Financial Inclusion in Hooghly

Author(s): CHIRODIP MAJUMDAR and GAUTAM GUPTA

Source: Economic and Political Weekly , MAY 25, 2013, Vol. 48, No. 21 (MAY 25, 2013),
pp. 55-60
Published by: Economic and Political Weekly

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NOTES

The article is organised as follows:

Financial Inclusion in Hooghly Section i defines financial inclusion and
briefly describes initiatives taken in India
to achieve this. Section 2 describes the

CHIRODIP MAJUMDAR, GAUTAM GUPTA survey design and the sample selection
methodology. Section 3 reports the ex
The Reserve Bank of India has tent of financial inclusion and the role of

growth strategy followed by the Gov agents in achieving the target in the dis
directed all banks to maintain
"no-frills accounts" - a bank
It ernment
has been recognised
of India (goi) could not en that the trict. Section 4 identifies the financially
sure that the fruits of growth reach the excluded categories. Section 5 investi
account at zero balance - for poorest of the poor and the marginal gates whether the no-frills accounts
100% financial inclusion so as to ised, underprivileged sections of the scheme is able to include the financially

population; the benefits of growth have excluded categories. Section 6 concludes

include all households under the
not percolated down to the bottom. with the necessary policy implications.
ambit of the formal financial
The benefits of economic growth have
1 Initiatives for Financial Inclusion
sector. This study conducted in not been shared equitably. Rising
inequality calls for an emphasis on Financial inclusion implies access to
2008 in Hooghly district of
inclusive growth and measures for social formal sector financial services for all
West Bengal reveals that the
protection and this has resulted in the sections of the population. In a broad
scheme has been largely introduction of various national schemes sense, it implies inclusion of the entire
unsuccessful in the financial such as the Food Security Mission, Rash adult population under the ambit of bank

inclusion of excluded categories triya Krishi Vikas Yojana, Sarva Shiksha ing and financial services, loan facilities,
Abhiyan, Rural Employment Guarantee insurance options, etc, or the ability to
such as the scheduled castes,
Scheme, and Rural Health Mission. choose to use these services. In a strict
scheduled tribes, Other Backward One bottleneck to inclusive growth is sense, financial inclusion implies inclu
Classes and those who are less the lack of participation of all sections sion of at least one member of each house

of the population in formal banking hold in formal sector banking services

educated. The survey revealed
activity. Access to credit at a moderate through a deposit account. This article
that this scheme is ill-targeted considers a household to be included if
rate of interest is necessary for empower
and the benefits are reaped by the any member of that household has an
ing the poor and vulnerable, and to
higher classes of society. address poverty. account in a bank or post office.
To make growth inclusive for all sec Steps taken towards financial inclusion
tions of society, initiatives have been in India have a long history. The introduc
taken to make banking and other finan tion of cooperative banks for financing
cial services easily accessible. The first agricultural credit in the late 1950s,
such initiative was the Reserve Bank of branch licensing policy and use of com
India's (rbi) policy statement of 2005-06 mercial banks in priority sector lending
to achieve 100% financial inclusion. One after the nationalisation of banks in 1969,
of the measures that followed the initial induction of regional rural banks in 1975,
reduction in cash reserve ratio and statu
guideline directed commercial banks to
open "no-frills accounts", i e, accounts tory liquidity ratio to release more loana
requiring no minimum balance, aimed ble funds in the post-liberalisation phase,
at the poor (rbi 2006). initiation of microfinance by the National

The authors are grateful to the Reserve Bank This article reports the results from a Bank for Agricultural and Rural Develop
of India for funding the study and permitting • survey of 20,753 households to observe ment (nabard) in 1992 linking self-help
us to use the data and for the support received the extent of financial inclusion from groups with banks, and the introduction
from Anup Dewanji for helping with the
183 villages and 61 municipal wards of the Kisan Credit Card (kcc) scheme in
random selection of sample units by
of Hooghly district in West Bengal in 1998 were measures to improve financial
appropriate statistical software.
2008. The financially excluded are cate inclusion (Subba Rao 2007).
Chirodip Majumdar (chiro_m@rediffmail.com) To tackle the problem of financial ex
is with the Department of Economics at
gorised on the basis of their socio
economic characteristics. This article clusion and to use inclusion as an engine
Rabindra Mahavidyalaya, Champadanga
in Hooghly and Gautam Gupta is with the further investigates how the no-frills of participation and poverty alleviation,
Department of Economics at Jadavpur accounts scheme is able to target the several steps have been taken by the
University in Kolkata.
financially excluded. Goi in recent years. The term financial
55
Economic & Political weekly ESE3 may 25, 2013 vol xlviii no 21

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NOTES

inclusion was used by the rbi for the villages and the district is mainly agri- inclusion, identify socio-econo
first time in its annual policy statement cultural in nature with paddy and pota- gories of the excluded househ
of 2005-06 and several measures have toes being the two main crops produced the categories of households o
been taken since then to achieve this, in the district. The standard of living of the benefit of no-frills accoun
The introduction of no-frills accounts the district with respect to other districts
with low or zero minimum balance and of West Bengal is shown in Tablet, which 3 The Role of Agents
general purpose credit card, relaxation clearly shows that the position of the dis- After the directives issued by
of "know your customer" (kyc) norms, trict relative to most other districts of 100% financial inclusion, eff
and the introduction of business corre- West Bengal in terms of standard of liv- been made for some time in
spondents/facilitators in rural areas to ing indices is high. The literacy rate and country to attain this objectiv
bring banking services to the farmers' school enrolment rate, macroeconomic bank in Hooghly district along w
doorstep are some notable measures. indicators on education, are 75.59% and commercial banks, local self-gov
More recently, (i e, after this study was 66.4%, respectively and is better than institutions, district administr
completed) in response to the Rangarajan many other districts of West Bengal. The worked sincerely in this d
(2008) Committee Report on financial 25% infant mortality rate means the dis- this study, the households wer
inclusion, the Financial Inclusion Fund ' trict has performed relatively better than and surveyed to obtain inf
(fif) and Financial Inclusion Technology other districts on the health front. financial inclusion.
Fund (fitf) were established with nab- Efforts have been made in the district We asked our respondents, pr
ard. fif supports developmental and to attain the targeted goal of financial the head of the household
promotional activities to financially in- inclusion in recent years. This article whether any member in her/
elude underprivileged people and cover attempts to measure the extent of hold had a saving account in the b
backward areas, fitf aims to increase success so far achieved in the district post office. Of the 17,128
investment in information communica
Table
Table 1: Standard
1: Standard
of Livingof
of Hooghly
livingCompared
of Hooghly
to OtherCompared
Districts of West
to Bengal
Other Districts
tion technology to promote financial in- District HDIRank
District HDIRank StandardofLiving
Standard of Rural Occupation
Living RuralMain Workers as a Main
Occupation % %ofBe
W
Measured (Rs) Structure of Total Workers Level (BPL)
elusion. The main purpose of these funds
. on the Basis Rural PerBasis
on the Month
Measured
Urban
Rural PerPer
(Rs)Urban
Month
Month
Structure
Farmers
of Total Workers
and Non-agricultural
Per Month Farmers and Male
Level M(
Female Househ
Non-agricultural
IS tO make funding support to businessof
ofIncome,
Income, Per Capita
Per Capita Per
Per Capita Capita Agricultural
Agricultural Labourers
Labourers as a Rural Urban as a Rural U
Education and Expenditure Expenditure Labourers % of Total
facilitators/correspondents, promotional Education
. Health Index
Health as
and Expenditure
a %
Index as of
a %Total
Expenditure
Workers
of Total Workers
Labourers % of Total
support to institutions such as self-help Workers Workers

groups, local level institutions, farmers'

HooghlyHooghly
6 486.96 723.03
486.9 723.03
55 45 55 26.13
45 26.13 4.20
4.20 20.4311.43
20.43 11.43
clubs, providing financial (5)
support to (5)(6)
(10) 00) (6)
(7)(7)
technological institutions etc. Ranks are denoted within parenthesis and calculated ou
J , The highest in standard of living indicators is ranked 1 and the low
NABARD and the United Nations Deve- The district having lowest percentage of BPL household

lopment Programme (undp) have under- Source: GoWB (2004)

taken a joint venture to design pro-poor through a sample survey of s
financial products and doorstep delivery households. Appropriate statist
of financial services in seven undp focus ware was used to randomly s
states. A shift in policies where more em- villages across all 18 blocks
phasis is given to delivery of financial municipal wards across all 12 m
services has been observed in recent times, palities of the district where
But investigative studies such as that of survey was conducte
Chavan (2007), Deb and Rajeev (2007), A questionnaire developed in
and Bhatia and Chatteijee (2010) conclude was finalised after several ro
that such steps were not able to meet the focus group discussions and p
expected goals in many parts of India. The questionnaire was kept shor
concise so that the respondent's atten- of inclusi
2 Survey Design tion could be retained during the sur- ban and semi-urban areas) was 69.19%.
and Sample Selection vey. Surveyors trained by the present Not surprisingly, the rate of inclusion in
Hooghly district in West Bengal is authors administered the questionnaire municipalities was considerably higher
spread over 3,149 sq km. It has a popula- to the head of the household and a total
tion of over 50 lakh as per the census of 22,051 households were surveyed of EconODlÍC&PolÍtÍCcllWEEKLY
estimates of 2001. The district, with its which 20,753 households were retained available at
headquarters at Chinsura, is bounded by across these 183 villages and 61 muni
Uniquality
the districts of Howrah, 24 Parganas (n), cipal wards after eliminating incomplete
Burdwan and Medinipur, and is divided and inconsistent questionnaires. V303 l3^' ®aPu^ee ®azar
n , . . - lii j . . , , Bhubaneshwar 751 009, Orissa
into 18 administrative blocks and 12 The primary Ph:
intention of the surv
2530064, 2530024
municipalities. There are 1,886 inhabited was to observe the extent of financia

56 may 25, 2013 VOL XLVlll NO 21 Q23 Economic & Political weekly

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 = NOTES

Figure 1:
than in blocks. In aggregate, 10,632, i Financial
e, FigureInclusion
I: across Blocks andInclusion
Financial Municipalities: across
Toppers and Backbenchers
Blocks and Municipalities: Topp
% included % included
51.23% of the 20,753 surveyed house- 0 20 ""eo so 0 20 To" so ,00 20 40 60 80 100

holds were found to be financially Goghat-I 66.25 Konnogar

included. This is reported in Table 2.
An inspection of block level data re- Pursura ■■■¡■■■i 62.06 _ uttarpara
veals that the rate of inclusion is better
Blocks
in Goghat-i, Purshura and Chinsurah- Magra
Blocks
Magra blocks. The scenario is depress- chanditaia -11 a— 35.9 s chinsurah
Chanditala - II

ing in Chanditala-n, Khanakul-i and Bansberia

Chanditala-i blocks. The rate of inclu
sion varies from 66.25% in Goghat-I to Chanditaia-I MMHWH—B 39.12 Arambagh
35.9% in Chanditala-11. The level of
financial inclusion in the worst perform- of inclusion is as high as 83% in Konnogar A supply-side improvement in term
ing block is only 54% of the level of in- municipality, the rate is a low 52.2% in of increase in bank branches is a tool t
elusion achieved in the best performing Chinsurah municipality. The coefficient of reach the goal of 100% financial inc
block. A moderate variation in financial variation of the rate of financial inclu- sion. The number of all scheduled co
inclusion is manifested by a coefficient sion across municipalities is 15.4% and mercial bank branches in India increas
of variation of 17.92% across blocks. comparable with that across blocks. The from 57,262 in 2005-06 to 71,998
Konnogar, Uttarpara and Bhadreshwar leaders and backbenchers across blocks 2009-10 (rbi 2010) and the intention i
are the three municipalities that top across and municipalities are shown in Figure 1. to reach out to all corners and bring the
municipalities according to the rate of More effort to reach the financially ex- excluded within the financial system. T
inclusion while Chinsurah, Bansberia and eluded is to be exerted in blocks and mu- respondents in this survey were ask
Arambagh lag behind. Whereas the rate nicipalities that have performed poorly. whether they felt they had a bank near
» u. , r „ . ... Less that 75% of respondents in seven
Table
Table 2:2: Extent
Extent ofof Financial
FinancialInclusion
Inclusionin inSurveyed
Surveyed Blocks/Municipalities
Blocks/Municipalities r
Name
Name ofthe Block/Municipality
of the NumberNumber
Block/Municipality Number of of
ofVillages
Number Households
Households
or
of Villages
Number Financially
or Number of Financially
of Financially out of 18 blocks - Arambagh, Balaga
Included Households Excluded Households
Municipal
Municipal Wards
Wards Surveyed
Surveyed
Surveyed Chanditala-11, Chinsurah-Magra, Harip
Blocks Arambagh 14 1,572 739 (47.01)
(47.01) 833 (52.99)
(52.99)
Pandua and Tarakeshwar - reported th
Balagarh 13 1,355 626 (46.2) 729 (53.8)
(53.8)
they did have a bank nearby. The sa
Chanditaia-1
Chanditala-1 6 795 311 (39.12) 484
484(60.88)
(60.88)
number across municipalities was on
Chanditala-11
Chanditala—II 4 702
702 252
252(35.9)
(35.9) 450(64.1)
450 (64.1)
5 635
635 394
394(62.05)
(62.05) 241
241(37.95)
(37.95) three - Baidyabati, Bansberia and Ch
Chlnsurah-Magra
Chirisurah-Magra
Dhanlakhall
Dhaniakhali 21 1,236 576 (46.60)
576 (46.60) 660 (53.40) surah. Steps need to be taken to reach
Goghat-I
Goghat-1 10 797
797 528
528(66.25)
(66.25) 269 (33.75)
269 (33.75) to more people by extending banki
Goghat-ll
Goghat- II 10 586
586 239 (40.78)
239 (40.78) 347 (59.22) services in these blocks and municipalit
Haripal 14 1,592 766(48.12) 826 (51.88) Moreover, a very small proportion
Jangipara 12 1,190 511 (42.94) 679 (57.06)
679 (57.06)
respondents reported that banks, lo
Khanakul-I 9 931 363
363 (39.00)
(39.00) 568 (61.00)
568 (61.00)
self-government institutions or the adm
Khanakul — II 4 561 275 (49.02) 286(50.98)
286 (50.98)
stration have tried to motivate them
Pandua 16 1,292 612(47.37)
612(47.37) 680 (52.63)
680 (52.63)
19 1,146 464 (40.49) 682 (59.51) open an account. This is a clear sign t
Polba
Polba Dadpur
Dadpur
Purshura 5 601
601 373
373(62.06)
(62.06) 228
228(37.94)
(37.94) these institutions should play a mo
SerampurUttarpara
Serampur Uttarpara 2 301 174(57.81)
174 (57.81) 127(42.19)
127(42.19) effective role to attain the stated object
Singur 10 1,166 584 (50.09) 582(49.91)
582 (49.91)
Figure
Figure2: Coverage 2:
of Financial
Co
Tarakeshwar 9 670
670 337
337 (50.30)
(50.30) 333
333 (49.70)
(49.70) Households
Households by Different Bankb
Block
Block TotalTotal 183
183 17,128 8,124 (47.43) 9,004(52.57)
9,004 (52.57) Others UCO
4 200 119(59.50) 81 (40.50) 12% 8%
Municipalities Arambagh UNITED
Baidyabati 6 300 222 (74.00) 78 (26.00)
Bansberia
Bansberia 6 248
248 132(53.23)
132(53.23) 116(46.77)
116(46.77)
Bhadreshwar 5 200
200 161
161 (80.50)
(80.50) 39(19.50)
39 (19.50)

Chandannagar
Chandannagar 5 200 134(67.00)
134(67.00) 66 (33.00)
(33.00) PNB

Chapdani 2 200
200 152
152(76.00)
(76.00) 48(24.00)
48 (24.00) 5%

Chinsurah
Chinsurah 6 500
500 261
261 (52.20)
(52.20) 239(47.80)
239 (47.80)
Central Bank
Konnogar 5 500 415 (83.00) 85
85(17.00)
(17.00)
/
Rlshra
Rishra 4 401
401 252
252 (62.84)
(62.84) 149 (37.16)
149(37.16) Bank
Bankofof India
4%
Serampore 8 376 277 (73.67) 99 (26.33)
Tarakeshwar 4 200
200 137(68.50)
137 (68.50) 63(31.50)
63 (31.50)
The respondents were asked to report
Uttarpara 6 300
300 246
246(82.00)
(82.00) 54(18.00)
the name of the bank where they had an
Municipality Total
Municipality Total 61 3,625 2,508(69.19)
2,508 (69.19) 1,117(30.81)
account. The role of different banks in
Grand Total -
-

20,753
20,75310,121
10,632
10,632 (48.77)
10,121 (51.23)
(51.23)
(48.77)
Percentage in parenthesis. financial inclusion is shown in Figure 2.
Economic & Political weekly E32S3 may 25, 2013 vol xlviii no 21 57

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 NOTES = . =

It was
Figure 3: found
The Most Excluded
% of Total
holds have
0 20 40 60
-| ' -*
bank or the State Bank of 1India
42.6
Non-Hindus
Non-Hindus
(sbi). them
■llllMBlillll—■■IBIIBBHB
(religion)
(religion)
w
This manifests the importance
r~
Included x—Excluded
of
erative banks in financial inclusion in spection of the data ■
SCandSTscandST(dai¡t)KQjHH^I
(dalit) I 34.3 . 65J
Hooghly district. also reveals that a lot | Agricultural labourer
| Agricultural labourer and 1 27.77 and
■ i 72.23
72,23 - j
is yet to be done to S" §? daily worker (occupation)
dally worker (occupation) I
I
4 Who Are financially include u Illiterateu Illiterate
or andcan barely read! i H I&8M
or can barely read
write (education)
77.1*
77,14 ■■■■1

Financially Excluded? people belonging to Below Rs 2,500 | 36.14 63.86 ll|

We asked the respondent from each sur- the scheduled caste (monthlyIncome"
(monthly income) 63 — -
veyed household to report socio-economic (sc) and scheduled
characteristics such as religion, caste, tribe (st) categories and people with least 183 days of paid work in a year are
primary occupation, the highest level of low education and income level. This classified as main workers. Naturally,
education attained by any member of the is expected and consistent with the fact such persons are expected to have a bank
household, monthly household income, that people belonging to the minority account. On the other hand, marginal
etc. Table 3 reports this socio-economic communities, underprivileged castes, workers are mostly seasonally employed
break-up of the households surveyed, agricultural labourers, daily workers and often fight for subsistence; they often
The surveyed households were mostly and persons with low educational at- do not have a surplus to save. Apart from
Hindus, belonging to general caste and tainment and monthly income are the economic considerations, demographic
with a low earning capacity. Column 4 of most excluded. and social characteristics may also explain
Table 3 reports the proportion of finan- Figure 3 shows the most excluded the variation. Blocks/municipalities that
dally excluded households with respect according to different socio-economic are inhabited mainly by Hindus are ex
to total households surveyed in a partie- categories. The result is quite predictable pected to perform better in financial in
ular socio-economic category. in that the minorities, underprivileged elusion whereas blocks/municipalities
The survey found 11.51% of the sur- castes, marginal workers, uneducated inhabited mainly by ses and sts are ex
veyed households were Muslims and the and the poor are the most excluded. The pected to lag behind. An indicator of
Table
Table 3: Financial Inclusion/Exclusion
3: Financial by Socio-economic Criteriaby
Inclusion/Exclusion tw0 most troubling fea- education
Socio-economic such as the literacy rate may
Criteria
Socio-economic
Socio-economic Criteria íA/Rvinn ír/AVMnn m/Aï*inn
Criteria (A/B)*100 (C/A)*100
(A/B)*100 (D/A)"100
(0*1*100 (D/A)*100 tures of financial exclusion have a positive relation with the rate of
(1) (1) (2) (3)(2) (4)
(3) (4)
is the non-participation of financial inclusion,
Hindu 87.52 87.52
Hindu 52.51
52.51 47.49
Religion uneducated households and Hooghly district is well known in
Muslim
Muslim 11.51
11.5143.61
43.6156.39
workers who are mostly West Bengal for its network of coopéra
Others 0.97 30.50 69.50

Caste General 64.29 58.96 41.04

marginal. tive societies. According to estimates ob
Scheduled castes 25.11 34.55 65.45
it is interesting to ask tained in 2007-08, the total number of
Other Backward Classes 5.89 54.08 45.92 why the rate of financial members in all credit and non-credit co
Scheduled tribes 4.71 32.99 67.01 inclusion varies across operative societies in the district was
Occupation Agricultural labourer 23.94 27.55 72.45 blocks and municipalities, more than three lakh (gowb 2008). At
Cultivator 23.11 65.79 34.21 As the blocks are rural and taining financial inclusion front was ex
Daily worker 20.12 28.04 71.96
municipalities urban, it is pected to be better where cooperative
Business 13.15 72.83 27.17
logical to segregate the societies had reached out. Table 4 reports
16.74
Service 12.95 83.26
district into blocks and the rank correlation coefficient of select
Others 6.73 51.77 48.23
municipalities and search ed variables across blocks and munici
Education Illiterate 6.46 19.51 80.49
for the causes of variation, palities. All rank correlation coefficients
11.83
Can barely read and write 24.69 75.31
A variation in economic, were found to have expected signs, but in
Class 1-5 15.17 31.50 68.50

Class 6-8
5-8 20.64 45.17
45.17 54.83 demographic and social most cases the strength of the relationship
17.24 57.67 42.33 Table
characteristics is expected Table 4: Rank 4: Rank
Correlation Correlation
Coefficient of Selected Coeffic
Class 9-10
Variables with Rate of Financial
Class 11-12
Class 11-12 11.01
11.01 72.59 27.41 to explain the variation in Variables with Rate of Financial Inclusion across
Blocks
Blocks(Rural) and Municipalitiesand
(Rural) (Urban) Municipalities
Up to college level 14.83 85.81 14.19 the rate of financial inclu Variables Financial
Financial inclusion Inclusion
Blocks Municipalitie
Above college level 2.82 91.49 8.51 sion. Disaggregated data Blocks Municipalities

Poverty
PovertyratloA ratioA -0.18
-0.18Not available
Monthly income Below Rs 2,500 67.62 36.14 63.86 on the rate of poverty and
Literacy rate* 0.31 0.24
0.24
Rs 2,500-Rs 5,000 21.91 77.18 22.82
employment are indicators 0.01 0.50
%
%of
of main
main workers*
workers*
Rs 5,001 - Rs 10,000 8.25
8.25 95.11 4.89
of economic conditions of
% of Hindu
Hindu population*
population* 0.72 0.28
0.28
Rs 10,001 - Rs 20,000 1.97 97.52 2.48
people living in that area. % of SC and ST population* -0.05
ST population* -0.61
-0.61
Above
Above Rs Rs 20,000 0.25
20,000 0.25 96.15
96.15 3.85

A = number of households surveyed belonging to a particular socio-economic

Employed persons are Numberofof
Number cooperative
cooperative
societies
societies Not Not
members* 0.080.08
members* available
available
category; B = total number of households surveyed; C = number of financially classified as main and mar
included households belonging to a particular socio-economic category; ginal in data On emDloV- A RHS(2005);Blockwiththelowestratioisassignedrank1.
D = number of financially excluded households belonging to a particular ® . *GoWB (2008); Block/municipality with the highest rate/%/
socio-economic category. ment. Persons getting at number is assigned rank 1.
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 = NOTES

was not too strong. The rank correlation survey of Hooghly district, only 1,041 the benefi
coefficient between the rate of financial households among 10,632 financially in- success of t
inclusion and the percentage of main eluded households reported possessing a the so fa
employment in municipalities was high no-frills account. When asked to report most of th
but similar coefficients with the rate of the name of the bank that had provided should mai
poverty and employment variables are the account, it was found that most of munities, da
not noteworthy. Whereas the economic the no-frills accounts had been provided uneducate
variables were found to have no major by cooperative banks, the United Bank ports the soc
role in explaining variation in the rate of of India and sbi. The major role of coop- the househ
financial inclusion across blocks and mu- erative banks in opening of no-frills ac- It is found
nicipalities, the demographic and social counts is presented in Figure 4. Whereas eluded cat
factors were important explanatory var- 28% of financially included households fited from
iables. A very high rank correlation co- had an account with a cooperative bank, as 57.45% of
efficient of 0.72 between the percentage above 40% of the no-frills accounts were were foun
of the Hindu population and the rate of found to be provided by a commercial 14.19% had
financial inclusion signals that banks bank. The agricultural cooperative move- Poor target
have to take several steps to reach out to ment has a long history in Hooghly dis- manifested
the minorities. trict. This existing institutional strength below the poverty
The same rank correlation coefficient is to be further developed as an instru- had a no-fril
Table 5: No-Frills Accounts as Per
across municipalities was relatively small ment of change. Table 5: No-Frills A
, . , , . , Socio-economic Socio-economic Criteria Criteria
implying that Figure people from
4: Bank Coverage of No-Frills Accounts the minority
Socio-economic
Socio-economic Criteria
CriteriaTotal No-Frills Figur
Total No-Frills

communities had been included in the Others UCO Accounts

Accounts Held by a bya
Held
Particular
Particular Category (%)
Category (%)
financial sector in municipal towns. The Hindu
Hindu 85.81
85.81
Religion
rank correlation coefficient between the Muslim
Muslim 13.71
13.71

percentage of dalit population and the Others

Others 0.48

rate of financial inclusion was found to Caste General 70.83

Scheduled caste 16.30

16.30
be negative; however, this relationship
Other
OtherBackward
BackwardClasses
Classes 8.58
8.58
was very strong in the municipalities.
Scheduled
Scheduledtribe
tribe 4.29
The literacy rate had a modest relation
Occupation Agricultural labourer 13.68
13.68
ship with financial inclusion in both Cultivator
Cultivator 27.56
blocks and municipalities. It has been Daily
Daily worker
worker 10.24
10.24

already mentioned that the cooperative Opening of no-frills accounts gained Business 19.81
19.81

societies had played an important role in momentum after the rbi order of 2005. Service 25.36

financial inclusion in the district but the It was found that only 20% of no-frills Others
Others 3.35

Education Illiterate 1.76

1.76
relationship between the number of co- accounts had been opened in the last
Barely read and write 8.40
operative members and financial inclu- two years prior to the survey in the dis 11.62
Class 1-5
Class 1-5 11.62
sion in explaining variation across blocks trict, i e, during 2006-07. This is a sign Class 6-8 19.04
was quite weak. Thus, the variation in that the commendable achievement in Class 9-10
Class 9-10 19.04
19.04

the rate of financial inclusion was mostly opening no-frills accounts have been Class 11-12 13.77

explained by the social composition of made after the initial rbi directive. The Up to college level 22.07
22.07

Above college
college level
level 4.30
the population. The personal and cultural banking habit of no-frills account holders
BPLcard
BPLcard Non-holders
Non-holders 75.90
75.90
characteristics of some people may also is also an important point of concern. It
Holders 24.10
have been a barrier to financial inclusion, is generally true that these accounts
often become inactive and later expire. A very high proportion of agricultural
5 No-Frills Accounts and When respondents were asked to report labourers and daily wage workers were
Financial Inclusion the iast time the account holder had visit- excluded, underscoring the fact that the
The decision of opening no-frills accounts ed the bank, 25% of no-frills account hold- benefits of a government programme are
was taken to make growth inclusive for ers reported they had not operated their often reaped by the socially and econom
all sections of society by making banking account in the previous three months, ically advanced sections. The result is an
and other financial services easily accès- An identification of such accounts and indication that more careful targeting in
sible to all sections of the population, suitable steps to keep such accounts selection of households for no-frills ac
Commercial banks are the most important operative is necessary. counts should be done. It is often the case
agents in making the plan successful. Another investigation made during that service providers do not find these
After the directive issued by the rbi, the study was to check whether the so- excluded categories cost-effective cus
commercial banks are trying to extend daily and economically backward cate- tomers of the financial system. This atti
the facility of no-frills accounts. In our gories of population are actually getting tude is reflected in the provision of no-frills

Economic & Political weekly ¡3SSÁ may 25, 2013 vol xlviii no 21 59

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NOTES

Table
Table 6;
6: Explanatory
ExplanatoryVariables
Variablesof of
Savings
Savings
Behaviour
Behaviour
of No-Frills
of No-Frills
Account
Account
Holders
Holders incentive to such account holders to con
Abbreviated
AbbreviatedForm
Formofof Description
Description of the
of the Variable Variable Mean
Mean Standard
Standard Coefficient
the Variables Deviation (P Values in
tinue their accounts. How the specific
Parentheses) needs of the poor can be served through a
CLOSBAL bank account needs to be stressed further.
(dependent variable) Last balance
Last balanceheld
held
in in
thethe no-frills
no-frills account 4,156.85
account 4,156.85 6,647.59 -

It was found in the study that opening

Explanatory - - -

Constant
-337.7529
(0.5833) no-frills accounts is not well-targeted in
RELGDU =1, If
=1, Ifthe
thehousehold
household belongs
belongs to Hindu
to the the Hindu
0.86 0.86 0.35
0.35 -55.5549 the district. The most excluded catego
religion (0.9197) ries of the population in terms of reli
= 0, Otherwise
gion, caste, occupation, education or in
CASTDU =1, If
=1, If the
thehousehold
householdbelongs
belongs
to to
thethe 0.71
general
general 0.71 0.46 1006.0739
come have not benefited from no-frills
caste category (0.0170)**
= 0, Otherwise accounts. There are signs that the upper
OCCUDU =1, If most
most of
of the
the household
household income
income is
is earned 0.25
earned 0.43
0.43 1252.3133
0.25
classes of the society in terms of social
from salary (0.0073)*
= 0, Otherwise
and economic status are reaping the
YRSCHL years devoted
Number of years devoted on
on education
education by the9.02
by the 9.02 4.59 154.0453 benefits. Banks are not positive in tar
most educated person in the household (0.0011)* geting the most excluded sections as
INC Monthlyincome
Monthly income
of of
thethe household
household in Rsin Rs 3,865.273,865.27 3,719.25 0.6008
they prefer to deal with a small number
(0.0000)*
LOANDU
of large accounts than a large number of
=1, If
=1, If the
the household
householdhas
hastaken
taken loan
loan from 0.33
from 0.33 0.47 -578.5345
any sources
sources (0.1586) accounts with meagre balance.
= 0, Otherwise
Otherwise It is to be acknowledged that the pro
Number of observations used 1,041; Joint significance: F value = 46.29 *; Adjusted R2 = 0.21;
vision of no-frills accounts in the district
* Denotes significance at the 1% level. ** Denotes significance at the 5% level.
may be successful in including some ex
cluded households but there is no doubt
accounts for the economically and socially reluctant in providing no-frills accounts
advanced categories of people. to people belonging to the lower strata
that the financial system, while provid
Further, households having no-frills of the society, ing no-frills accounts, has worked in a
accounts were asked to report the last way that favours the economically and
closing balance held in their account. 6 Conclusions socially powerful. Commercial banks
The savings behaviour of the no-frills This article found that the rate ofshould
finan acknowledge that the high vol
account holders reveals that the socially cial inclusion is around 50%.ume House
of deposits that these poor house
and economically advanced categories holds belonging to minority communi holds bring in together can make them
of people maintained a higher balance ties, backward classes, people whoprofitable
are customers, even though the
in their accounts. An ordinary least below the poverty line, illiterate, people
transaction cost of serving them is high
square (ols) regression was run to iden- working as agricultural labourersandand
the per account profit margin low.
tify explanatory factors of variation workers often on daily wage basis were
in the last closing balance held by no- the most excluded. It is to be acknowl
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