide the terms and conditions of
loan to their own members. The peer pressure in the group ensures timely
repayment and becomes social collateral for the bank loans.
Generally, the SHGs need self-help promoting institutions (SHPIs) to

promote and nurture them. These SHPIs include various NGOs, banks,
farmers’ clubs, government agencies, self- employed individuals and
federations of SHGs. However, some SHGs have also been formed
without any assistance from such SHPIs. There are three different models
that have emerged under the linkage programme:-
I. Model I: This involves lending by banks directly to SHGs
without intervention/facilitation by any NGO.
II. Model II: This envisages lending by banks directly to SHGs
with facilitation by NGOs and other agencies.
III. Model III: This involves lending, with an NGO acting as a
facilitator and financing agency.
e) KCC / GCC Guidelines:
1) GCC SCHEME:
With a view to providing credit card like facilities in the rural areas, with
limited point-of- sale (POS) and limited ATM facilities, the Reserve
Bank advised all scheduled commercial banks, including RRBs, in
December 2005 to introduce a General Credit Card (GCC) Scheme for
issuing GCC to their constituents in rural and semi-urban areas, based on
the assessment of income and cash flow of the household similar to that
prevailing under a normal credit card.
The Reserve Bank also advised banks to classify fifty per cent of the
credit outstanding under loans for general purposes under General Credit
Cards (GCC), as indirect finance to agriculture under priority sector. The
Reserve Bank further advised banks in May 2008 to classify 100 per cent
of the credit outstanding under GCCs as indirect finance to agriculture
sector under the priority sector with immediate effect.
2) KCC Scheme:
Eligible farmer will be provided a Kisan Credit Card and a Pass Book or
a Card-cum- Passbook. Revolving cash credit facility allowing any
number of withdrawals and repayments within the limit.
Entire production credit needs for full year plus ancillary activities related
to crop production to be considered while fixing limit. In due course,
allied activities and non- farm short term credit needs may also be
covered. Limit to be fixed on the basis of operational land holding,
cropping pattern and scales of finance. Seasonal sub limits may be fixed
at the discretion of banks. Limit of valid for 3 years subject to annual
review. Conversion /re-schedulement of loans also permissible in case
of damage to crops due to natural calamities. As incentive for good
performance, credit limits could be enhanced to take cares of increase in
costs, changing in cropping pattern etc. Security, margin and rate of
interest as per RBI norms. Operations may be through issuing branch /
PACS or through other designated branches at the discretion of bank.
Withdrawals through slips /cheques accompanies by card and passbook.
Personal Accident Insurance of Rs. 50,000 for death and permanent
disability and Rs. 25,000/- for partial disability available to Kisan Credit
Card holder at an annual premia of Rs. 15/- per annum.
f) Financial Literacy Program
Recognizing that lack of awareness is a major factor for financial

exclusion, the Reserve Bank has taken a number of measures towards
imparting financial literacy and promotion of credit counselling services.
The Reserve Bank has undertaken a project titled “Project Financial
Literacy”.
The objective of the project is to disseminate information regarding the

central bank and general banking concepts to various target groups,
including, school and college going children, women, rural and urban
poor, defence personnel and senior citizens. The banking information
would be disseminated to the target audience with the help of, among
others, banks, local government machinery, schools/colleges using
pamphlets, brochures, films, as also, and the Reserve Bank’s website.
Various initiatives taken by the Reserve Bank in order to promulgate

Financial Literacy:
 A multilingual website in 13 Indian languages on all matters

concerning banking and the common person has been launched by
the Reserve Bank on June 18, 2007.
 Comic type books introducing banking to schoolchildren have
already been put on the website. Similar books will be prepared
for different target groups such as rural households, urban poor,
defence personnel, women and small entrepreneurs.
 Financial literacy programs are being launched in each state with
the active involvement of the state government and the SLBC.
Each SLBC convener has been asked to set up a credit counselling
centre in one district as a pilot project and extend it to all other
districts in due course.
 The ‘Financial Inclusion and Financial Literacy Cell’ has been
established the college of Agricultural Banking, which would act
as a resource centre in this field.
III. THIRD PHASE - RANGRAJAN COMMITEE
The Government of India (Chairman Dr. C. Rangrajan) constituted the

Committee on Financial Inclusion on June 26, 2006 to prepare a strategy
of financial inclusion. The Committee submitted its final Report on
January 4, 2008. The Report viewed financial inclusion as a
comprehensive and holistic process of ensuring access to financial
services and timely and adequate credit, particularly by vulnerable groups
such as weaker sections and low-income groups at an affordable cost.
Financial inclusion, therefore, according to the Committee, should
include access to mainstream financial products such as bank accounts,
credit, remittances and payment services, financial advisory services and
insurance facilities.
The Report observed that in India 51.4 per cent of farmer households are
financially excluded from both formal/informal sources and 73 per cent
of farmer households do not access formal sources of credit. Exclusion is
most acute in Central, Eastern and North- eastern regions with 64 per cent
of all financially excluded farmer households. According to the Report,
the overall strategy for building an inclusive financial sector should be
based on
 Effecting improvements within the existing formal credit delivery

mechanism.
 Suggesting measures for improving credit absorption capacity
especially amongst marginal and sub-marginal farmers and poor
non-cultivator households.
 Evolving new models for effective outreach.
 Leveraging on technology-based solutions.
Keeping in view the enormity of the task involved, the Committee

recommended the setting up of a mission mode National Rural Financial
Inclusion Plan (NRFIP) with a target of providing access to
comprehensive financial services to at least 50 per cent (55.77 million) of
the excluded rural households by 2012 and the remaining by 2015. This
would require semi-urban and rural branches of commercial banks and
RRBs to cover a minimum of 250 new cultivator and non-cultivator
households per branch per annum. The Report of the Committee on
Financial Inclusion Committee has also recommended that the
Government should constitute a National Mission on Financial Inclusion
(NaMFI) comprising representatives of all stakeholders for suggesting the
overall policy changes required, and supporting stakeholders in the
domain of public, private and NGO sectors in undertaking promotional
initiatives.
The major recommendations relating to commercial banks included target

for providing access to credit to at least 250 excluded rural households
per annum in each rural/semi urban branches; targeted branch expansion
in identified districts in the next three years; provision of customised
savings, credit and insurance products; incentivising human resources for
providing inclusive financial services and simplification of procedures for
agricultural loans. The major recommendations relating to RRBs are
extending their services to unbanked areas and increasing their credit-
deposit ratios; no further merger of RRBs; widening of network and
expanding coverage in a time bound manner; separate credit plans for
excluded regions to be drawn up by RRBs and strengthening of their
boards.
In the case of co-operative banks, the major recommendations were early

implementation of Vaidyanathan Committee Revival Package; use of
PACS and other primary co-operatives as BCs and co-operatives to adopt
group approach for financing excluded groups. Other important
recommendations of the Committee are encouraging SHGs in excluded
regions; legal status for SHGs; measures for urban micro-finance and
separate category of MFIs.
CREATION OF SPECIAL FUNDS
The “Committee on Financial Inclusion” set up by the Government of

India (Chairman: Dr. C. Rangrajan) in its Interim Report recommended
the establishment of two Funds, namely the “Financial Inclusion
Promotion and Development Fund” for meeting the cost of
developmental and promotional interventions for ensuring financial
inclusion, and the “Financial Inclusion Technology Fund (FITF)” to meet
the cost of technology adoption.
The Union Finance Minister, in his Budget Speech for 2007-08

announced the constitution of the Financial Inclusion Fund (FIF) and the
FITF, with an overall corpus of Rs.500 crore each at NABARD.
The Government advised that for the year 2007-08 it was decided to
initially contribute Rs.25 Crore each in the two funds by the Central
Government, RBI and NABARD in the ratio 40:40:20. The final report of
the Committee has been submitted to the Government in January 2008.
2.8 BANKING STRUCTURE TO PROVIDE FINANCIAL

SERVICES:
Banking system is like a team, which constitutes from various entities

which are different in nature, form, structure and its working but together
they makes system in which they efficiently work for a common motive.
SHG BANK LINKAGE PROGRAM:
The SHG-Bank Linkage program can be regarded as the most powerful

initiative since independence for providing financial services to the poor
in a sustainable manner. The program has been growing rapidly YOY
basis. Currently, 10 million SHG’s are working across the country with a
credit base of Rs. 100000 Crore. But this is not enough to reach the entire
mass. This number needs to be increased substantially.
However, the spread of the SHG- Bank linkage program in different

regions has been uneven with southern states accounting for the major
chunk of credit linkage. Many states with high incidence of poverty have
shown poor performance under the program. NABARD has identified 13
states with large population of the poor, but exhibiting low performance
in implementation of the programme. The on-going efforts of NABARD
to upscale the programme need to be given a fresh impetus. NGOs have
played a commendable role in promoting SHGs and linking them with
banks.
As of now, SHGs are operating as thrift and credit groups. They may
evolve to a higher level of commercial enterprise in future. Hence, it
becomes critical to examine the prospect of providing a simplified legal
status to the SHG
MICRO FINANCE INSTITUTIONS (MFIs):
From the late 1980s, the emergence of the Grameen Bank in Bangladesh
drew attention to the role of microcredit as a source of finance for
micro-entrepreneurs. Lack of access to credit was seen as a binding
constraint on the economic activities of the poor.
Microfinance Institutions (MFIs) are those, which provide thrift, credit,

and other financial services and products of very small amounts mainly to
the poor in rural, semi-urban or urban areas for enabling them to raise
their income level and improve living standards. Lately, the potential of
MFIs as promising institutions to meet the demands of the poor has been
realized. The closer proximity with the people at grassroots level and the
mix of offering right products at right price based on the actual needs of
the masses makes their role very important in deepening financial
inclusion.
However, there is exigency to upscale their outreach. In India, out of
some 400 million poor workers, less than 20 per cent have been linked
with financial services provided by MFIs.
Steps needed to promote MFIs:
 One of the ways of expanding the successful operation of

microfinance institutions in the informal sector is through
strengthened linkages with their formal sector counterparts.
 Efforts are needed to make MFIs an integral part of mainstream
banking and to bring down the rates of interest on microcredit to
ensure the micro finance movement gets further impetus
 A mutual beneficial partnership should be established between
MFIs and Banks contingent on comparative strength of each
sector. For example, informal sector microfinance institutions have
comparative advantage in terms of small transaction cost achieved
through adaptability and flexibility of operations.
COOPERATIVE CREDIT INSTITUTIONS:
Rural credit cooperatives in India were originally envisaged as a

mechanism for pooling the resources of people with small means and
providing them with access to different financial services. It has served as
an effective institution for increasing productivity, providing food
security, generating employment opportunities in rural areas and ensuring
social and economic justice to the poor and vulnerable sections.
Despite the phenomenal outreach and volume of operations, the health of

a very large proportion of these credit cooperatives has deteriorated
significantly. Various problems faced by these institutions are:
 Low resource base
 High dependence on external source of funding
 Excessive government control
 Huge accumulated losses and imbalances
 Poor business diversification
 Low recovery
Taking all these facts in mind, there is an urgent need to address the
structural deficiencies of these institutions in order to make them play an
effective role in meeting the financial inclusion goal. RRBs, post-merger,
represent a powerful instrument for financial inclusion. RRBs account for
37% of total rural offices of all scheduled commercial banks and 91% of
their workforce is posted in rural and semi-urban areas. They account for
31% of deposit accounts and 37% of loan accounts in rural areas. RRBs
have a large presence in regions marked by financial exclusion of high
order.
RRBs are, thus, the best suited vehicles to widen and deepen the process
of financial inclusion. However, they need to be oriented suitably to serve
the rural population with a specific mandate to achieve financial
inclusion. It is hoped that recent regulatory changes and fresh impetus
provided by the regulator will help in making RRBs front institution in
achieving the target of reaching out to financially excluded people.
THE BUSINESS CORRESPONDENT MODEL
In January 2006, the Reserve bank permitted banks to utilize the services
of non- government organizations (NGOs/SHGs), micro-finance
institutions and other rural organizations as intermediaries in providing
financial and banking services through the use of business facilitator (BF)
and business correspondent Models(BC). The BC model allows banks to
do ‘cash in cash out’ transactions at a location much closer to the rural
population, thus addressing the last mile problem.
Banks are also entering into agreement with Indian Postal Authority for
using the enormous network of post offices as business correspondents
for increasing their outreach and leveraging the postman’s intimate
knowledge of the local population and trust reposed in him. The intention
behind the model is to promote the business of banking with low capital
cost by enabling outsourcing of rural business to agents on a commission
basis.
Recent guidelines issued by RBI to ensure adequate supervision over

operations of BCs:
 Every BC to be attached to a certain bank to be designated as the

base branch.
 The distance between the area of operation of a BC and the base
branch should not exceed 30 km in rural, semi-urban and urban
areas.
Initiatives needed to be undertaken to promote BC model:
 Allow more entry to private well governed small finance banks.

The intent is to bring local knowledge to financial products that
are needed locally.
 Facilitate the use of existing networks like cell phone kiosks or
kirana shops as business correspondents to deliver products of
large financial institutions.
 Liberalize the business correspondent regulation so that a wide
range of local agents can serve to extend financial services.
2.9 ROLE OF TECHNOLOGY IN FINANCIAL INCLUSION
According to recent Boston Consulting Group report, with cost of funds

today at 9%, provision for bad debts at 10% and cost of operation and
transaction at 13% for poor customers in far flung areas, banking for the
poor by formal sector becomes unviable. The key role the technology is
expected to play is to reduce the last two components drastically.
Unfortunately, public sector banks (PSBs), which account for 70% of
assets, have been slow in making use of modern technology to bring
down transaction costs.
How technology can lower operating costs as well as lending rates?
 In rural areas, different villages are separated by large distances

and poor connectivity. Consequently, communication technology
could play an important role in bridging the last miles between
the customer and the provider thus facilitating faster transactions.
 The telecom network in India is expanding rapidly as more and
more private operators are entering in the telecom sector. Banks
could leverage the network for expanding operations, reducing
costs and increase reliability of their operations.
 As more than one million new mobile users are being added
every month in India, Mobile Banking can become the most
promising front end technology for facilitating financial inclusion
in India. As mobile phones have reached out to segments and
geographies but not yet penetrated by banking sector, this may be
one of the most preferred choices for banks for spreading their
network in unbanked areas.
However, banks need to consider certain facts before leveraging
technology to bring more and more population under the net of financial
inclusion
 Cost effectiveness of technology

 Security of accounts
 Financial viability of technology in rural areas
 Ability of potential beneficiaries to use the technology
2.10 FINANCIAL INCLUSION IN KERALA:
According to a working paper from the Reserve Bank of India, in the

group of 23 states for which a 3-dimensional Index of Financial Inclusion
(IFI) has been estimated by using data on 3 dimensions of financial
inclusion, Kerala leads with the highest value of IFI followed by
Maharashtra and Karnataka. Three dimensions of the IFI are banking
penetration, availability of banking services and usage.
Only three states, viz., Kerala, Maharashtra and Karnataka belong to the
high IFI group with IFI values of 0.5 or more. The state had already been
declared a financially inclusive state in December 2007. Lead bank
officials explained that the 2007 announcement had to do with the fact
that at least one member in every household in the state had a bank
account.
Following upon this, RBI directed that the plan be extended to provide
banking facilities in all districts with a population above 1,000. As such,
127 districts were identified and a bank branch or mobile bank or banking
councillor appointed there. But the process was not yet complete as it
would require extension of credit and insurance facilities to all those held
accounts for the inclusion plan to be fully effective, they added.
Palakkad was the first district in the state to achieve total financial
inclusion in 2007.
 Kerala became total banking state

 Financial inclusion campaign in Kerala
 Palakkad declared India's first district to complete 100% financial
inclusion
 Kerala banks ahead in issuance of General Credit Cards
CHAPTER – III
3.0 INTRODUCTION
The term analysis means systematic classification of the data given.

Interpretation means explaining the analysed data. Both analysis and
interpretation are related to each other. Data is collected from the
respondents by giving Interview Schedule. In this chapter the data
received through the questionnaire is analysed and interpreted.
Lots of tables and chart are used for the interpretation. The tables and
charts represent the figure in percentage. Immediately after the each
tables and charts the interpretation is given in detailed form. The
interpretation is given on the basis of the percentages from the table.
3.1 PROFILE
In this chapter an attempt is made to analyse various aspects relating to
the financial inclusion with special reference to Madapally. Primary data
for the study is collected from 60 local peoples at random from
Madapally. The study is analytical in the sense that data collected are
analysed with the help of frequency and percentage table, pie chart for
better understanding. For testing the validity of null hypothesis chi square
test is used.
3.2 ANALYSIS AND INTERPRETATION
Table 3.1
Age wise distribution of respondents:
Age
Frequency Percent
18-28 9 13.8
28-38 13 20.0
38-48 21 32.3
48-58 15 23.1
Above 58 7 10.8
Total 65 100.0
Source: Primary Data
Figure 3.1
Age- Wise Distribution of Respondents
18-28
11% 14%
23% 20% 28-38
38-48
32%
48-58
Above 58
The above table shows that 32% of respondents belong to age group of
38-48, 20% of respondents belongs to age group of 28-38,14% of
respondents belongs to age group of 18-28,23% of respondents belongs to
age group of 48-58 and11% of respondents are of above 58.
Table 3.2
Gender - Wise Distribution of Respondents
Gender Frequency Percent

Male 43 66.2
Female 22 33.8
Total 65 100.0
Figure 3.2
Gender- Wise Distribution of Respondents
Gender Wise Distribution Of Respondents

Male Female
34%
66%
The above table shows that 66.2% of respondents are male and
remaining 33.8% respondents are female.
Table 3.3
Education -wise distribution of respondents:

Education Frequency Percent
10 or below 34 52.3
Predegree/12th 11 16.9
Graduate 9 13.8
Post Graduate 10 15.4
Not educated 1 1.5
Total 65 100.0
Source: Primary data
Figure 3.3
Education -Wise distribution of respondents
Education Wise distribution of respondents
60 52.3
50
40
30 16.9 13.8 15.4
20
1.5 Percent
10
0
The above table shows that 52% of respondents are with educational
qualification 10th or below, 17% respondents with Predegree, 15%
respondents are post graduates, 14% respondents are graduates and
remaining 2% respondents are not educated.
Table 3.4
Occupation- wise distribution of respondents:

Occupation Frequency Percent
Self 40 61.5
Government 10 15.4
Private 10 15.4
NRI 2 3.1
Student 3 4.6
Total 65 100.0
Figure 3.4
Occupation- Wise Distribution Of respondents
Occupation Wise Distribution Of respondents

Self Government Private NRI Student
3% 5%
15%
15% 62%
From the above table it is clear that out of 65 respondents 61.5% of

respondents are self employed,15.4% respondents are government
employees,15.4% respondents are private empolyees,4.6% respondents
are students and remaining 3.1% are NRIs.
Table 3.5
Income- wise distribution of respondents:
Income Frequency Percent
Below 50,000 32 49.2
50,000-1,00,000 19 29.2
1,00,000-2,00,000 10 15.4
Above 2,00,000 4 6.2
Total 65 100.0
Figure 3.5
Income- Wise Distribution of Respondents
Income Wise Distribution Of Respondents

Percentage
49.2
29.2
15.4
6.2
The above table shows that 49.2 % of respondentsbelong to the income

group of below 50,000, 29.2%among them belongs to the income group
of 50,000-1, 00,000 and 15.4%of them belongs to the income group of 1,
00,000-2, 00,000and remaining 6.2% belongs to income group above 2,
00,000.
Table 3.6
Savings From income of respondents
Particulars Frequency Percent
None of above 3 4.6
Some extent 21 32.3
Moderate extent 23 35.4
Large extent 14 21.5
Very large extent 4 6.2
Total 65 100
Figure 3.6
Savings from Income of respondents
Savings From Income of respondents

None of above Some extent Moderate extent
Large extent Very large extent
6%5%
22%
32%
35%
The above table shows that 35.4% respondents are having savings to a
moderate extent, 32.3% respondents are having savings to some extent,
21.5% respondents are having savings to a large extent, 6.2% respondents
are having savings to a very large extent and remaining 4.% respondents
are not having any savings.
Table 3.7
WHERE DO RESPONDENTS KEEP SAVING
PARTICULARS NO: OF RESPONDENTS
BANKS 59
INSURANCE SCHEME 21
CASH AT HOME 10
POST OFFICE 20
NBFC 4
The above table shows that majority 59 respondents keep savings in

banks , 21 respondents keep their savings in insurance scheme, 20
respondents keep their savings in post office, 10 respondents keep their
savings at home and 4 respondents keep their savings in NBFC.
Table 3.8
Kinds of account
None 5 7.7
Deposit account 31 47.7
Loan account 9 13.8
Both deposit &loan account 20 30.8
Total 65 100.0
Figure 3.8
Kinds of Account
Kinds Of Account
None Deposit account Loan account Both deposit &loan account
7%
31%
14% 48%
The above table shows that 47.7% of respondents have deposit account,
30.8% of respondents have both loan account and deposit account,13.8%
respondents have only loan account and remaining 7.7% respondents
does not have any account.
Table 3.9
TYPES OF DEPOSIT ACCOUNT
PARTICULARS NO. OF RESPONDENTS
Savings Account 58
Current Account 1
Recurring Account 0
Fixed Deposit Account 16

The above table shows that 58 respondents have savings account,16
of respondents have fixed deposit account only 1 respondent have
current account and none of them have recurring account.
Table 3.10
BANK ACCOUNT
Yes 60 92.3
No 5 7.7
Total 65 100.0
Figure 3.10
BANK ACCOUNT
BANK ACCOUNT
No
8%
Yes
92%
The above table shows that 92.3% of respondents have bank account and
7.7% does not have bank account.
Table 3.11
Type of bank account

None 5 7.7
Cooperative bank 12 18.5
Commercial bank 31 47.7
Both cooperative 17 26.2
&commercial bank
Total 65 100.0
Figure 3.11
Type of bank account
Type Of Bank Account
Percentage
47.7
26.2
18.5
7.7
None Cooperative bank Commercial bank Both cooperative

&commercial bank
The above table shows that 47.7%of respondents are having commercial
bank account,18.5%respondents are having cooperative bank
account,26.2% respodents are having both commercial and cooperative
bank account and remaining 7.7% respondents are not having any type of
account.
Table 3.12
PRODUCTS/SERVICES AVAIL ALONG WITH BANK
Particulars Frequency
PAYMENT&REMITTANCE 60
MOBILE BANKING 11
ATM/DEBIT CARDS 49
LOANS &ADVANCES 21
CREDIT CARD 9
NET BANKING 11
The above table shows that 60of the respondents utilise the payment &
remittance facility, 11 respondents utilise mobile banking, 49
respondents utilise ATM/Debit cards, 21 respondents utilise
loans&advances, 9 respondents utilise credit card and 11 respondents
utilise net banking.
Table 3.13
Satisfaction with various banking services:

None 5 7.7
Not at all 2 3.1
Some extent 11 16.9
Moderate extent 27 41.5
Large extent 11 16.9
Very large extent 9 13.8
Total 65 100.0
Figure 3.13
Satisfaction with various banking services:
Satisfaction of respondents with various banking Services
None Not at all Some extent
Moderate extent Large extent Very large extent
3%
14% 8%
17%
17%
41%
The above table shows that 41.5% respondents are moderately satisfied
with bank services, 16.9%respondents are satisfied to a large extent,
16.9% of respondents are satisfied to some extent, 7.7% respondents are
not at all utilising the banking services and remaining 7.7% respondents
are not at all utilising the banking services.
Table 3.14
Reasons for not having bank account
None 60 92.3
Low level of literacy 1 1.5
Lack of guidance& 2 3.1
awareness
Tedious procedure 1 1.5
Not aware of bank account 1 1.5
Total 65 100.0
Figure 3.14

Percentage
92.3
1.5 3.1 1.5
1.5
None Percentage
Low level ofLack of
literacy guidance& Tedious Not aware
procedure
awareness of bank
account
The above table shows that 92.3% respondents are having bank account
and out of 5 respondents who are not having bank account 1.5%
respondents are not having bank account because of low level of literacy,
3.1% respondents are not having bank account due to lack of guidance
and awareness, 1.5% of respondents are not having bank account because
of tedious procedures and remaining 1.5% respondents are not aware of
bank account.
Table 3.15
LOAN ACCOUNT

Yes 29 44.6
No 36 55.4
Total 65 100.0
Figure 3.15
LOAN ACCOUNT
Loan Account
Percentage
55.4
44.6
Yes No
The above table shows that majority of the respondents 55.4%

respondents are not having loan account and 44.6% respondents are not
having loan account.
Table 3.16
Number of times of borrowings:

None 36 55.4
1 to 3 21 32.3
3 to 5 8 12.3
Total 65 100.0
Figure 3.16
Number of times of borrowings:
Number Of Times Of Borrowings
3 to 5
12%
0
1 to 3 56%
32%
The above table shows that 55.4% respondents are not having any
borrowings, 32.3% respondents borrowed for 1-3 times and remaining
12.3% of respondents borrowed for 3-5 times
Table 3.17
Denial of application
None 32 49.2
Yes 8 12.3
No 25 38.5
Total 65 100.0
Figure 3.17
Denial of application Of Respondents
Denial Of Application Of Respondents

Percentage
49.2
38.5
12.3
None
Yes
No
The above table shows that 49.2% ofrespondents have no loan account,
12.3% respondents have experienced denial of application for loan and
remaining 38.5% respondents are of opinion that their application for
loan have never been denied.
Table 3.18
REASONS FOR DENIAL OF LOAN
PARTICULARS NO. OF RESPONDENTS
Inability to offer to collateral security 4
Poor credit worthiness 6
Lack of supporting documents 6
The above table shows that 4 respondents are of opinion that the reason
for denial of loan is inability to offer collateral security, 6 respondents are
of opinion that denial of loan is due to poor credit worthiness and 6
respondents are of opinion that denial of loan is due to lack of supporting
documents.
Table 3.19
Purpose of borrowing
None 9 13.8
Personal purpose 35 53.8
Funding business 3 4.6
Residential house 10 15.4
purpose
Education of children 8 12.3
Total 65 100.0
Figure 3.19
Purpose of borrowing
Purpose Of Borrowing
Percentage
53.8
13.8 15.4 12.3

4.6
The above table shows that 53.8% respondents borrow money for
personal purpose, 15.4% respondents borrow money for residential house
purpose, 12.3% respondents borrow money for education of children,
13.8% respondents do not borrow and remaining 4.6% of respondents
borrow for funding business.
Table 3.20
Sources of Borrowing
MONEY LENDERS 14
FRIENDS/RELATIVES 45
BANKS 17
NBFIs 3
The above table shows that 14 of the respondents borrow money from
money lenders, 45 of them borrow from friends/relatives, 17 of them
borrow from banks and remaining 3 of them borrow from NBFIs
Table 3.21
Total amount of borrowings

None 9 13.8
Below 50,000 28 43.1
50,000-1,00,000 12 18.5
1,00,000-1,50,000 7 10.8
1,50,000-2,00,000 3 4.6
Above 2,00,000 6 9.2
Total 65 100.0
Figure 3.21
Total Amount Of Borrowings
Total Amount Of Borrowings

None Below 50,000 50,000-1,00,000
1,00,000-1,50,000 1,50,000-2,00,000 Above 2,00,000
9% 14%
5%
11%
43%
18%
The above table shows that 43.1% of respondents are having borrowings
below 50,000,18.5% respondents are having borrowings between 50,000
– 1,00,000, 13.8 % respondents does not have borrowings,10.8% of
respondents are having borrowings between 1,00,000-1,50,000,9.2 %
respondents are having borrowings above 2,00,000 and remaining 4.6%
respondents are having borrowings between 1,50,000- 2,00,000 .
Table 3.22
Awareness about banking credit:
Yes 23 35.4
No 42 64.6
Total 65 100.0
Figure 3.22
Awareness About Banking Credit
Awareness About Banking Credit

Yes No
64.6
35.4
The above table shows that majority that is 64.6% respondents are not
aware of banking credit and remaining 35.4% respondents are aware of
banking credit.
Table 3.23
Approach for bank credit
Yes 5 7.7
No 60 92.3
Total 65 100.0
Figure 3.23
Approach for bank credit
Approach For Bank Credit

Percentage
92.3
7.7
Yes No
The above table shows that 92.3% of respondents do not approach bank
for credit facilities and remaining 7.7%respondent’s only approach bank
for credit facilities.
Table 3.24
Advice about money matters

Yes 12 18.5
No 53 81.5
Total 65 100.0
Figure 3.24
Advice about money matters
Advice About Money Matters

Yes No
18%
82%
The above table shows that majority that is 81.5% respondents does not
receive any advice about money matters and remaining 53% of
respondents receive advice about money matters from various sources.
Table 3.25
Suggestions for Effective Financial Inclusion
CUSTOMER CARE/RECEPTION/MAY I 58
HELP YOU COUNTER
CREDIT COUNSELLING CENTERS 35
COMPULSORY NO FRILL ACCOUNT 53
The above table shows that majority of respondents are of opinion that
customer care reception is necessary for effective financial inclusion, 53
of the respondents are of opinion that compulsory no frill account is
necessary, 35 of the respondents are of opinion that credit counselling
centres should be made available by banks.
3.3 TESTING OF HYPOTHESES
Hypothesis 1:
H0: There is no significant relationship between savings of respondents

and approach for bank credit
H1: There is significant relationship between savings of respondents and

approach for bank credit
Here statistic used is chi-square test.
Chi Square test is a statistical test, which test the significance of

difference between observed frequencies and the corresponding
theoretical frequencies of a distribution, without any assumption about
the distribution of the population. It is a non-parametric test. It analysis
the differences between a set of observed frequencies and a set of
corresponding expected frequencies.
Table 3.26
Chi-Square Tests
Chi-Square Tests
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 11.291a 5 .046

Likelihood Ratio 10.276 5 .068
Linear-by-Linear 5.297 1 .021
Association
N of Valid Cases 65
Source: SPSS
Level of Significance = .05
As per the rule if the Probability value of significance is less than .05,
reject H0 and otherwise accept it. Here the probabilityvalue of
significance is .046. That means less than .05(5% level of significance).
Hence we accept H1 and reject H0, i.e.
There is significant relationship between savings of respondents and

approach for bank credit.
Hypothesis 2:
H0: There is no significant relationship between type of accounts and

Services/products avail along with the account.
H1: There is significant relationship between type of account and

Services/products avail along with the account.
Here statistic used is chi-square test.
Chi Square test is a statistical test, which test the significance of

difference between observed frequencies and the corresponding
theoretical frequencies of a distribution, without any assumption about
the distribution of the population. It is a non-parametric test. It analysis
the differences between a set of observed frequencies and a set of
corresponding expected frequencies.
Table 3.27
Chi-Square Tests
Payment& Mobile ATM/ Loans& Credit Net
remittance banking Debit advances Card Banking
card
SAVINGS .000 .206 .000 .280 .262 .206
A/C
CURRENT .771 .026 .565 .486 .012 .026
A/C
FD A/C .184 .078 .967 .609 .020 .078
Source: SPSS
Level of Significance = .05
There is significant relationship between payment of remittance and

savings account since probability value of significance is less than .05that
is .000.
There is no significant relationship between mobile banking and saving

account since probability value of significance is more than .05 that is
.206.
There is significant relationship between ATM/Debit card and savings

account since probability value of significance is less than .05 that is
.000.
There is no significant relationship between loans & advances and

savings account since probability value of significance is more than .05
that is .280.
There is no significant relationship between credit card and savings

.262.
There is no significant relationship between net banking and savings

.206.
There is no significant relationship between payment and remittance and

current account since probability value of significance is more than .05
that is .771.
There is significant relationship between mobile banking and current

account since probability value of significance is less than .05that is .026.
There is no significant relationship between ATM/Debit card and current

account since probability value of significance is more than .05that is
.565.
There is no significant relationship between loans & advances and current

account since probability value of significance is more than .05that is
.486.
There is significant relationship between credit card and current account
since probability value of significance is less than .05that is .012.
There is significant relationship between credit card and current account

since probability value of significance is less than .05that is .026.
There is no significant relationship between payment & remittance and

fixed deposit account since probabilityvalue of significance is more than
.05 that is.184.
There is no significant relationship between mobile banking and fixed

deposit account since probabilityvalue of significance is more than .05
that is.078.
There is no significant relationship between ATM/Debit cards and fixed

that is.967.
There is no significant relationship between loans & advances and fixed

that is.609.
There is significant relationship between credit card and fixed deposit

account since probabilityvalue of significance is less than .05 that is .020.
There is no significant relationship between net banking and fixed deposit

account since probabilityvalue of significance is more than .05 that is
.078.
CHAPTER-IV
This chapter contains the main findings. On the basis of these finding
certain suggestions are also made.
4.0 THE STUDY IN RETROSPECT
The main objective of the study is to assess the level of awareness and
satisfaction level of rural people in Madapally with present banking
services. The study is descriptive and analytical in nature. It is descriptive
which means that it is a fact finding study. The researcher had no control
over variable. Data is being collected by personnel interviews with the
local peoples in Madapally. Primary data is collected from 65
respondents selected in random with the help of interview cum
questionnaire schedules. Secondary data is gathered from published
materials from internet, library, journals etc. The study is analytical in the
sense that data collected are analyzed with the help of statistical
techniques. The following conclusions are drawn from the analyzed data.
4.1 IMPORTANT FINDINGS:
 Majority of the respondents have educational qualification below

SSLC.
 Annual income of many of the respondents is below 50,000 which
restrict their savings to a certain extent.
 92.3% of respondents living in rural area have bank account.
 90.76% of respondents keep their savings in bank where majority
of them have account in commercial banks.
 89.23% of respondents have savings account which shows their
interest to save from their limited income.
 92.3% of respondents utilize the payment & remittance service of
banks but they are not utilizing the modern banking facilities like
mobile banking.
 The banking utilization of rural people is limited and they are
moderately satisfied with current banking facilities.
 One of the major reasons for not maintaining bank account is lack
of guidance and awareness
 Majority of respondents are of the opinion that their application for
loan has never been denied which means banks are ready to grant
loan facilities to rural people.
 Major reason for the purpose of borrowing is for their personal
purpose and they borrow money from friends/relatives which is
limited to amount of below 50,000.
 64.6% of respondents are not aware of bank credit as a result they
do not approach bank for credit facilities.
 81.5% of respondents do not receive advice about money matters.
 There is significant relationship between savings of respondents
and approach for bank credit
 Out of 65 respondents 49 of the respondents are availing ATM

facilities.
 There is significant relationship between payment of remittance

and savings account.
 There is no significant relationship between mobile banking and
saving account.
 There is significant relationship between ATM/Debit card and
savings account.
 There is no significant relationship between loans & advances and
savings account.
 There is no significant relationship between credit card and savings
account.
 There is no significant relationship between net banking and
savings account.
 There is no significant relationship between payment and
remittance and current account.
 There is significant relationship between mobile banking and
current account.
 There is no significant relationship between ATM/Debit card and
current account.
current account.
 There is significant relationship between credit card and current
account.
 There is significant relationship between credit card and current
account.
 There is no significant relationship between payment & remittance
and fixed deposit account.
 There is no significant relationship between mobile banking and
fixed deposit account.
 There is no significant relationship between ATM/Debit cards and
 There is significant relationship between credit card and fixed
deposit account.
 There is no significant relationship between net banking and fixed
deposit account.
4.2 SUGGESTIONS:
It is clear from the study that, even though there are many without bank
account, financial inclusion is success to some extent. Bank must take
necessary steps to include all the people into banking services and make
them to avail all banking services.
 Basic awareness should be provided to rural people regarding

importance of bank and services and make them aware of various
modern facilities provided by bank such as ATM, mobile banking,
net banking, credit card etc.
 Provide necessary support to illiterate people to have a bank
account in nearby bank.
 Provide necessary guidelines to help them to invest their savings in
right place.
 Every bank should establish a customer care/May I help you
counter at every branch for customer guidance.
 Facilitate Credit counseling centers in each district so that it can
take care of uneducated/illiterate individuals.
 Every bank should be made to offer no frill savings account with
basic services without terms & conditions which are class/group
specific but are applicable to all.
 Programmes may be organized to create awareness among rural
people about various deposits and loan products of banks.
 More private sector banks should be involved in financial inclusion
and they should be made realize that it is not only a business
opportunity for them but CSR too.
4.3 CONCLUSION:
Financial inclusion or inclusive financing is the delivery

of financialservices, at affordable costs, to sections of disadvantaged and
low income segments of society, compared to financial exclusion, where
they are not. Financial Inclusion is the process of making the banking
services available to the low income groups and providing affordable
services to the disadvantaged. The main methods include providing loans,
insurance services and many more of these steps.
The study named “Effectiveness of financial inclusion among rural

people with special reference to Madapally panchayath” reveals that
majority of people at Madapally are having annual income less than
50,000 and are having education below SSLC. Even though they are
having bank account their access to modern banking facilities are limited.
From the study it is found that financial inclusion in Madapally is success

to some extent. But necessary steps should be taken to make the rural
people aware of various modern facilities offered by banks and utilization
of these facilities in an effective way for the success of financial
inclusion.
BIBLIOGRAPHY:
BOOKS:
Ceasar Julias M., Financial Inclusion, PG & Research Department of
commerce St.Xavier’s college
Karmakar K.G. –Banerjee G.D. –MohapatraN.P, Towards

FinancialInclusionin India, Sage Publications
Kochar Sameer – ChakrabartyK.C–Phatak Deepak, Financial Inclusion,

Academic Foundation
Kapila Uma, Indian Financial Reforms, Academic Foundation 2013
JOURNAL:
The Need for Financial Inclusion with Indian Perspective, Amal

Aggarwal
WEBSITES:
www.wikipedia.com
www.rbi.org.in
http://aryavart-rrb.com/
www.grameen-info.org
http://cab.org.in
INTERVIEW SCHEDULE
I. Personal Profile:
1. Name :
2. Age : 18-28 28-38 38-48
48-5 above 58
3. Gender : Male Female
4. Education : 10 or below pre degree/12th
Graduate post graduate
Not educated
5. Occupation : self Government
Private Student
NRI
6. Income : Below 50,000 50,000-1,00,000

1, 00,000-2, 00,000 above 2,00,000
II. Financial Profile:
7. Do you have savings from your income?
To a very large extent To a large extent
To a moderate extent To some extent
None of above
8. Where do you keep your savings?
Bank Insurance scheme
Cash at home post office
NBFC Others
9. Do you have a bank account?
Yes No
10. What kind of account do you have?
Deposit Account Loan Account
Both Loan & Deposit Account
11. If you have a deposit account, mention the type of account?
Savings Account
Current Account
Recurring Account
Fixed Deposit Account
12. What type of bank you maintain account?
Cooperative Bank Commercial Bank
Both Commercial & Cooperative Bank
13. What are the services/products you avail along with your bank
account?
Payment & Remittance
Mobile Banking
ATM/Debit card
Loans & Advances
Credit card
Net Banking
14. Are you satisfied with various services offered by bank?
To a very large extent To a large extent
To moderate extend To some extend
Not at all
Those who do not have a bank account:
15.Reasons for not having bank account.

Low level of literacy
Lack of guidance & awareness
Tedious procedure/paper work
Not aware of benefits of a bank account
Tried but refused
III. Credit pattern:
16.Do you have a loan account?
Yes No
17. If you have loan account, how many times you borrowed money from
bank for past 5 years?
1-3 3-5 5-7
7-9 Above 9
18.Have your application for loan ever been denied?
Yes No
11.
19. If yes, state the reason for denial of loan?
Inability to offer collateral security
Poor credit worthiness
Lack of supporting documents
Others
20. What are the purposes of borrowing?
Personal purpose
Funding business
Residential house purpose
Education of children
Other reasons (if any)
21. Which are the sources of borrowing?
Money lenders
Friends/relatives
Banks
NBFIs
Other
22. How much is the total amount of borrowings?
Below 50,000
50,000-1, 00,000
50,000-1, 00,000
1, 00,000-1, 50,000
1, 50,000-2, 00,000
Above 2, 00,000
IV. Awareness Aspect:
23. Do you know about banking credit?
Yes
24. Have you ever approached any bank for credit need?
Yes No
25. Have you been anywhere for advice about money matters?
Yes No
If yes, specify the place/person from where/whom you get such an

advice…………………
V. Suggestions:
26. Do you think that every bank should have following things in place to
enable financial inclusion?
Customer care/reception/May I help you counter
Credit Counselling Centres
Compulsory No frill account offering from bank
Any other Suggestions……………………………….

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CHAPTER I

The term financial inclusion was first coined in 1993 by geographers

The United Nations defines the goal of financial inclusion as follows:

 To access at a reasonable cost for all households to a full range of

Various other factors assessed in financial inclusion are as follows:

1.1 IMPORTANCE OF THE STUDY:

In this study the approach to financial inclusion is based on three major

1.2 STATEMENT OF THE PROBLEM:

H1: There is significant relationship between savings of

H0: There is no significant relationship between type of

1.5 SCOPE OF THE STUDY:

The scope of the study is limited to residence of Madapally region .In

1.6 PERIOD OF STUDY:

The research is an exploratory study on financial inclusion based on both

1.7.1 Primary data:

POPULATION: The entire rural people residing in Madapally Panchayath.

SAMPLE UNIT: A person of age18 and above residing in rural area of

SAMPLE SIZE: A sample of 65 people residing in rural area of Madapally

SAMPLING TECHNIQUE: Sample size of people is taken by convenience

1.7.2 Secondary Data:

The required data gathered from the respondents through convenience

 Financial literacy and financial education need to be taken up on

1.9 Layout of the dissertation:

Chapter II A Theoretical Framework on Financial Inclusion

Chapter III Analysis of Data

Chapter VI Findings & Suggestions

“Finance is a simple task of providing the necessary funds required by the

Inclusive and exclusive growth is the new mantra promoted by central

Financial inclusion or inclusive financing is the delivery of financial

Financial inclusion is the process of ensuring access to appropriate

“The accounts must be operational to provide benefits beyond deposit of

“Financial inclusion is the process of ensuring access to financial services

(The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan,

It could prove to be a boon in a situation like a natural disaster, a

 The main objective is to provide the benefit of vast formal

 The access to various mainstream financial services e.g. saving

 To take banking services to everybody to meet their entire savings,

 To provide banking services to the entire population residing in

 Basic saving bank account- an account with all basic feature of

MAIN STREAM FINANCIAL SERVICES:

 Basic saving bank account

Financial Inclusion therefore, is delivery of not only banking, but also

TYPE OF PRODUCT OR SERVICES REQUIRED FOR

1. A bank account, where he/she can save small amounts at regular

2. Micro-Credit for working capital to increase stock and business. This

3. Insurance for life

4. Health Insurance for minor illnesses and hospitalization

5. Investment plan for child's education

6. Pension for old age

Working or operational definitions of financial exclusion generally focus

More importantly, Financial Inclusion is imperative for creating an

2.5 FACTORS AFFECTING ACCESS TO FINANCIAL

Some of the major factors affecting access to financial services are:-

Psychological and cultural barriers:

Many people willingly excluded themselves due to psychological barriers

Various terms and conditions:

Structural procedural formalities:

Lack of financial literacy and basic education prevent people to have

Social security payments:

Attractiveness of the product:

A more focused and structured approach towards financial inclusion has

Policy development in India for financial inclusion can be seen in three

•prescription of priority sector target

•lead bank scheme