FINANCIAL INCLUSION AND RURAL CREDIT

IN INDIAN ECONOMY 2000-2010

FOR THE PARTIAL FULFILLMENT OF BBA (2011-2014)
OF
INVERTIS UNIVERSITY, BAREILLY

Submitted To:
Mr. Rajeev Bhandari

Submitted By:
Ishpreet Singh BaggaInvertis
BBA 6THSEM

University
~1~

CERTIFICATE
TO WHOM IT MAY CONCERN

It is to certify that I ISHPREET SINGH BAGGA student of BBA 6TH Semester in our institute has
successfully completed her winter project entitled FINANCIAL INCLUSION AND RURAL

CREDITING IN INDIAN ECONOMY for the partial fulfillment of degree of BACHELOR OF

BUSINESS ADMINISTRATION.

DR.S.M.MEHDI

MR.RAJEEV BHANDARI

(HOD BBA)

(Asttprof.ofManagenment)

~2~

ACKNOWLDGEMENT

I feel an immense pleasure in taking this opportunity to express my sincere indebtedness

and deep gratitude towards Mr. RAJEEV BHANDARI who gave me full support and
cooperation getting good understanding of the topic chosen.
Further I express my sincerest thanks for their constant encouragement, meticulous,
guidance constructive criticism and invaluable console throughout the conduct of study.

ISHPREET SINGH BAGGA

BBA-

VI- SEM.

~3~

LIST OF CONTENTS

Introduction of Financial System

History of Indian Banks
Introduction of Financial Inclusion
Review of literature
Financial Inclusion in Rural India
Financial Inclusion Trends
Financial Inclusion Policies
Objective
Research Methodology
Research Design
Data Presentation & Analysis
Findings
Suggestions & Recommendations
Bibliography
Conclusion

5-8
9-16
17-18
19-33
34
35
36-37
38
39-43
44-46
47-49
50
51
52
53

INTRODUCTION OF FINANCIAL SYSTEM

The word system in the term Financial System implies a set of complex
andclosely connected or intermixed instructions, agents, practices, markets,

~4~

transactions, claims and liabilities in the economy. Finance is the study of money, its
nature, creation, behavior, regulations and administration. Therefore, Financial
Systemincludes all those activities dealing in finance, organized into a system.
Financialsystem plays a crucial role in the functioning of the economy because it
allowstransfer of resources from savers to investors. The financial system consists
offinancial institutions, financial markets, financial instruments and the services
providedby the financial institutions. Figure 1.1 gives a birds overview of the
financial systemof an economy.

As stated earlier, the financial system comprises of four major components.

Thesecomponents are:

1) Financial Institutions
2) Financial Markets
3) Financial Instruments
4) Financial Services

~5~

1) Financial Institutions: These are institutions which mobilise and transfer the
savings or funds from surplus units to deficit units. As can be seen from Figure 1.1
these institutions can be classified into, Regulatory, Intermediaries, Non-intermediaries
and Others.
2) Financial Markets: This is a place or mechanism where funds or savings are
transferred from surplus units to deficit units. These markets can be broadly classified
into money markets and capital markets. Money market deals with short-term claims
or financial assets (less than a year) whereas capital markets deal with those
financial assets which have maturity period of more than a year
3) Financial Instruments: As already stated, the commodities that are traded or Financial System
dealt in a financial market are financial assets or securities or financial instruments.
There is a variety of securities in the financial markets as the requirements of lenders
and borrowers are varied. Financial assets represent a claim on the repayment of
principal at a future date and/or payment of a periodic or terminal sum in the form of
interest or dividend.

~6~

4) Financial Services: Financial services include the services offered by both types
of companies Asset Management Companies and Liability Management
Companies. The former include the leasing companies, mutual funds, merchant
bankers, issue/portfolio managers. The latter comprises the bill discounting houses
and acceptance houses. The financial services help not only to raise the required
funds but also ensure their efficient deployment.

o BANKING SYSTEM
You know people earn money to meet their day-to-day expenses on food, clothing, education of
children, housing, etc. They also need money to meet future expenses on marriage, higher
education of children, house building and other social functions. These are heavy expenses,
which can be met if some money is saved out of the present income. Saving of money is also
necessary for old age and ill health when it may not be possible for people to work and earn their
living.
The necessity of saving money was felt by people even in olden days. They used to hoard money
in their homes. With this practice, savings were available for use whenever needed, but it also
involved the risk of loss by theft, robbery and other accidents. Thus, people were in need of a
place where money could be saved safely and would be available when required. Banks are
such places where people can deposit their savings with the assurance that they will be able to
withdraw money from the deposits whenever required. People who wish to borrow money for
business and other purposes can also get loans from the banks at reasonable rate of interest.
Bank is a lawful organisation, which accepts deposits that can be withdrawn ondemand. It also
lends money to individuals and business houses that need it.
Banks also render many other useful services like collection of bills, payment of foreign bills,
safe-keeping of jewellery and other valuable items, certifying the credit-worthiness of business,
and so on.

~7~

Banks accept deposits from the general public as well as from the business community. Any one
who saves money for future can deposit his savings in a bank. Businessmen have income from
sales out of which they have to make payment for expenses. They can keep their earnings from
sales safely deposited in banks to meet their expenses from time to time. Banks give two
assurances to the depositors
a. Safety of deposit, and
b. Withdrawal of deposit, whenever needed
On deposits, banks give interest, which adds to the original amount of deposit. It is a great
incentive to the depositor. It promotes saving habits among the public. On the basis of deposits
banks also grant loans and advances to farmers, traders and businessmen for productive
purposes.
Thereby banks contribute to the economic development of the country and well being of the
people in general. Banks also charge interest on loans. The rate of interest is generally higher
than the rate of interest allowed on deposits. Banks also charge fees for the various other
services, which they render to the business community and public in general. Interest received on
loans and fees charged for services which exceed the interest allowed on deposits are the main
sources of income for banks from which they meet their administrative expenses.
The activities carried on by banks are called banking activity. Banking as an activity involves
acceptance of deposits and lending or investment of money. It facilitates business activities by
providing money and certain services that help in exchange of goods and services. Therefore,
banking is an important auxiliary to trade. It not only provides money for the production of
goods and services but also facilitates their exchange between the buyer and seller.
You may be aware that there are laws which regulate the banking activities in our country.
Depositing money in banks and borrowing from banks are legal transactions. Banks are also
under the control of government. Hence they enjoy the trust and confidence of people. Also
banks depend a great deal on public confidence. Without public confidence banks cannot
survive.

~8~

o HISTORY OF INDIAN BANKING

The English traders that came to India in the 17th century could not make much use of the
indigenous bankers, owing to their ignorance of the language as well the inexperience
indigenous people of the European trade.
Therefore, the English Agency1 Houses in Calcutta and Bombay began to conduct banking
business, besides their commercial business, based on unlimited liability. The Europeans with
aptitude of commercial pursuit, who resigned from civil and military, organized these agency
houses. A type of business organisation recognizable as managing agency took form in a period
from 1834 to 1847.
The primary concern of these agency houses was trade, but they branched out into banking as a
sideline to facilitate the operations of their main business. The English agency houses, that
began to serve as bankers to the East India Company had no capital of their own, and depended
on deposits for their funds. They financed movements of crops, issued paper money and
established joint stock banks. Earliest of these was Hindusthan Bank, established by one of
the agency houses in Calcutta in 1770.
Banking in India originated in the last decades of the 18th century. The first bank in India,
though conservative, was established in 1786 in Calcutta by the name of bank of Bengal. Indian
banking system, over the years has gone through various phases. For ease of study and
understanding it can be broken into four phases

~9~

 Early Phase (1786 to 1935)

Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India, which started in 1786, and the Bank of Hindustan, both of which are now
defunct.

The oldest bank in existence in India is the State Bank of India, which originated in the Bank of
Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of
the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all
three of which were established under charters from the British East India Company.
For many years the Presidency banks acted as quasi-central banks, as did their successors. The
East India Company established Bank of Bengal, Bank of Bombay and Bank of Madras as
independent units and called it Presidency Banks. The three banks merged in 1925 to form the
Imperial Bank of India, which, upon India's independence, became the State Bank of India.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s.

The

ComptoiredEscompte de Paris opened a branch in Calcutta in 1860 and another in

Bombay in 1862; branches in Madras and Pondichery, then a French colony, followed. HSBC
established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly
due to the trade of the British Empire, and so became a banking center.

~ 10 ~

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 because
of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still
functioning today, is the oldest Joint Stock bank in India.

Swadeshi Movement

The Swadeshi movement inspired local businessmen and political figures to found banks of and
for the Indian community. A number of banks established then have survived to the present
such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and
Central Bank of India.
AmmembalSubba Rao Paifounded Canara Bank Hindu Permanent Fund in 1906. Central
Bank of India was established in 1911 by Sir SorabjiPochkhanawalaand was the first commercial
Indian bank completely owned and managed by Indians. In 1923, it acquired the Tata Industrial
Bank.
The fervor of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South Canara
(South Kanara ) district.
Four nationalized banks started in this district and also a leading private sector bank. Hence,
undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

Banks with Year of Start

Bank of Bengal
Bank of Bombay
Bank of Madras
Allahabad Bank
Punjab National Bank Ltd.
Canara Bank
Indian Bank
Bank of Baroda
Central Bank of India
Bank of Mysore
Union Bank if India

1809
1840
1843
1865
1894
1906
1907
1908
1911
1913
1922

~ 11 ~

 Pre Nationalization Phase (1935 to 1969)

Organized banking in India is more than two centuries old. Until 1935 all, the banks were in
private sector and were set up by individuals and/or industrial houses, which collected deposits
from individuals and used them for their own purposes.
In the absence of any regulatory framework, these private owners of banks were at liberty to use
the funds in any manner, they deemed appropriate and resultantly, the bank failures were
frequent.
For many years the Presidency banks acted as quasi-central banks, as did their successors.
Bank of Bengal, Bank of Bombay and Bank of Madras merged in 1925 to form the Imperial
Bank of India, which, upon India's independence, became the State Bank of India.
Even though consolidation in banking was building trust among the investors but a central
regulatory, authority was much needed. British Government in India passed many trade and
commerce laws but acted little on regulating the banking industry.

~ 12 ~

 Reserve Bank of India

Another breakthrough happened in this phase, which was Reserve Bank of India. The Reserve
Bank of India was set up on the recommendations Royal Commission on Indian Currency and
Finance4 also known as the Hilton-Young Commission. The commission submitted its report in
the year 1926, though the bank was not set up for nine years.
Reserve Bank of India (RBI) was created with the central task of maintaining monetary stability
in India. The Government on December 20, 1934 issued a notification and on January 14, 1935,
the RBI came into existence, though it was formally inaugurated only on April 1, 1935.
Main functions of RBI were
1. Regulate the issue of banknotes
2. Maintain reserves with a view to securing monetary stability and
3. To operate the credit and currency system of the country to its advantage

The Bank began its operations by taking over from the Government the functions so far being
performed by the Controller of Currency and from the Imperial Bank of India. Offices of the
Banking Department were established in Calcutta, Bombay, Madras, Delhi and Rangoon.
Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve Bank continued to act
as the Central Bank for Burma until Japanese Occupation of Burma and later unto April 1947.
After the partition of India, the Reserve Bank served as the central bank of Pakistan up to June
1948 when the State Bank of Pakistan commenced operations.

Post Nationalization Phase (1969 to 1990)

I think nationalizationof banks in India was an important phenomenon. On July 19, 1969 - the erstwhile
government of India nationalized 14 major private banks. Nationalization of bank in India was not new or

~ 13 ~

happening first time. From 1955 to 1960, State Bank of India and other seven subsidiaries were
nationalized under the SBI Act of 1955.

It was not a step taken at random or because of the whims of the leadership of the time, but
reflected a process of struggle and political change which had made this an important demand of
the people.
Nationalisation took place in two phases, with a first round in 1969 covering 14 banks followed
by another in 1980 covering seven banks. Currently there are 27 nationalized commercial banks.

Modern Phase from 1991 till date

~ 14 ~

This is the phase of New Generation tech-savvy banks. This phase can be called as The
Reforms Phase. Starting of the modern and current phase of Indian Banking is marked by two
important events.
Narasimhan Committee
The Committee on Banking Sector Reforms Committee8 headed by Mr. M. Narasimhan, it is
also known as Narasimhan Committee. The Committee, headed by former Reserve Bank of
India governor M Narasimhan, was appointed by the United Front government to review the
progress in banking sector reforms. The committee submitted its recommendations to union
Finance Minister Yashwant Sinha in November of 1991.
Some of the recommendations offered by the committee are:
1. A reduction, phased over five years in the Statutory Liquidity Ratio (SLR) to 25 percent,
synchronized with the planned contraction in Fiscal Deficit.
2. A progressive reduction in the Cash Reserve Ratio (CRR).
3. Gradual deregulation of interest rates.
4. All banks to attain Capita Adequacy 8% in a phased manner.
5. Banks to make substantial provisions for bad and doubtful debts.
6. Profitable and reputed banks be permitted to raise capital from the public.
7. Instituting an Assets Reconstruction Fund to which the bad and doubtful debts of banks
and Financial Institutions could be transferred at a discount.
8. Facilitating the establishment of new private banks, subject to RBI norms.
9. Banks and financial institutions to classify their assets into four broad groups, viz,
Standard, Sub-standard, Doubtful and Loss.

~ 15 ~

10. RBI to be primarily responsible for the regulation of the banking system.
11. Larger role for Securities Exchange Board of India (SEBI), particularly as a market
regulator rather than as a controlling authority.

Economic Liberalization in India

The second major turning point in this phase was Economic Liberalization in India. After
Independence in 1947, India adhered to socialist policies. The extensive regulation was
sarcastically dubbed as the "License Raj".
The Government of India headed by Narasimha Rao decided to usher in several reforms that are
collectively termed as liberalization in the Indian media with Manmohan Singh whom he
appointed Finance Minister.
Dr. Manmohan Singh, an acclaimed economist, played a central role in implementing these
reforms. New research suggests that the scope and pattern of these reforms in India's foreign
investment and external trade sectors followed the Chinese experience with external economic
reforms.

o INTRODUCTION OF FINANCIAL INCLUSION

~ 16 ~

Financial inclusion has indeed far reaching positive consequences, which can facilitate many
people to come out of the abject poverty conditions. It is widely believed that financial
inclusion provides formal identity, access to payments system and deposit insurance, and
many other financial services. Universally, it is accepted that the objective of financial
inclusion is to extend the scope of activities of the organized financial system to include
within its ambit the people with low incomes.
In India, there is a need for coordinated action amongst the banks, the government and
related agencies to facilitate access to bank accounts to the financially excluded. In view of
the need for further financial deepening in the country in order to boost economic
development, there is a dire need for expanding financial inclusion. By expanding financial
inclusion, inclusive growth can be attained by achieving equity. The policy makers have
already initiated some positive measures aimed at expanding financial inclusion. However, the
efforts are opined by many as not commensurate with the magnitude of the issue. There is
also a need on the part of the academicians and researchers to study the issue of financial
inclusion with a comprehensive approach in order to highlight its need and importance.
The recent developments in banking technology have transformed banking from the traditional brickand-mortar infrastructure like staffed branches to a system supplemented by other channels like
automated teller machines (ATM), credit/debit cards, internet banking, online money transfers, etc.
The moot point, however, is that access to such technology is restricted only to certain segments of
the society. Indeed, some trends, such as increasingly sophisticated customer segmentation
technology allowing, for example, more accurate targeting of sections of the market have led to
restricted access to financial services for some groups. There is a growing divide, with an increased
range of personal finance options for a segment of high and upper middle income population and a
significantly large section of the population who lack access to even the most basic banking services.
This is termed financial exclusion. These people, particularly, those living on low incomes, cannot
access mainstream financial products such as bank accounts, credit, remittances and payment
services, financial advisory services, insurance facilities, etc.

~ 17 ~

Deliberations on the subject of Financial Inclusion contributed to a consensus that merely having a
bank account may not be a good indicator of financial inclusion. Further, indebtedness as quantified
in the NSSO 59th round (2003) may not also be a reflective indicator. The ideal definition should
look at people who want to access financial services but are denied the same. If genuine claimants for
credit and financial services are denied the same, then that is a case of exclusion. As this aspect
would raise the issue of credit worthiness or bankability, it is also necessary to dwell upon what
could be done to make the claimants of institutional credit bankable or creditworthy. This would
require re-engineering of existing financial products or delivery systems and making them more in
tune with the expectations and absorptive capacity of the intended clientele. Based on the above
consideration, a broad working definition of financial inclusion could be as under:

Financial inclusion may be defined as 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 essence of financial inclusion is in trying to ensure that a range of appropriate financial services
is available to every individual and enabling them to understand and access those services. Apart
from the regular form of financial intermediation, it may include a basic no frills banking account for
making and receiving payments, a savings product suited to the pattern of cash flows of a poor
household, money transfer facilities, small loans and overdrafts for productive, personal and other
purposes, insurance (life and non-life), etc. While financial inclusion, in the narrow sense, may be
achieved to some extent by offering any one of these services, the objective of Comprehensive
Financial Inclusion would be to provide a holistic set of services encompassing all of the above.

LITERATURE REVIEW
~ 18 ~

Financial inclusion, of late, has become the buzzword in academic research, public policy
meetings and seminars drawing wider attention in view of its important role in aiding
economic development of the resource poor developing economies. In the Indian scenario, the
term financial inclusion is popular in financial circles, especially after the Reserve Bank of
India (RBI) announced a series of measures in its credit policy for 2006-07 to include many
of the hitherto excluded groups in the banking net.
Rangarajan Committee (2008) on financial inclusion stated that: Financial inclusion may
be defined as 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 financial services include the entire gamut of savings, loans,
insurance, credit, payments, etc. The financial system is expected to provide its function of
transferring resources from surplus to deficit units, but both deficit and surplus units are those
with low incomes, poor background, etc. By providing these services, the aim is to help them
come out of poverty.
Indian Institute of Banking & Finance (IIBF) opines, Financial inclusion is delivery of
banking services at an affordable cost (no frills accounts,) to the vast sections of
disadvantaged and low income group. Unrestrained access to public goods and services is the
sine qua non of an open and efficient society.
A perusal of literature on finance and economic development reveals that the earlier
theories of development concentrated on labor, capital, institutions, etc., as the factors for
growth and development. There have been numerous researches analyzing how financial
systems help in developing economies. A great deal of consistency exists among economists
regarding financial development prompting economic growth. Many theories have established
that, financial development creates favorable conditions for growth through either a
supplyleading
or a demand-following channel.

~ 19 ~

According to Rajan and Zingales (2003),

development of the financial system contributes to economic growth.
Empirical evidence time and again emphasizes the relationship between finance and
growth. According to the works of King and Levine (1993) and Levine and Zervos (1998),
at the cross-country level, evidence indicates that various measures of financial development
(including assets of the financial intermediaries, liquid liabilities of financial institutions,
domestic credit to private sector, stock and bond market capitalization) are robustly and
positively related to economic growth. Other studies also establish a positive relationship
between financial development and growth at the industry level, like the one by Rajan and
Zingales (1998). The topical endogenous growth literature structured on learning by doing
processes, allocates a special role to finance (Aghion and Hewitt, 1998 and 2005). The
researchers so far have not only looked at how finance facilitates economic activity, but also
social aspects like poverty, hunger, etc. The consensus is that finance promotes economic
growth, but the magnitude of impact differs.
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 Indias 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

~ 20 ~

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 thegovernment
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 wouldnt be denied of access to a basic service such
as banking.

Financial Inclusion Present Scenario in India: An Analysis

Measures of the Extent of Financial Inclusion

One common measure of financial inclusion that is by and large accepted universally is the
percentage of adult population having bank accounts. According to the available data on the
number of savings banks, we note that on an all-India basis 59% of adult population has bank
accounts. In other words, 41% of the population is unbanked. In rural areas, the coverage is
found to be 39% as against 60% in urban areas. The unbanked population is largely observed
in the northeastern and eastern regions.

Table 2 illustrates that rural and semi-urban offices constitute a majority of the commercial
bank offices in India. Rural bank offices as a percent of total have increased from 22 in 1969

~ 21 ~

to 45 in 2005. It is observed that the share of deposits and credit in rural and semi-urban areas
is on the decline. In contrast, the share in metropolitan areas is rising. Further, it can be noticed
that the share of credit is lower than that of deposits in all regions, except metropolitan,
implying that resources get intermediated in metropolitan areas.

The number of savings accounts as percent of number of households is considered to be

a better indicator of banking penetration than other deposit accounts as percent of number
of households. It was 137 in rural areas and 244 in the urban areas on the eve of reforms in
1991 (Table 3). By 2005, notwithstanding the reforms, the differential continues to be similar.
In the case of number of credit accounts, the situation has deteriorated further for rural
households, while showing significant improvement in the urban areas, corroborating the very

~ 22 ~

significant increase in retail credit.

Table 4 illustrates the level of financial inclusion in India through region-wise statistics.
Region-wise population coverage per bank branch office in India is presented in Table 4. In
terms of financial broadening, the scope for improvement remains. Since 1991, population per
bank office has increased in rural areas from 13,462 in 1991 to 16,650 in 2005 and, as
expected, declined in the urban areas from 14,484 to 13,619 over the same period.
Northeastern, eastern and central regions in India have higher population per office than the
all-India average and it has increased significantly in the rural areas in 2005 as compared to
1991. It is noticeable from the table that southern, western and northern regions have

~ 23 ~

population coverage below the national average. All the other regions in the country have
coverage well above the national average calling for urgent improvement in the coverage of
the population. However, in both rural and urban areas there has been a distinct progress in
the coverage of the population by the bank branch offices.

Table 4 offers further clarity providing a break-up of the deposit accounts. Both the deposit
and credit accounts are lower in rural households than urban households. Further, an attempt
has been made in Table 4 to capture the progress of the number of savings accounts per 100
population during the period 1991-2005 in different regions in India. The relevant progress
in the case of rural and urban areas of the different regions is also presented. Northeastern
region calls for an immediate attention to improve the banking facilities as the coverage is
very poor. While the southern, western and northern regions have coverage below the national
level, the other regions have coverage above the national average. The national average itself
is quite high compared to that of other advanced economies.

~ 24 ~

In understanding the extent of financial inclusion, it is imperative in the Indian context,

to know the coverage of population by bank offices in both rural and urban areas. It can be
elucidated that there has not been much significant progress in terms of coverage during the
period 1991-2005. Southern, western and northern regions have higher coverage in terms of
number of deposit (savings) accounts per population of 100 than the all-India coverage. The
other regions again fall behind in this aspect. Number of credit accounts opened per
population of 100 is also an important indicator of the extent of financial inclusion.

~ 25 ~

Accordingly, we find that except in southern region, in all other regions the extent of credit
delivery is very poor. The extent of financial exclusion in Indian states in captured in Table 5.

Further, the rise in the number of credit accounts per population has not been significant
despite the fact that there has been increase in the number of bank branches right across all
the regions of the country. Even in the case of the southern region, where the coverage is
distinctly high compared to all other regions, the increase during the period 1991-2005 was
not encouraging. During the period 1991-2005, only in western and southern regions there
has been a significant improvement in the coverage of credit accounts. In the southern region
there has been a growth of 129% in the urban areas, while it showed a negative growth
(6.6%) in case of rural areas. Similar is the case in the western region. While it experienced
a growth of 154% in urban areas, it showed a negative growth (32%) in rural areas. Even
in other regions, negative growth was observed in rural areas.

~ 26 ~

On an analysis of the region-wise distribution of the bank offices, credit and deposit ratios
it is apparent that the population per office has increased in the rural areas of all the regions,
while in urban areas the population per bank office has declined in all the regions, except
the western region. In spite of the increase in financial deepening in the urban regions, the
number of savings accounts per 100 persons has declined in all regions. Contrastingly, in the
rural areas, the number of savings accounts per 100 persons has increased in northeastern,
central and southern regions, indicating that banks in these rural areas have led to more financial
inclusion than their counterparts in other rural regions and all urban regions. In terms
of number of credit accounts per 100 persons, the scenario is no different with the figure
falling in all regions, except urban areas of southern and western regions in India.

Analysis Based on the Performance of Rural Credit

Banking system in India needs to adjust to the realities in the rural sector. There is evidence
that they are finding it difficult to do so. It is generally believed that agricultural credit to
total GDP declines as the ratio of agricultural GDP to total GDP declines. However, this is not
observed from the data (Table 6). Even though the data reveal that agriculture credit as a ratio
of total credit has been rising in the recent years, it is still below the level of 1970s (see also
Table 7 for agricultural GDP).

~ 27 ~

~ 28 ~

Even though the share of agriculture in overall GDP has declined from around 33.1% in
1980s to 20.8% during 2000-06, the fall in the proportion of population dependent on this
sector has been restricted (Table 7).

A majority of the workforce in India is still dependent on agriculture, even as the GDP
growth due to agriculture is marginally above the population growth rate, in contrast to a
strong growth rate in the non-agricultural sector. Select Macroeconomic Indicators for India
are furnished in Table 8.

~ 29 ~

Analysis Based on the Coverage of Farmer Households

In the following section, an attempt is made to analyze the extent of financial inclusion
based on the coverage of farmer households based on different social groups. It is evident from
Table 9 that 51.4% of farmer households are non-indebted and it is more pronounced in the
case of Scheduled Tribes (STs).
In the case of the STs farmer households, out of 119.24 lakh households, 75.94 lakh
households are non-indebted and that constitute about 63.69%. In case of Scheduled Castes
(SCs),out of total 155.93 lakh households, 77.6 lakh households are non-indebted, i.e., about
49.77%. However in the case of Other Backward Classes (OBCs) farmer households, out of
370.43 lakh households, 179.96 lakh households are non-indebted, constituting 48.58%. In
the case of other farmer households, out of 247.9 lakh households, 125.76 lakh households
are non-indebted, constituting about 50.73%. In total, out of 893.5 lakh farmer households,
459.26 lakh households, constituting about 51.4%, are non-indebted.

Analysis on the Basis of Coverage of Farmer Households Based on Land

~ 30 ~

Holdings
Further, analysis of coverage of farmer households is also attempted based on the size of their
land holdings. From Table 10 it can be seen that the proportion of non indebtedness is quite
obvious in the case of marginal farmers whose land holding is less than 1 ha.

While the extent of non-indebtedness is highest in the case of marginal farmers (70.6%),
it is lowest in the case of large farmers (0.6%). In the case of medium farmers it is 3.2% and
8.5% in the case of semi-medium farmers. However, in the case of small farmers it is 17.1%
(see Figure 3).

~ 31 ~

Findings of the Study

Spatial Distribution of Banking Services: Even after often emphasized policy intervention
by the government and the concerted efforts of RBI and the public sector banks and a
significant increase in the number of bank offices in the rural areas, the coverage was not
adequate for the large population living in the rural areas. For a population of 70%, only 45%
of bank offices provide the financial services.
Number of Bank Accounts (Deposit and Credit) of Households: Even in the case of the
number of households having bank accounts, there is a vast bias in favor of urban areas. For
the rural households which constitute about 70% of population the percentage of number of
households having deposit accounts is 181.8, while it is 335.4 in the case of urban households,
which constitute only 30% of the population. Similarly, in case of credit linkage, it is 32.2% in

~ 32 ~

the case of rural households and 50.2% in case of urban households. This indicates that there is a
need for further broadening of the bank services in the rural areas.
It is also worth mentioning that a similar result was obtained from the study by Agarwal
(2008), who made illustrative analysis of the distribution of bank offices in India and also
the extent of financial deepening in India.
Regional Distribution of Banking Services: The analysis brings to the fore that there has
been uneven distribution of the banking services in terms of population coverage per
bank office in the six regions of the country, viz., northern, northeastern, eastern, central,
western and southern. For an equitable growth in all the regions of the country, there is a need for
addressing the banking needs of the northeastern, eastern and central regions of the
country.
Ratio of Direct Agricultural Credit to Agricultural GDP, Total GDP and Total Credit: Even
though the falling share of agricultural GDP as a proportion of total GDP has been a point
of concern in the recent years, the analysis reveals that in spite of the rise in the agri-credit
as a ratio of total credit it is still below the level of 1970s.
Contribution of Agriculture in GDP: The analysis reveals that there has been a continuous
downslide in the contribution of agriculture to the GDP. While it was 42.8% in the 1970s,
it receded down to 21.9% in the period 2001-06. This is indeed a point of concern. A similar
sort of opinion has also been put forward by Mohan (2006), who has stated that majority of
the workforce are still dependent on agriculture, while the GDP growth due to agriculture is
only marginally above the rate of growth of the population, in contrast to a high growth rate
in the non-agricultural sector.
Coverage of Farmer Households: The analysis points out that a very large number of farmer
households are excluded from the financial services. About 51.4% of the farmer households
are non-indebted and the extent of non-indebtedness is a great cause of concern particularly
in the case of STs (63.69%). This calls for provision of banking services to all the social
groups in an equitable manner in order to achieve social and economic equity in the country.

~ 33 ~

Coverage of Small and Marginal Farmers: The study finds that a whopping 70.6% of the
marginal farmer households are non-indebted and are badly in need of financial services. It
also reveals that the financial inclusion among the farmer households has so far been able to
serve only the large and medium farmers and has completely neglected the marginal and small
farmers.

Financial inclusion in rural India

The responsibility of meeting the credit needs in the rural areas of India was entrusted primarily
with the cooperative sector and later to the commercial banks. One of the major objectives of the
nationalization of major commercial banks in 1969/1980 was to improve the flow of formal
institutional credit to rural households. Although these measures were ambitious and laudable,
bank credit did not reach the poor people in adequate quantum. The financial sector reforms
begun in 1992 have been systematically moving away from the social objective of the banking
sector. The formal financial sector in India is shifting its focus from mass banking to superclass banking.Though banking sector has witnessed tremendous changes in recent
periods in terms of technological advancements, internet banking, online money transfers, etc,
financial exclusion is a reality. It is in this context that the term financial inclusion gains
importance and it is definedas the process of ensuring access to financial services and timely and
adequate credit needed by vulnerablegroups such as weaker sections and low income groups at
an affordable cost. In countries with a large ruralpopulation like India, financial exclusion has a
geographic and social dimension.
Geographic exclusion isexposed through inaccessibility; distances and lack of proper
infrastructure. Building an inclusive financialsector has gained growing global recognition
bringing to the fore the need for development strategies that touchall lives, instead of a select
few. The overall strategy for financial inclusion, especially amongst the poor and
disadvantaged segments of the population should comprise ways and means to effect
improvements within the existing formal credit delivery mechanism, as well as an evolution of

~ 34 ~

new models for extending outreach, and a leverage on technology solutions to facilitate large
scale inclusion. Only two to five percent of the 500 million poorest households in the world have
access to institutional credit. Of which, women receive a disproportionately small share of credit
from formal banking institutions. The Womens Self Help Group movement is bringing about a
profound transformation in rural areas of India. Microfinance Institutions (MFIs)
play a significant role in facilitating inclusion, as they are uniquely positioned in reaching out to
the rural poor.
Many of them operate in a limited geographical area, have a greater understanding of the issues
specific to the rural poor, enjoy greater acceptability amongst the rural poor and have flexibility
in operations providing a level of comfort to their clientele. The present paper deals with how the
mechanism of microfinance can enable the financial inclusion of hitherto excluded population,
especially the women, into the formal financial sector.

Financial inclusion trends

There has been significant but uneven progress toward financial inclusion around the world in
recent years. Some of these steps have been driven by market-friendly policies that will be
presented in more detail in a later section.
Some countries in Asia, such as India and Indonesia, have a long tradition of emphasizing access
to finance.15At the regional level, these policy priorities have paid off: 25 percent of households
living on less than $2 a day now have access to formal or semiformal financial services,
compared to 4050 percent of the population as a whole.
Other success stories include:
Mongolia: a successful turnaround of a state bank increased the number of deposit accounts by
over 1.4 million since 2006, now reaching 62 percent of households.
Philippines: mobile phone banking has expanded to serve to 4 million clients since 2002.
India: access to credit among the poor is up from 7 percent in 2004 to 205 percent in 2009, as
the microfinance sector added 9.9 million clients.

~ 35 ~

Bangladesh: 46 million new microcredit clients have been added since 2006; financial
services have reached about 55 percent of poor households, substantially expanding access to
savings.
Viet Nam: 2.1 million new microfinance clients have been added since 2006.
In contrast, access in Peoples Republic of China (PRC) appears to have declined since the
reforms of the rural cooperatives. Also, Indias poor have little access to deposits: no frills
accounts have increased to over 28 million, but studies show that many of these are barely used.
Particularly in Asia, the poor are often served by public banks or nonbank entities, including
nongovernmental organizations (NGOs), with private sector banks playing a smaller role. Key
examples of these public banks and nonbank entities include:
Pakistan: Post Savings Bank, with 3.6 million accounts in 2006.
India: post offices, with 60.8 million savings accounts as of March 2007.
Bangladesh: Rural Development Board, with 4.7 million active borrowers in 2007.
Viet Nam: Bank for Agriculture and Rural Development, with 10 million farmer clients in
2007, and Bank for Social Policy, with 6.79 million active borrowers in 2008.
Thailand: Government Savings Bank, with 36 million accounts in 2006.
Sri Lanka: state banks, which were used by 72 percent households by the end of 2006.
However, despite this outreach, service quality is inferior, and most institutions depend on
subsidies. Furthermore, as shown in Figure 2, despite remarkable improvements in India and
Bangladesh, an estimated 535 million people in these two countries still are excluded from
financial services. Table 1 shows how countries in Asia sort out by their level of financial
inclusion

Financial inclusion policies

The financial sector is prone to market failure and, therefore, is generally heavily regulated. The
low-income segment is particularly plagued by information asymmetries as participants on the
demand side often lack a track record or collateral to pacify lenders concerns. In addition,
lenders lack experience in new markets at the bottom of the pyramid and face adjustment costs
regarding business processes. At the same time, the limited size of both individual transactions
and the overall market pose challenges to suppliers that need to recover fixed costs.

~ 36 ~

However, once the pioneers of the microfinance revolution demonstrated tangible market
opportunities, substantial business model innovation has expanded the access possibilities
frontier.34More recently, technological innovation has dramatically lowered the fixed costs of
reaching the low-income segment and attracted a broader range of new suppliers.
Policies are a key complement to private sector innovation through regulatory frameworks,
public ownership, the provision of market infrastructure, and measures that lower demand-side
barriers. Regulatory frameworks determine the set of institutions that are allowed to enter, shape
the scope of available services, and affect institutions cost of doing business.
Prudential regulation is critical to enable financial intermediation and facilitate domestic
resource mobilization and financial institution growth while simultaneously protecting savers.
Furthermore, public ownership has frequently expanded outreach into segments that were
considered beyond the scope of commercial approaches. Secured lending frameworks and public
credit registries facilitate transactions despite asymmetric information. Finally, the low education
level of poor clients suggests a need for consumer protection and financial education policies.
Policymakers have struggled to accompany rapid innovation. They have been particularly
successful where they facilitated experimentation within regulatory frameworks that carefully
limited the potential risks. In some cases, policymakers have even taken the lead in introducing
new solutions to the market through regulatory or legislative measures or direct participation in
the market.
The rapid pace of innovation has substantially increased the complexity of policymaking. On the
one hand, this calls for a rethinking of policy principles with respect to financial inclusion.35On
the other hand, there is substantial scope for stepping up peer-to-peer advice as innovative
solutions are being generated by developing country regulators.
To capture and compare emerging policy trends in developing countries, the German
GesellschaftfrTechnischeZusammenarbeit or GTZ (German Technical Cooperation) assessed
thirty-five policy solutions geared toward promoting financial inclusion across ten countries.

~ 37 ~

OBJECTIVE OF THE STUDY

1. To study the Financial Inclusion in Rural India

a) To study the Bank penetration
b) To study the account status
c) To study the saving pattern

RESEARCH METHODOLOGY
~ 38 ~

A broad definition of research is given by Martyn Shuttleworth - "In the broadest sense of the
word, the definition of research includes any gathering of data, information and facts for the
advancement of knowledge."
Another definition of research is given by Creswell who states - "Research is a process of steps
used to collect and analyze information to increase our understanding of a topic or issue". It
consists of three steps: Pose a question, collect data to answer the question, and present an
answer to the question.[
Research is often conducted using the hourglass model structure of research.The hourglass
model starts with a broad spectrum for research, focusing in on the required information
through the method of the project (like the neck of the hourglass), then expands the research
in the form of discussion and results. The major steps in conducting research are:

Identification of research problem

Literature review

Specifying the purpose of research

Determine specific research questions or hypotheses

Data collection

Analyzing and interpreting the data

Reporting and evaluating research

Generally, research is understood to follow a certain structural process. Though step order may
vary depending on the subject matter and researcher, the following steps are usually part of most
formal research, both basic and applied:

~ 39 ~

1.

Observations and Formation of the topic: Consists of the subject area of ones interest
and following that subject area to conduct subject related research. The subject area should
not be
randomly chosen since it requires reading a vast amount of literature on the topic to
determine the gap in the literature the researcher intends to narrow. A keen interest in the
chosen subject area is advisable. The research will have to be justified by linking its
importance to already existing knowledge about the topic.

2.

Hypothesis: A testable prediction which designates the relationship between two or more
variables.

3.

Conceptual definition: Description of a concept by relating it to other concepts.

4.

Operational definition: Details in regards to defining the variables and how they will be
measured/assessed in the study.

5.

Gathering of data: Consists of identifying a population and selecting samples, gathering

information from and/or about these samples by using specific research instruments. The
instruments used for data collection must be valid and reliable.

6.

Analysis of data: Involves breaking down the individual pieces of data in order to draw
conclusions about it.

7.

Data Interpretation: This can be represented through tables, figures and pictures, and
then described in words.

8.

Test, revising of hypothesis

~ 40 ~

9.

Conclusion, reiteration if necessary

A common misconception is that a hypothesis will be proven. Generally a hypothesis is used to

make predictions that can be tested by observing the outcome of an experiment. If the outcome is
inconsistent with the hypothesis, then the hypothesis is rejected .However, if the outcome is
consistent with the hypothesis, the experiment is said to support the hypothesis. This careful
language is used because researchers recognize that alternative hypotheses may also be
consistent with the observations. In this sense, a hypothesis can never be proven, but rather only
supported by surviving rounds of scientific testing and, eventually, becoming widely thought of
as true.
A useful hypothesis allows prediction and within the accuracy of observation of the time, the
prediction will be verified. As the accuracy of observation improves with time, the hypothesis
may no longer provide an accurate prediction. In this case a new hypothesis will arise to
challenge the old, and to the extent that the new hypothesis makes more accurate predictions than
the old, the new will supplant it. Researchers can also use a null hypothesis, which state no
relationship or difference between the independent or dependent variables. A null hypothesis uses
a sample of all possible people to make a conclusion about the population.
The goal of the research process is to produce new knowledge or deepen understanding of a topic
or issue. This process takes three main forms (although, as previously discussed, the boundaries
between them may be obscure):

Exploratory research, which helps to identify and define a problem or question.

Constructive research, which tests theories and proposes solutions to a problem or

question.

Empirical research, which tests the feasibility of a solution using empirical

evidence.

~ 41 ~

The research room at the New York Public Library, an example of secondary research in
progress.
There are two major types of research design: qualitative research and quantitative research.
Researchers choose qualitative or quantitative methods according to the nature of the research
topic they want to investigate and the research questions they aim to answer:

Maurice Hilleman is credited with saving more lives than any other scientist of the 20th
century.

Qualitative research
Understanding of human behavior and the reasons that govern such behavior. Asking a broad
question and collecting data in the form of words, images, video etc that is analyzed searching
for themes. This type of research aims to investigate a question without attempting to
quantifiably measure variables or look to potential relationships between variables. It is viewed
as more restrictive in testing hypotheses because it can be expensive and time consuming, and
typically limited to a single set of research subjects. Qualitative research is often used as a
method of exploratory research as a basis for later quantitative research hypotheses. Qualitative
research is linked with the philosophical and theoretical stance of social constructionism.

Quantitative research
Systematic empirical investigation of quantitative properties and phenomena and their
relationships. Asking a narrow question and collecting numerical data to analyze utilizing
statistical methods. The quantitative research designs are experimental, correlational, and survey
(or descriptive).Statistics derived from quantitative research can be used to establish the
existence of associative or causal relationships between variables. Quantitative research is linked
with the philosophical and theoretical stance of positivism.

~ 42 ~

The Quantitative data collection methods rely on random sampling and structured data collection
instruments that fit diverse experiences into predetermined response categories. These methods
produce results that are easy to summarize, compare, and generalize. Quantitative research is
concerned with testing hypotheses derived from theory and/or being able to estimate the size of a
phenomenon of interest. Depending on the research question, participants may be randomly
assigned to different treatments (this is the only way that a quantitative study can be considered a
true experiment). If this is not feasible, the researcher may collect data on participant and
situational characteristics in order to statistically control for their influence on the dependent, or
outcome, variable. If the intent is to generalize from the research participants to a larger
population, the researcher will employ probability sampling to select participants.
In either qualitative or quantitative research, the researcher(s) may collect primary or secondary
data. Primary data is data collected specifically for the research, such as through interviews or
questionnaires. Secondary data is data that already exists, such as census data, which can be reused for the research. It is good ethical research practice to use secondary data wherever
possible.
Mixed-method research, i.e. research that includes qualitative and quantitative elements, using
both primary and secondary data, is becoming more common.

Research Methods VS Research Methodology

Research methods are all those methods or techniques that are used for conducting research such
as various data collection methods, different types of sampling etc.
On the other hand, research methodology refers to the different steps that are followed by the
researchers in conducting research along with the logic behind them.
A Researcher should not only know the different research methods but also the methodology
behind them.

Research Design
~ 43 ~

A research Design is a complete scheme or programme of the research. It includes an outline of

what the investigator will do from research problem formulation to final analysis of data. Thus,
we can say research design includes the following:

a) Clear Statement of research problem.

b) Technique to be used for collecting data.
c) The target population to be studied.

d) Methods to be used in processing and analysis of data.

e)

Sources & Methods of Data collection

Secondary Data
Secondary data means that are already available that is they refer to the data, which have already
been collected and analyzed by someone else for its own use and later the same data is used by a
different user or person.
It is based on secondary source of information.
The source of data is called secondary because this data have already been collected, tabulated
and presented in some form by someone else for some purpose.
Data may be primary for one agency, may be secondary for the other and vice-versa.
For Example, the number of deaths and birth registered by a government office clerk constitute
Primary data while the same be secondary data for a student doing demographic research.

~ 44 ~

ADVANTAGES and DISADVANTAGES OF SECONDARY DATA

ADVANTAGES

It is economical-The amount of money spent in acquiring secondary data is generally less

than that needed to obtain primary data. The various secondary data from libraries can be
obtained at no cost.

Quickness-Secondary data is instant since it already exists and merely needs to be

discovered. Thus the time in collecting secondary data is largely search time and usually
requires few hours or few days.

DISADVANTAGES

Relevance- The data may not fit into the needs of current investigation. It may not be
related to the area of present enquiry or it may pertain to some other period of time.

In case of secondary data the researcher has no control over the data that is collected
since it is being collected by someone else. Therefore, the accuracy and reliability of the
collected data can be questioned.

COLLECTION OF SECONDARY DATA:

These are already available i.e. they refer to the data which have already been collected
and analyzed by someone else.

~ 45 ~

Secondary data may either be published or unpublished data.

Published Data: The various sources of published data are:

1. Published Thesis-There are a number of students engaged in research work at different

universities/institutions of the country.
2. Government Reports- Most of the government organisations, departments of central, state
and local governments publish regularly the statistical data on a number of subjects. for
example, ministry of agriculture and irrigation publishes monthly report on Agriculture
Situation in India.
3. International Reports: This includes official publications of international bodies like IMF,
UNESCO, WHO, etc.
4. Newspapers and Journals of repute, both local and international.
5. Official publications of RBI, and other Banks, LIC, Trade Unions, Stock Exchange,
Chambers of Commerce, etc.
6. Bye product of Administration-The data collected by different administrative
departments as their routine work. For example, death, birth registration.
7. Commissions Reports: The state and central governments appoint a number of
committees and commissions for the purpose of some enquiry. The reports of such
commissions and committees are submitted and published after a specific period.

Unpublished Data:
The various sources of unpublished data are:

Unpublished findings of certain inquiry committees.

Unpublished thesis submitted to a university for the award of Ph.D. Degree.

Unpublished material found with Trade Associations, Labour Organisations and

Chambers of Commerce.

~ 46 ~

METHODOLOGY

Research is common parlance refers to search for knowledge. In fact research is an

art of scientific investigation or it can be defined as a systemized effort to gain
new knowledge.

DATA SOURCE
Secondary data being the main source for the research was collected by the government
reports, newspapers, journals, and other published data websites.

DATA PRESENTATION AND ANALYSIS

No. of Current Accounts

1400000
1200000
1000000
800000
600000
400000
200000
0

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

~ 47 ~

2000

Cureent Account Amount

700000.00
600000.00
500000.00
400000.00
300000.00
200000.00
100000.00
0.00

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

2000

No. of Saving Accounts

70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

~ 48 ~

2000

Saving Account Amount

7000000.00
6000000.00
5000000.00
4000000.00
3000000.00
2000000.00
1000000.00
0.00

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

~ 49 ~

2000

No. of Term Accounts

12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

2000

Term Account Amount

5000000.00
4000000.00
3000000.00
2000000.00
1000000.00
0.00

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

NORTHERN REGION

NORTH-EASTERN REGION

EASTERN REGION

CENTRAL REGION

WESTERN REGION

SOUTHERN REGION

FINDINGS
~ 50 ~

2000

 Number of Branches Open from 2000-2010 (In 2000 the branches

Open is about 32673)
2000 to 2005= (-706) 31967
2005 to 2010= (352) 32320

Number of accounts open from 2000-2010

Current Account:-3652887
Saving Account:-96143912
Term Account: - (-1493955)

Number of amount saved from 2000-2010 in Lakhs

Current Account:-1956592
Saving Account:-16715233
Term Account:-11848028

SUGGESTIONS & RECOMMENDATIONS

~ 51 ~

 More banking outlets should be open.

Bank should provide financial education and awareness to rural
people.
Bank should provide employment assistance/entrepreneurial
guidance and support to the rural people.

BIBLIOGRAPHY
~ 52 ~

www.google.com

www.rbi.com

www.rural.nic.in

Conclusion

~ 53 ~

Finance is the lubricant, which oils the wheels of development. All economies rely upon the
intermediary function of finance to transfer resources from savers to investors. In market
economies, this function is performed by commercial banks, financial institutions and capital
markets. In many developing countries, capital markets are at a rudimentary stage, and
commercial banks are reluctant to lend to the poor largely because of the lack of collateral and
high transaction costs. The poor would borrow relatively small amounts, and the processing and
supervision of lending to them would consume administrative costs disproportionate to the
amount of lending.

~ 54 ~