A PROJECT REPORT ON FINANCIAL INCLUSION: A STUDY OF TAKING BANKING SERVICES TO THE RURAL POPULATION

DEVELOPED FOR

PREPARED BY RIDDHI BHATIA (11047) MBA BATCH 20102012

Founded: In 1985 as Kotak Capital Management Finance Ltd. by Mr. Uday Kotak and Sidney A.A. Pinto. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that is when the company's name was changed to Kotak Mahindra Finance Limited.

In February 2003, company was given the license to carry on banking business by the Reserve Bank of India (RBI).

Delivery of financial services at affordable costs to sections of disadvantage and low income segments of society. Financial Exclusion one major factor. FI is essential for overall economic growth. Key Focus:
A Pure savings product with inbuilt overdraft facility A recurring deposit product A remittance product Entrepreneurship credit in the form of KCC/GCC

Extending formal banking system among less privileged in urban & rural India. Weaning them away from unorganized money markets and moneylenders. Equipping them with the confidence to make informed financial decisions.

To know the priority of existing customers of banking sector. To know the satisfaction of existing customers of banking sector. To know the financial literacy of the people. To understand various aspects of financial inclusion. To analyse the initiatives to be implemented to achieve financial inclusion.

Exploratory type of research Sample Size: 1000 (specified by the bank) Primary data collection : Questionnaires Secondary data collection Area sampling used suggested by the bank ( in and around Ahmedabad) Areas covered: Dudeshwar, Bapunagar, Vadaj, Kalupur, Naroda, ThaltejGam, Rakhial, Asarva, Meghaninagar, Vatva, Sabarmati, Changodar, Kadi, Viramgham, Visnagar, Mehsana, Nadiad, Baroda, Bhayali, Padra, Por, Halol, Dahod, Rajkot

Relaxation of Know Your Customer (KYC) guideline for No-Frill accounts. Introduction of Business Correspondent (BC) Model for service delivery in remote areas. Financial Literacy and Credit Counseling (FLCC) Setting up of RUDSETIs Establishment of FIF and FITF Financial Empowerment through Mobile phones Swabhimaan

More than 54,000 No frills accounts opened under FI initiative. Started its ICT based FI Initiative at Mehsana District,Gujarat. Covered 30 villages by opening rural bank branches and 245 villages by engaging Business Correspondents.

Easy Savings Account offered through bank branches (No frills)

Initial Deposit: Rs. 100/ AQB: Rs. 100/ Free: Replacement of damaged card,Internet banking facility,Bank statement,Pass Book Etc.

Easy Savings Account offered through Business Correspondents (No frills)

Initial Deposit: Rs. 100/AQB: NIL Free: Account Opening,Cash Deposit Etc.

Khan Commission 2004

Featured in Pondicherry by K C Chakraborthy, the chairman of Indian Bank. No frills account KYC norms relaxed (annual deposits < Rs.50,000) Issuance of GCC NGOs and other intermediaries

RBIs vision by 2020 : to open nearly 600 million new customers' accounts and service them through a variety of channels by leveraging on IT.

AWARENESS OF BANKING FACILITIES

agri finance loan against lic loan against shares working capital loan against gold loan against property home loan personal loan car loan no answer 0 7 10 20 30 Series1 40 50 60 70 80 90 3 5 6

5
55 54 71 82

84

agri finance loan against lic loan against shares working capital loan against gold loan against property home loan 0

1 1 1 2 3 4 4 89

personal loan
car loan

no answer 0 10 20 30 40
Series1

50

60

70

80

90

100

machinery travel home shop accident theft motor marine fire health endowment pension money back permanent life insurance term life insurance no answer 0

6 11 17 8 11 36

13
54 65 7 54 40 65 62 14 10 20 30 40 50 60 70

machinery travel home shop accident theft motor marine fire health endowment pension

0 0 0 0 1 6 0 2 12 0 0 2 12 9

money back permanent life insurance

term life insurance no answer 0

70
10 20 30 40 50 60 70 80

AWARE ABOUT MOBILE BANKING

24%

yes 51% no

25%

12 fixed deposit a/c 14

9 recuring a/c 4

17 current a/c 31

126 saving a/c 205

50

100
Outside A'bad Ahmedabad

150

200

250

Products Processes Technology People Outreach

Financial illiteracy Low and cyclical income Minimal collateral Lack of credit history Absence of formal and verifiable identity General illiteracy Apprehension of bureaucracy social oppression Credit primarily for personal consumption

Appropriate products Financial counseling Increased accessibility Simplified procedures Improved public interface Leverage modern technologies Provide information in local languages Lower transaction costs Educate youth in rural areas

Main barriers from customers side:

Lack of awareness of financial services Social exclusion Unsuitable products Unfriendly and distant behavior by the bank staff Exorbitant & non-transparent fees Terms & conditions

Main barriers from implementer's side:

Lack of communication Language barrier Cost of infrastructure, technology, etc. leading to high costs. Products