lucky- financial inclusion - copy (1)

7/25/2019 Lucky- Financial Inclusion - Copy (1)

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PROJECT REPORT

ON

Study on Financial Inclusion in Banks

A Comparison beteen SBI Bank and ICICI Bank

Submitted by

!AJ"I #$C%& NARASIN'"

Roll No( ) *+

T,&,B,!,S,

$N-ER T"E '$I-ANCE OF

PROF, !E'"A NAIR

Submitted to $ni.ersity o/ !umbai in partial /ul/ilment

O/ t0e re1uirements /or t0e aard o/ de2ree o/

BAC"E#OR OF !ANA'E!ENT ST$-IES

PAT$C% 'A#A CO##E'E OF CO!!ERCE 3 !ANA'E!ENT

SANTACR$4 5E67 !$!BAI) 8***99

:*;9):*;


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CERTIFICATE

This is to certify that the project titled =ST$-& ON FINANCIA#

INC#$SION IN BAN%S, A CO!PARSION BET>EEN SBI BAN% AN-

ICICI BAN%? is a true and satisfactory work done by !a@0i #ucky

Narasin207 T,&,B,!,S,7 3Roll No( *+. The reportI submitted to University of

Mumbai in partial fulfilment for the requirements of the award of the degree of

=BAC"E#OR OF !ANA'E!ENT ST$-IES?for the academic year :*;9)

:*;


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-EC#ARATION

I !AJ"I #$C%& NARASIN'"& student of atuck$!ala %ollege of

%ommerce ' Management& T,&,B,!,S,hereby declare that I have completed

the project on =ST$-& ON FINANCIA# INC#$SION IN BAN%S, A

CO!PARSION BET>EENSBI BAN% AN- ICICIBAN%?in the academic

year :*;9):*;


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AC%NO>#E-'E!ENT

It is my earnest and sincere desire and ambition to acquire profound knowledge in the study

of 3anking and Insurance. I have had considerable help to advice at very outset of this

roject. It is my pleasure to acknowledge the help and guidance that I had received from

those personnel and to thank them individually.

4irst of all& I e#pect my sincere thanks to 5r. 6Mrs.7 Meeta athade& I8% rincipal for having

given me a chance to undergo the project work.

Secondly& I convey my sincere thanks to the %ourse %o$ordinator& Mrs 3yshi anikar for her

valuable suggestions and co$operation which helped me to complete the project successfully.

The completion of the project is a milestone in the life of the management student and its

e#ecution is inevitable without the co$operation of the project guide. I am deeply grateful to

my project guide rof. Megha air for her valuable ideas& required suggestions and

encouragement for refining this project study.

4inally& I thank all the staff members and my friends for their valuable support and

contribution to my project.


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EEC$TIE S$!!AR&

4inancial Inclusion is delivery of banking services of an affordable cost to the vast sections of

disadvantaged and low income groups. (s banking services are in the nature of public good& it

is essential that availability of banking and payment services to the entire population without

discrimination is the prime objective of the public policy. The banking industry has shown

tremendous growth in volume and comple#ity during the last few decades. 5espite making

significant improvements in all the areas relating to financial viability& profitability and

competitiveness& there are concerns that banks have not been able to include vast segment of

the population& especially the underprivileged sections of the society& into the fold of basic

banking services. Internationally efforts are being made to study the causes of financial

e#clusion and designing strategies to ensure financial inclusion of the poor and

disadvantaged. The reasons may vary from country to country and hence the strategy could

also vary but lot of efforts are being made as financial inclusion can truly lift the financial

condition and standards oflife of the poorand the disadvantaged.

The objective of financial inclusion is to deliver banking services at an affordable cost to vast

sections of the low$income groups. Indian 4inance Minister has set the ball rolling by

articulating the !overnment9s decision to provide essential financial services like savings&credit& micro insurance and remittance& for all villages with population over :&111 by March

:1;:. Therefore& the present study attempts to find out the impact of financial inclusion on

daily wage earners.

(t the end of March :1;:& 1.


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IN-E

Sr, No, Title P2, No,

; 4inancial Inclusion 1= $ :>: @verview of S3I 3ank :< $ >A

> @verview of I%I%I 3ank >= $


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%*(T"/ ;

Introduction to4inancial Inclusion

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C0apter *;

FINANCIA# INC#$SION

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

Introduction and Meaning of 4inancial Inclusion

"volution of 4inancial Inclusion In India

The resent ' Indian Scenario

/easons for 4inancial Inclusion

Importance of 4inancial Inclusion

eed ' illars of 4inancial Inclusion

Scope of 4inancial Inclusion

Institutions ' 4inancial Inclusion

Initiatives for 4inancial Inclusion In India

/3I Initiatives for 4inancial Inclusion.


INTRO-$CTION(

The Dorld is moving at an amaEing pace. !lobaliEation has enabled the rise of global trade

leading to wealth generation in developed as well as developing countries. Dealth can be

created in any part of the world with a single click of the mouse. 5eveloping nations& like

India have immensely benefited from the globaliEing economy. Dealth has been pouring into

the country as investments 6both direct and institutional7. Dealth has been also generated by

Indian companies from global trade. This has directly affected the lives of many citiEens in

our country. 4or 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.

Since& there have been progressive reforms in the financial sector allowing for better and

easier facilities and options to the consumer. (n increasing financially aware middle class

have realiEed the importance of financial services. 3anks have streamlined and rationaliEed

themselves to meet up with the changing demands of the people. 3anks have become partners

in growth for many offering them a safer and secure future.

*owever& not all the reforms in the financial services sector have still been able to bring in

the other half of IndiaFs population who are un$banked. There are many reasons that

percolated into the lower strata of the society. It is easy to blame the capitalist are obvious for

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this kind of financial e#clusion. The new surge in the economy has not yet growth for this

sort of income disparitiesG however& the inefficiencies and the inadequacies of the government

and its policies are equally at fault for lack of reduction in poverty. "ven after B1 years of

Indian independence& ;8> of our population is still illiterate 6let alone financially literate7 and

at least :BH of the population still lives under the poverty line. There are many statistics&

which goes on to prove that for even a developing nation India has a long way to go.

Most of the un$banked or financially e#cluded population of India live in rural areasG

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 e#cluded in these

areas are illiterates earning a meagre income just enough to sustain their daily needs. 4or 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 6which make up most of their e#penditure7 rather than to follow

the cumbersome process at banks. ( lot of the financially e#cluded populations are at the

mercy of money lenders or pawn shop owners. They should be made a part of the formal

banking structure so that they could also have the benefits that the others enjoy. 3y making

them financially inclusive we are making their financial position less volatile. (t the same

time& we are treating them on an equal par with other members of the population so that they

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

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Back2round0

ationalisation of banks in India in ;2B2 and ;2=1 marked a paradigm shift in the focus of

banking from class banking to mass banking. The multi$agency approach consisting of

cooperatives& regional rural banks 6//3s7& commercial banks& non$banking financial a keyinstitutions& etc. has played a key role in catering to the credit needs of rural population. Most

of these agencies have been acting not merely as financial intermediaries but also playing a

key developmental role. In the post nationalisation era& launching of S*!$3ank linkage

programme in ;22: and its success as one of the largest micro credit programmes in the

world could be considered as a landmark programme can be regarded as the most potent

initiative since independence for delivering financial services to the poor in a sustainable

manner.

5espite large scale deepening and widening of formal as also informal credit delivery system&

it is estimated that ?;& :11?7 to the total adult population was only


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-EFINITION(

-e/ined by RBI(

4inancial Inclusion Is the process of ensuring access to appropriate and services needed by

vulnerable groups such as weaker sections and low income groups at an affordable cost in a

fair and transparent manner by main stream Institutional players

4inancial Inclusion& broadly defined& refers to universal access to a wide range of financial

services at a reasonable cost. These include not only banking products but also other financial

services such as insurance and equity products. *ousehold access to financial services is

depicted

4inancial inclusion denotes delivery of financial services at an affordable cost to the vast

sections of the disadvantaged and low$income groups. The various financial service1s include

credit& savings& insurance and payments and remittance facilities. The objective of financial

inclusion is to e#tend the scope of activities of the organiEed financial system to include

within its ambit people with low incomes.

!EANIN'(

4inancial inclusion is delivery of banking services at an affordable cost to the vast sections of

disadvantaged and low income groups. Unrestrained access to public goods and services is

thesine qua nonfor an open and efficient society. 3anking services are in the nature of public

good& it is essential that availability of banking and payment services to the entire population

without discrimination is the prime objective of the public policy.

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EO#$TION OF FINANCIA# INC#$SION IN IN-IA

olicy makers have grabbed with the issue of reducing the scope of informal sector since

colonial times. icholson report 6;=2


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(gricultural 5ebt /elief Scheme and 4inancial Sector /eforms

S*!$3ank +inkage as the most suitable model in Indian conte#t a8c to (3(/5

:111$/eforms sharply focused on (gricultural credit

doubling the flow of agricultural credit K implementation of agricultural credit package

(nnual Special (gricultural %redit lan

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ON TRAC%S OF N-A 'OERN!ENT

4inancial inclusion is e#pected to make significant changes in the economy& especially the

rural economy& which is e#pected to witness a revolution in availability of financial

instruments mainly because of which will operate through the banking system will also

ensure regularity of flow of liquidity in households and therefore opportunities for

investment.

P!J-& No, o/ Accounts 4ero balanced accounts

Public sector banks 2.;: H

Pri.ate sector banks :.11 = ?2.>H

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T"E PRESENT SCENARIO FINANCIA# INC#$SION

4inancial inclusion& in the sense of e#tending banking products at an affordable cost to the

vast sections of disadvantaged and low income groups& is not new to India. 4or more than

three decades after nationaliEation of major commercial banks in ;2B2& Indian banking has

shown tremendous growth in volume and outreach resulting in increase in the total number of

branches of scheduled commercial banks from =&>:; in the year ;2B2 to B=&B=; as at the end

of March :11B and reduction of the average population per branch office from B?&111 to

;B&111 during the same period. ublic sector banks were in the forefront of reaching out to

sections that were once neglected and designing new& innovative loan products for agriculture

and small$scale industries sectors is an outstanding e#ample in this regard.

There are& however& concerns that banks have still not been able to reach a vast segment of

the population and provide them with basic banking services. !rowth has also not been

uniform across all the regions8 States of the country and there still continue to be wide gaps in

the availability of banking services in the rural areas. Dhile from the policy angle none of the

earlier measures aimed at broad basing their clientele has been withdrawn& the banks might be

laying somewhat less emphasis on inclusive practices in view of the thrust on profitability.

3anks are working overtime to utilise their quota of branch licences before the end of this

financial year. It is good to see some large banks getting their act together to open fully$

networked branches and (TMs simultaneously across the country. @pening many branches

and (TMs on the same day requires meticulous strategy and well$coordinated efforts& which

by no means is a small achievement. This is a great effort by the banks to promote financial

inclusion& which is critical to promote equitable economic growth& as a large part of the

country is under banked.

( 4inancial Inclusion survey was conducted by Dorld 3ank in India between (pril$)une&:1;; which included face to face interviews of >&< per cent of people had formal accounts

versus the global average of


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IN-IAN SCENARIO) FINANCIA# INC#$SION

The bank nationaliEation in India marked a paradigm shift in the focus of banking as it was

intended to shift the focus from class banking to mass banking. The rationale for creating

/egional /ural 3anks was also to take the banking services to poor people. The branches of

commercial banks and the //3s have increased from =>:; in the year ;2B2 to B=&:=:

branches as at the end of March :11


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REASONS FOR FINANCIA# INC#$SION

There are a variety of reasons for 4I. In remote& hilly and sparsely populated areas with poor

Infrastructure& physical access itself acts as a deterrent.4rom the demand side& lack of

awareness& low$income8assets& social e#clusion& illiteracy act as barriers. 4rom the supply

side& distance from branch& 3ranch timings& cumbersome documentation and procedures&

unsuitable products& language& staffs (ttitudes are common reasons for e#clusion. (ll these

result in higher transaction cost apart from rocedural hassles. @n the other hand& the ease of

availability of informal credit sources makes this opular even if costlier. The requirements of

independent documentary proof of identity and address can be a very important barrier in

having a bank account especially for migrants and slum dwellers.

'ender issues((ccess to credit is often limited for women who do not have& or cannot

hold title to assets such as land and property or must seek male guarantees to borrow.

A2e /actor(4inancial service providers usually target the middle of the economically

active population& often overlooking the design of appropriate products for older or

younger potential customers.

#imited literacy(+imited literacy& particularly financial literacy& i.e.& basic mathematics&

business finance skills as well as lack of understanding often constrains demand for

financial services.

Place o/ li.in2((lthough effective distance is as much about transportation infrastructure

as physical distance& factors like density of population& rural and remote areas& mobility of

the population 6i.e.& highly mobile people with no fi#ed or formal address7& insurgency in

a location& etc.& also affect access to financial services.

Psyc0olo2ical and cultural barriers(The feeling that banks are not interested to look

into their cause has led to self$e#clusion for many of the low income groups. *owever&

cultural and religious barriers to banking have also been observed in some of the

countries.

#e2al identity(+ack of legal identities like identity cards& birth certificates or written

records often e#clude women& ethnic minorities& economic and political refugees and

migrant workers from accessing financial services.

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Social security payments(In those countries where the social security payment system is

not linked to the banking system& banking e#clusion has been higher.

Bank c0ar2es(In most of the countries& transaction is free as long as the account has

sufficient funds to cover the cost of transactions made. *owever& there are a range of

other charges that have a disproportionate effect on people with low income.

Terms and conditions(Terms and conditions attached to products such as minimum

balance requirements and conditions relating to the use of accounts often dissuade people

from using such products8services.

Type o/ occupation( Many banks have not developed the capacity to evaluate loan

applications of small borrowers and unorganised enterprises and hence tend to deny such

loan requests.

#e.el o/ income(4inancial status of people is always important in gaining access to

financial services. "#tremely poor people find it difficult to access financial services even

when the services are tailored for them. erception barriers and income discrimination

among potential members in group$lending programmes may e#clude the poorer members

of the community.

Attracti.eness o/ t0e product(3oth the financial services8products 6savings accounts&

credit products& payment services and insurance7 and how their availability is marketed

are crucial in financial inclusion.

The major reasons were8are (bsence of TechnologyG (bsence of reach and coverageG (bsence

of Liable 5elivery MechanismG not having an appropriate 3usiness model and /ich have no

compassion for poor.

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I!PORTANCE OF FINANCIA# INC#$SION IN IN-IA

The policy makers have been focusing on financial inclusion of Indian rural and semi$rural

areas primarily for three most important pressing needs0

Creatin2 a Plat/orm /or Inculcatin2 t0e "abit to Sa.e !oney( The lower income

category has been living under the constant shadow of financial duress mainly because of

the absence of savings. The absence of savings makes them a vulnerable lot. resence of

banking services and products aims to provide a critical tool to inculcate the habit to save.

%apital formation in the country is also e#pected to be boosted once financial inclusion

measures materialiEe& as people move away from traditional modes of parking theirsavings in land& buildings& bullion& etc.

Pro.idin2 Formal Credit A.enues(So far the unbanked population has been vulnerably

dependent of informal channels of credit like family& friends and moneylenders.

(vailability of adequate and transparent credit from formal banking channels shall allow

the entrepreneurial spirit of the masses to increase outputs and prosperity in the

countryside. ( classic e#ample of what easy and affordable availability of credit can do

for the poor is the micro$finance sector.

Plu2 'aps and #eaks in Public Subsidies and >el/are Pro2rammes(( considerable

sum of money that is meant for the poorest of poor do not actually reach them. Dhile this

money meanders through large system of government bureaucracy much of it is widely

believed to leak and is unable to reach the intended parties. !overnment is therefore&

pushing for direct cash transfers to beneficiaries through their bank accounts rather than

subsidiEing products and making cash payments. This laudable effort is e#pected to

reduce governmentFs subsidy bill 6as it shall save that part of the subsidy that is leaked7

and provide relief only to the real beneficiaries. (ll these efforts require an efficient and

affordable banking system that can reach out to all. Therefore& there has been a push for

financial inclusion.

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NEE- OF FINANCIA# INC#$SION IN IN-IA

5A 'RAP"ICA# REPRESENTATION6

PI##ARS OF FINANCIA# INC#$SION

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SCOPE OF FINANCIA# INC#$SION

The scope of financial inclusion can be e#panded in two ways.

Through state$driven intervention by way of statutory enactments 6 for instance the US

e#ample& the %ommunity /einvestment (ct and making it a statutory right to have bank

account in 4rance7.

Through voluntary effort by the banking community itself for evolving various strategies

to bring within the ambit of the banking sector the large strata of society.

Dhen bankers do not give the desired attention to certain areas& the regulators have to step in

to remedy the situation. This is the reason why /eserve 3ank of India is placing a lot of

emphasis on financial inclusion. In India the focus of the financial inclusion at present is

confined to ensuring a bare minimum access to a savings bank account without frills& to all.

Internationally& the financial e#clusion has been viewed in a much wider perspective. *aving

a current account 8 saving account on its own& is not regarded as an accurate indicator of

financial inclusion. There could be multiple levels of financial inclusion and e#clusion. (t

one e#treme& it is possible to identify the super$includedF& i.e.& those customers who are

actively and persistently courted by the financial services industry& and who have at their

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disposal a wide range of financial services and products. (t the other e#treme& we may have

the financially e#cluded& who are denied access to even the most basic of financial products.

In between are those who use the banking services only for deposits and withdrawals of

money. 3ut these persons may have only restricted access to the financial system& and may

not enjoy the fle#ibility of access offered to more affluent customers.4inancial Inclusion

should include access to financial products and services like&

3ank accounts K check in account

Immediate %redit

Savings products

/emittances ' ayment services

Insurance K *ealthcare

Mortgage

4inancial advisory services

"ntrepreneurial credit

INSTIT$TIONS AN- FINANCIA# INC#$SION

4inancial Institutions& both large and small have an important role to play in financial

inclusion. Dith their organiEed structure and effective management larger financial

institutions could act as mentors for small financial services firm by ensuring a strong

financial backing.

Commercial Banks( %ommercial banks could act as an important part of the process to

achieve full financial inclusion. "specially with simplified savings bank accounts

6including no$frills account7& rela#ed ,-% procedures& primary sector lending and even

microfinance.

Cooperati.e Banks(The Urban and /ural cooperative banks could cater to populationsthat are generally neglected by the commercial banks. Their position allows them to reach

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out to the people far easier than the more formal commercial banks. Since they are

operated by the members of the banks themselves& there would be more involvement from

the people of such cooperatives.

Re2ional Rural Banks(Through priority sector lending& ,%%s and !%%S the //3s

could ensure a steady flow of credit to the rural poor especially the marginal farmers. The

//3s like the commercial banks can deal with the agencies like !@s who are interested

in helping out the poor and the weaker sections.

Non)Bankin2 Financial Companies 5NBFCS6( The 34%s could include both large

and small financial firms which provide financial services. They could offer specific

financial products to the poor and low income people such as micro$insurance& micro$

credit& etc. The 34%s could create financial awareness among the people by not only

offering alternative financial services but also spreading financial literacy by providing

financial advices.

Post O//ice Sa.in2s Bank( These along with their e#tensive network could offer wide

variety of small and micro financial services to the people. The ost @ffice Savings bank

could utilise their staff to deliver door$to$door service to the people.

!icro Finance Institution 5!FIs6( Micro 4inance Institutions or M4Is are created withthe specific aim of e#tending financial services to the poor and the weaker sections of the

populations. ( M4I could be independent or as in most cases are promoted by !@s&

government agencies& 34%s& commercial banks and other institutions. Micro 4inance

Institutions have so far been the most successful at ensuring basic financial services to the

unbanked sections of the populations. (long with the S*! movement& the M4Is has

enabled the wealth generation in many underdeveloped rural as well as neglected urban

areas in India.

Non)'o.ernmental Or2aniDations 5N'Os6(!@s could provide financial assistance to

the poor and the weaker sections through !@ promoted M4Is or by providing financial

advice. !@s working the poor and the economically deprived can more closely analyse

their spending patterns and credit requirements. %ommercial banks and other large

financial agencies can work closely with !@s to ensure that the dealings with the poor

and the weaker sections turn out to be a fruitful activity not only for the people but also

for the lending agencies.

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INITIATIES FOR FINANCIA# INC#$SION IN IN-IA

4inancial inclusion in the Indian conte#t implies the provision of affordable financial

services& viE.& access to payments and remittance facilities& savings& loans and insurance

services by the formal financial system to those who tend to be e#cluded. In order to e#pand

the credit and financial services to the wider sections of the population& a wide network of

financial institutions has been established over the years. The organised financial system

comprising commercial banks& regional rural banks 6//3s7& urban cooperative banks

6U%3s7& primary agricultural credit societies 6(%S7 and post offices caters to the needs of

financial services of the people. 3esides& M4Is& self$help groups 6S*!s7 also meet the

financial service requirements of the poorer segments. 4urthermore& development to the

institutional framework in recent years has focussed on new models of e#panding financialservices involving credit dispensation using multiple channels such as civil society

organisations 6%S@s7& nongovernment organisations 6!@s7& post offices& farmersF clubs& and

panchayats as business facilitators8correspondents. Specific financial instruments8products

were also developed in order to promote financial inclusion.

The broad strategy for financial inclusion in India in recent years comprises the following

elements0

"ncouraging penetration into unbanked and backward areas and encouraging agents and

intermediaries such as !@s& M4Is& %S@s and business correspondents 63%s7 4ocussing on a decentralised strategy by using e#isting arrangements such as State +evel

3ankersF %ommittee 6S+3%7 and district consultative committee 65%%7 and

strengthening local institutions such as co$operatives and //3s Using technology for furthering financial inclusion

(dvising banks to open a basic banking no frillsF account

"mphasis on financial literacy and credit counselling

%reating synergies between the formal and informal segments

The objective of bringing financially e#cluded people within the fold of the banking sector

received renewed emphasis in :11


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(s the central bank of the country& the /eserve bank of India has taken steps to ensure

financial inclusion in the country. It has tried to make banking more attractive to citiEens by

allowing for easier transactions with banks. In :11? /3I appointed an internal group to look

into ways to improve 4inancial Inclusion in the country. It came out with a report in :11 billion in March :1;;

O.ercomin2 #an2ua2e Barrier( +arge sections of the Indian population are not familiar

with "nglish and *indi& the languages mostly used in bank forms. 3anks are therefore

required to provide forms pertaining to account opening disclosure etc. in the regional

language as well.

Simpli/ication o/ %no &our Customer 5%&C6

Norms and 'uidelines( To open a /egular (ccount& a customer has to provide

documents on 6a7 roof of identity& and 6b7 roof of address& as per /3I guidelines. 3ut

customers face difficulties in providing the requisite documentation for opening regular

bank accounts. (lso& most rural inhabitants do not have any of the identity documents that

are required for account opening and compliance with ,now -our %ustomer 6,-%7

norms. 4or that reason& the account opening process has been simplified for people who

intend to keep balances not e#ceeding /s.


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Financial #iteracy Pro2ram( 4inancial +iteracy rograms have been initiated by /3I to

improve financial education and literacy so that people will become aware about the basic

financial terms and services provided by banks and financial institutions. /3I provides

support to 4inancial +iteracy and %redit %ounseling %enterFs 64+%%s7.The broadobjective of the 4+%%s will be to provide free financial literacy8education and credit

counseling.

Simpli/ied branc0 aut0oriDation( Dith the objective of facilitating uniform branch

growth& /3I has permitted banks to freely open branches in tier III to tier LI centres with

population less than


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%isan Credit Cards 5%CCs6( ,isan %redit %ards to small time farmers have been issued

by banks. (s on March :1;:& the total number of ,%%s issued has been reported as >1

million with a total amount outstanding to the tune of /s.:& 1B= billion. The figure&

respectively& were :A million and /s.;& B11 billion on March& :1;;.

Role o/ 'o.ernment

State !overnments can play a proKactive role in facilitating 4inancial Inclusion. Issuing

official identity documents for opening accounts& creating awareness and involving district

and block level function arise in the entire process& meeting cost of cards and other devices

for pilots& undertaking financial literacy drives are some of the ways in which the State anddistrict administration have involved themselves.

India post is also looking to diversify its activities and leverage on its huge network of post

offices& the postmanFs intimate knowledge of the local population and the enormous trust

reposed in him. 3anks are entering into agreements with India post for using post offices as

agents for branchless banking.

Initiati.e o/ State 'o.ernment)Pictures o/ tec0nolo2y at ork,

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%*(T"/ :

@verview of S3I 3ank'

I%I%I 3ank

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C0apter *:

OERIE> OF SBI

@verview

Introduction

Lision& Mission ' Lalues

*istory of the bank

SD@T analysis of S3I 3ank

Initiatives of S3I for 4inancial Inclusion

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

T"E BAN%ER TO EER& IN-IAN

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OERIE>(

State 3ank of India is the largest and one of the oldest commercial bank in India& in e#istence

for more than :11 years. The bank provides a full range of corporate& commercial and retail

banking services in India. Indian central bank namely /eserve 3ank of India 6/3I7 is the

major shareholder of the bank with A

billion with the public holding 6other than promoters7 at ?1.>H. S3I has the largest branch

and (TM etwork spread across every corner of India. The bank has a branch network of

over ;. @f this& :2.H during the last five years.

5uring the same period& net interest margin 6IM7 of the bank has gone up from as low as

:.2H in 4-1: to >.?1H in 4-1B and currently is at >.>:H bank. The introduction of this

scheme leads to strong protests and S3I faced with a prospect of losing its talented employees

and be left with less efficient employees 6:1;:7. Ouality is our essence and we& at State 3ank

of India& have always stressed on the Oualitative aspect. %onsequently in this run for quality&

quantity has always pursued us. De look forward to reaching the Eenith and reaffirm our

commitment to the process of sound nation$building.

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INTRO-$CTION

State Bank o/ India 5SBI6& with a :11 year history& is the largest commercial bank in India in

terms of assets& deposits& profits& branches& customers and employees. The !overnment of

India is the single largest shareholder of this 4ortune


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E!P#O&EES

S3I is one of the largest employers in the country having ::=&:2B employees as on >;st

March :1;>& out of which there were ?B&=>> female employees 6:;H7 and :&?1: disabled

employees 6;H7. @n the same date& S3I had ?>&


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CORE CO!!IT!ENTS ) O$R STREN'T"

"motion

5iscipline

5uty

o discrimination

Ouality

!ive respect

Self$respect

Truth

%ollective Materialism

(bsolute *onesty

>"AT( ( commitment of State 3ank of India to the genuine needs and rights of anybody '

everybody $ 3e it to a depositor& Share *older& consumer.... all business associates and Sahara

India 4amily Members.

NEE-( India needs effective consumer protection and protection of workers9 genuine rights.

There are various agencies& promising protection ' action. 3ut no e#ternal body can provide

justice unless the company becomes 9OU(+IT- %@S%I@US9 DIT* ST/I%T+- @

5IS%/IMI(TI@ @+I%- (5 )USTI%" %@S%I@US"SS as its very dominating

nature.

!OTTO( De not only believe but practice @ 5IS%/IMI(TI@& )USTI%" ' *I!*OU(+IT- $ means enthusiastic& productive performance of duty Q,(/T(L-(9 towards the

consumer9& workers9 genuine satisfaction.

AI!( To provide justice $ be it a matter of the tiniest imperfection or injustice in our

%@MMITM"T $ products or services. 5irect or indirect& short term or long term

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ISION7 !ISSION 3 A#$ES

ision Statement(

Q3ecome first in %ustomer SatisfactionQ

!ission Statement(

To be prompt& polite and proactive with our customers.

To speak the language of young India.

To create products and services that help our customers achieve their goals.

To go beyond the call of duty to make our customers feel valued.

To provide service even in the remotest part of our country.

To offer e#cellence in services to those abroad as much as we do to those in India.

To imbibe state of the art technology to drive e#cellence.

alues Statement(

To always be honest& transparent and ethical.

To respect our customers and fellow associates.

To be knowledge driven.

To learn and share our learning.

ever take the easy way out.

5o everything we can to contribute to the community we work in.

To nurture pride in India

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"ISTOR& OF SBI BAN%

The origin of the State 3ank of India goes back to the first decade of the nineteenth centurywith the establishment of the 3ank of %alcutta in ;=1B in %alcutta. Three years later the bank

received its charter and was reKdesigned as the 3ank of 3engal 6: )anuary ;=127. ( unique

institution& it was the first jointKstock bank of 3ritish India sponsored by the !overnment of

3engal. The 3ank of 3ombay 6;< (pril ;=?17 and the 3ank of Madras 6; )uly ;=?>7

followed the 3ank of 3engal. These three banks remained at the ape# of modern banking in

India till their amalgamation as the Imperial 3ank of India on :A )anuary ;2:;. rimarily

(ngloKIndian creations& the three presidency banks came into e#istence either as a result of

the compulsions of imperial finance or by the felt needs of local "uropean commerce and

were not imposed from outside in an arbitrary manner to moderniEe India9s economy. Their

evolution was& however& shaped by ideas culled from similar developments in "urope and

"ngland& and was influenced by changes occurring in the structure of both the local trading

environment and those in the relations of the Indian economy to the economy of "urope and

the global economic framework.

The State 3ank of India& the countryFs oldest bank and a premier in terms of balance sheet

siEe& number of branches& market capitaliEation and profits is today going through a

momentous phase of change and transformation the two hundred year old public sector

behemoth is today stirring out of its public sector legacy and moving with an ability to give

the private and foreign banks a run for their money.

The bank is entering into many new businesses with strategic tie ups ension 4unds& !eneral

Insurance& %ustodial Services& rivate "quity& Mobile 3anking& oint of Sale Merchant

(cquisition& (dvisory Services& structured products etc. "ach one of these initiatives having a

huge potential for growth.

The bank is forging ahead with cutting edge technology and innovative new banking models&

to e#pand its rural banking base& looking at the vast untapped potential in the hinterland and

proposes to cover ;11&111 villages in the ne#t two years. (t the end March& :1;;& the total

number of branches was ;>&


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S>OT ANA#&ISIS OF SBI

STREN'T"S(

S3I is the largest bank in India in terms of market share& revenue and assets.

(s per recent data the bank has more than ;>&111 outlets and :: countries engaging currency trade all over the world.

The bank has a merged with State 3ank of Saurashtra& State bank of Indore and the bank

is planning to go further acquisition in the current 4-:1;:.

S3I has the first mover advantage in commercial banking service.

S3I has recently changed its vision and mission statements showing a sign of inclination

towards new age banking services.

*as a separate act for itself. Thus& a special privilege.

3iggest branch network in the country

4irst public sector to move to %3S.

>EA%NESS(

*uge amount of staff.

"#pected to e#perience high level of attrition due to retirement of its top management.

Still carries the image of the old !ovt. sector bank.

+ack of proper technology driven services when compared to private banks.

"mployees show reluctance to solve issues quickly due to higher job security and

customersF waiting period is long when compared to private banks.

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The banks spend a huge amount on its rented buildings.

S3I has the largest number of employees in banking sector& hence the bank spends a

considerable amount of its income in employeeFs salary compensation.

In spite of moderniEation& the bank still carries the perception of traditional bank to new

age customers.

S3I fails to attract salary accounts of corporate and many government sector employees

salary accounts are also shifted to private bank for ease of operations unlike before.

OPPORT$NITIES(

S3IFs merger with five more banks namely State 3ank of *yderabad& State bank of

atiala& State bank of 3ikaner and )aipur& State of bank of Travancore and State bank of

Mysore are in approval stage.

Mergers will result in e#pansion of market share to defend its number one position.

S3I is planning to e#pand and invest in international operations due to good inflow of

money from (sian Market.

Since the bank is yet to moderniEe few of its banking operations& there is a better scope of

using advanced technologies and software to improve customer relations.

-oung and talented pool of graduates and 3 schools are in rise to open new horiEon to so

called old government bankJ.

Make better use of its %/M.

T"REATS(

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et profit of the year has decline from 2;BB.1< in the year 4- :1;1 to A&>A1.>< in the

year 4-:1;;.

This shows the reduce in market share to its close competitor I%I%I.

@ther private banks like *54%& (RIS bank etc.

45Is allowed in banking sector is increased to ?2H & this is a major threat to S3I as

people tend to switch to foreign banks for better facilities and technologies in banking

service.

@ther governments banks like 3& (ndhra& (llahabad bank and Indian bank are

showing

%ustomer prefer to switch to private banks and financial service providers for loans and

mortgages& as S3I involves stringent verification procedures and take long time for

processing.

INITIATIES OF SBI FOR FINANCIA# INC#$SIONSBI #A$NC"ES TIN& S!A## ACCO$NTS

The objective of State 3ank of India in the present day conte#t is to ensure financial inclusion

of the whole population irrespective of areas and sectors. The 9inclusion9 phenomenon cannot

be confined to few pockets of area and people. S3I9s answer to financial inclusion is the 9S3I

Tiny project9& which can in simple terms be defined as a 3ank in a 3o#J. The entire set up

consists of a cell phone which serves as @S machine& a finger print reader and a tiny printer&

all of which can be packed into a ;1 inch by ;1 inch bo#. (ll these work on rechargeable

batteries. S3I Tiny accounts 6no frills accounts7 are opened on the smart cards. The smart

card is akin to an e$purse and stores information about the customer& the account number&

finger prints as well as the balance in the account. The smart card can handle up to ;B

accounts including loan accounts. This card is highly secure as it works on the bio$metric

validation of the customer. The card works on the /adio 4requency Identification 6/4I57

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technology. S3I is today using this technology in our smart cards which work in conjunction

with a mobile or a hand held connectivity device which works on ear 4ield %ommunication

Technology 64%7. Transactions are possible both in online and off line mode. It also permits

the real time updating of balances in the card. 3y issuing a smart card to the rural customer&

the cost of the transaction is reduced because we are dispensing with paper based transactions

and shifting the actual operation of transacting on the account away from the branch to

%ustomer Service oint 8 rovider 6%S7 at the outlet in the location of the rural customer

EFFORTS OF SBI

'RO$P

FINANCIA# INC#$SION As on ;,*,:*;9 As on *,*+,:*;9

umber of 3% outlets

;:.12

:2&?;?

4inancial +iteracy %entres 64+%s7

o. of 4+%s

o. of outdoor activities conducted

o. of persons participated in outdoor activities

o. of persons converted to customers

:;:

:=&=A2

;A&>2&>;>

:&B:&:A;

:;2

>:&B2A

:;&B:&=;=

>&


43/128

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FINANCIA# INC#$SION( "I'"#I'"TS FOR T"E C$RRENT &EAR

The 3ank has set up ?


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C0apter *

OERIE> OF ICICI

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

@verview

Introduction

Lision& Mission' Lalues

*istory of the bank

SD@T analysis of I%I%I 3ank

Initiatives of I%I%I bank for 4inancial Inclusion


%"A&AA# AAP%A

Page | 39


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OERIE>(

ICICI Bankis an Indian multinational banking and financial services company

headquartered in Ladodara. (s of :1;? it is the second largest bank in India in terms of assets

and market capitaliEation. It offers a wide range of banking products and financial

services for corporate and retail customers through a variety of delivery channels and

specialiEed subsidiaries in the areas of investment banking& life& non$life insurance& venture

capital and asset management. The 3ank has a network of >&=11 branches and

;;&;B:(TMs in India& and has a presence in ;2 countries. I%I%I 3ank is one of the 3ig 4our

banks of India& along with State 3ank of India& unjab ational 3ank and 3ank of 3aroda.

The bank has subsidiaries in the United ,ingdom& /ussia& and %anadaG branches in UnitedStates& Singapore& 3ahrain& *ong ,ong& Sri +anka& Oatar and 5ubai International

4inance %entreG and representative offices in United (rab "mirates& %hina& South (frica&

3angladesh& Thailand& Malaysia and Indonesia. The company9s U, subsidiary has also

established branches in 3elgium and !ermany. In March :1;>& @peration /ed Spider showed

high$ranking officials and some employees of I%I%I 3ank involved in money laundering.

(fter a government inquiry& I%I%I 3ank suspended ;= employees and faced penalties from

the /eserve 3ank of India in relation to the activity. The 3ank is a financial services group

providing a range of banking and financial services including commercial banking& retail

banking& project and corporate finance& working capital finance& insurance& venture capital

and private equity& investment banking& broking and treasury products and services. Its

operating segments include /etail 3anking& Dholesale 3anking& Treasury& @ther 3anking&

+ife Insurance& !eneral Insurance and @thers. /etail banking includes e#posures of the 3ank&

which satisfy the criteria of orientation& product& granularity and low value of individual

e#posures for retail e#posures laid down in 3asel %ommittee on 3anking Supervision

document International %onvergence of %apital Measurement and %apital Standards0 (

/evised 4ramework. Dholesale banking includes all advances of the 3ank to trusts&

partnership firms& companies and statutory bodies. Treasury includes the entire investment

and derivative portfolio of the 3ank.

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[email protected](

To assist in the creation& e#pansion and moderniEation of private concerns

To encourage the participation of internal and e#ternal capital in the private concerns

To encourage private ownership of industrial investment

I%I%I 3ank9s !reen initiative is to make healthy environment in the organiEation i.e. to

create intrapersonal skills among the customer and understanding between employees of

the organiEation.

INTRO-$CTION(

I%I%I 3ank was originally promoted in ;22? by I%I%I +imited& an Indian financial

institution& and was its wholly$owned subsidiary. I%I%I9s shareholding in I%I%I 3ank was

reduced to ?BH through a public offering of shares in India in fiscal ;22=& an equity offeringin the form of (5/s listed on the -S" in fiscal :111& I%I%I 3ank9s acquisition of 3ank of

Madura +imited in an all$stock amalgamation in fiscal :11;& and secondary market sales by

I%I%I to institutional investors in fiscal :11; and fiscal :11:. I%I%I was formed in ;2


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The merger would enhance value for I%I%I shareholders through the merged entity9s access to

low$cost deposits& greater opportunities for earning fee$based income and the ability to

participate in the payments system and provide transaction$banking services.

The merger would enhance value for I%I%I 3ank shareholders through a large capital base

and scale of operations& seamless access to I%I%I9s strong corporate relationships built up

over five decades& entry into new business segments& higher market share in various business

segments& particularly fee$based services& and access to the vast talent pool of I%I%I and its

subsidiaries.

In @ctober :11;& the 3oards of 5irectors of I%I%I and I%I%I 3ank approved the merger of

I%I%I and two of its wholly$owned retail finance subsidiaries& I%I%I ersonal 4inancialServices +imited and I%I%I %apital Services +imited& with I%I%I 3ank. The merger was

approved by shareholders of I%I%I and I%I%I 3ank in )anuary :11:& by the *igh %ourt of

!ujarat at (hmadabad in March :11:& and by the *igh %ourt of )udicature at Mumbai and

the /eserve 3ank of India in (pril :11:. %onsequent to the merger& the I%I%I group9s

financing and banking operations& both wholesale and retail& have been integrated in a single

entity.

I%I%I 3(, offers a wide range of banking products and financial services to corporate and

retail customers through a variety of delivery channels and through its specialiEed

subsidiaries and affiliates in the areas of investment banking& life and non$life insurance&

venture capital and asset management or wealth management. The 3ank currently has its

subsidiaries in the United ,ingdom& /ussia and %anada& branches in Unites States&

Singapore& 3ahrain& *ong ,ong& Sri +anka& Oatar and 5ubai International 4inance %entre

and representative offices in United (rab "mirates& %hina& South (frica& 3angladesh&

Thailand& Malaysia and Indonesia. The bankFs U, subsidiary has established branches in

3elgium and !ermany

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ISION7 !ISSION3 A#$ES

ision(

To be the dominant +ife& *ealth and ensions player built on trust by world$class people and

service. This we hope to achieve by0

Understanding the needs of customers and offering them superior products and serviceG

+everaging technology to service customers quickly& efficiently and convenientlyG

5eveloping and implementing superior risk management and investment strategies to

offer sustainable and stable returns to our policyholdersG

roviding an enabling environment to foster growth and learning for our employeesG

(nd above all& building transparency in all our dealings.

!ission(

@ur mission is to become the best 9%ustomiEable "$+earning and (pplications %ompany9 in

terms of quality& cost and delivery. The fundamental goal of the company is to raise the

practice as well as level of collaborative rapid "$+earning and (pplications 5evelopment.

Through our products& services ' solutions we facilitate the process of knowledge sharing

smoothly and in a cost effective manner.

alues(

The success of the company will be founded in its unflinching commitment to < core values $$

Integrity& %ustomer 4irst& *umility& assion and 3oundary$less. "ach of the values describes

what the company stands for& the qualities of our people and the way we work. "very member

of the I%I%I rudential team is committed to the < core values and these values shine forth in

all we do.

Boundary lessK I will treat organiEation agenda as paramount

Inte2rityK Dhat I do when nobody is watching me

"umilityK @penness to learn a change

Customer FirstK Service e#cellence towards Internal and "#ternal %ustomers

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PassionK 5emonstrates infectious energy and enthusiasm

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"ISTOR& OF ICICI BAN%

I%I%I 3ank was established by the Industrial Credit and In.estment Corporation o/ India

5ICICI6& an Indian financial institution& as a wholly owned subsidiary in ;22?. The parent

company was formed in ;2


52/128

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S>OT ANA#&ISIS OFICICI

STREN'"TS(

I%I%I is the second largest bank in terms of total assets and market share

Total assets of I%I%I is /s. ?1B:.>? 3illion and recorded a ma#imum profit after ta# of

/s.


54/128

There are also complaints of customer assault and abuse while recovering and the credit

payment reminders are sent even before the deadlines which annoys the customers

The bank service charges are comparatively higher

The employees of I%I%I are bank in ma#imum stress because of the aggressive policies of

the management to win ahead in the race. This may result in less productivity in future

years

OPPORT$NITIES(

3anking sector is e#pected to grow at a rate of ;AH in the ne#t three years

The concept of saving in banks and investing in financial products is increasing in rural

areas as more than B:H percentage of IndiaFs population is still in rural areas.

(s per :1;1 data in T@I& the total number b$schools in India are more than ;


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Though customer acquisition is high on one side& the unsatisfied customers are increasing

and make them to switch to other banks.

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INITIATIES OF ICICI BAN% FOR FINANCIA# INC#$SION

ICICI Bank #aunc0es :* 'ramin Branc0es under Financial Inclusion Plan

I%I%I 3ank +imited& IndiaFs largest private sector bank& said that it has started :1 new

!ramin branches across /ajasthan as part of its financial inclusion plan that aims at providing

banking services in unbanked villages. (ll these branches have been opened in small villages&

which were so far devoid of any banking facility. The Thikaria!ramin branch is one of the :1

branches the 3ank inaugurated in /ajasthan. The other !ramin branch in the same 5ausa

district is at adari. @ther branches opened in the state are at ritampuri and 3asri,hurd

villages in Sikar districtG at *udeel and +alas villages in agaur districtG at ::M+& 2M+&

!hamurwali and Sanwatsar villages in !anga agar districtG at 3hawad& 5anwara& oonasar

and )akhan villages in )odhpur districtG at @twala and (lasan villages in )alore districtG at

3hinyad and ,anasar villages in 3armer district and at !udli and Sangwa villages in Udaipur

district.

Dith these launches& I%I%I 3ank has opened over ;?1 rural branches in /ajasthan& which is

one$fourth of the total number of rural branches across the country. The addition of these new

branches has increased the network of I%I%I 3ank in /ajasthan to more than ?11 branches.

It is our constant endeavor to provide the entire gamut of financial services in rural and

remote areas& which include credit& savings& investments and insurance products. In line with

this approach& we have launched :1 !ramin branches& which will provide all basic banking

services in unbanked villages& which is a key part of our 4inancial Inclusion strategy.

4armer finance through ,isan %redit %ard 6,%%7 and (gri$term +oan 6(T+7 for the

cultivation and development of agricultural land.

/ural 3usiness %redit 6/3%7 to meet working capital and term loan requirements of

business entities in rural and semi$urban areas.

@verdraft 6@57 against fi#ed deposits 6457 under the 3ankFs ,isan,alpvriksh scheme for

rural customers.

Larious basic savings accounts to the customers based on their profile and requirements.

4unding to several Self$*elp !roups.

These branches also service business correspondents 63%s7

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I%I%I 3ank has undertaken a wide range of initiatives in the last few years as part of its

financial inclusion agenda. In this state& I%I%I 3ank is also engaged in "lectronic 3enefit

Transfers 6"3T7 for disbursement of wages to the Mahatma !andhi ational /ural

"mployment !uarantee Scheme 6M!/"!S7 workers. It has a wide distribution network to

service its rural and under banked customers.

I%I%I 3ank has >&>


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Beyond !icrocredit(Micro$savings0 /ecogniEing the need for easy savings facilities for

its low$income customers& I%I%I 3ank has launched a micro$savings facility under its

Qbusiness correspondentQ model. ( state$of$the$art solution based on a biometric$enabled

smartcard and a battery$operated authentication device developed by an I%I%I partner&

4inancial Information etwork and @perations 64I@7& the micro$savings product

provides access to a savings account with convenient features. The product combines

security& convenience 6pro#imity& convenient opening times and minimal paperwork7&

appropriate design 6frequent deposits& small variable amounts and quick access7 and

positive returns. The customer receives interest as in a regular savings account and can

maintain Eero opening balance. The customer also gets doorstep banking through business

correspondents. (part from this savings account& the bank also offers recurring and fi#ed

deposits to enable customers to avail of higher return on their savings. Today& I%I%I 3ank

works with ?; business correspondent partners operating out of ;:A branches across the

country& serving over AA&111 customers.

!icro Insurance(I%I%I rudential +ife Insurance9s provision of micro$insurance

services has promoted financial security among the rural poor and increased their comfort

to avail credit facilities 6micro$credit7 for undertaking income$generating activities.Increased credit worthiness results in availability of low cost capital that is employed in

entrepreneurial activities. Similarly& I%I%I +ombard 6www.icicilombard.com7 provides a

range of non$life insurance products& including health& weather and cattle insurance to

help mitigate the impact of other contingencies such as illness and crop failure.

'o.ernment >el/are Sc0emes(The rural Indian economy is e#posed to fundamental

risks and has limited access to risk mitigating solutions. In order to achieve significant

impact& it is critical to operate on a large scale with operational costs that are one tenth of

those in urban areas. To achieve this& I%I%I +ombard has worked on the premise that the

governments9 social and welfare initiatives can be outsourced for better implementation

and has focused on mass$based social and employee welfare schemes. I%I%I +ombard has

structured need$based& cost effective insurance solutions for a number of state

governments and ministries of the !overnment of India covering around =2 million lives

for ersonal (ccident insurance and *ealth insurance.

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NO FRI## AGC) T"E S!A##EST -EPOSIT A#SO !ATTER

I%I%I 3ankFs o 4rills (ccount& places emphasis on the smallest of deposits. @ur o 4rills

(ccount is available to you without any minimum monthly average balance requirement.

T0e ICICI Bank Ed2e

The monthly average balance requirement for this account is nil

4ree I%I%I 3ank LIS( debit card

@ne chequebook of ;< leaves per annum free. -ou can request for additional cheque

books 6 ;< leaves7 at /s. >1 6plus service ta# as applicable7 per chequebook

Internet 3anking facility is not available to the customers

Mobile 3anking facility is not available to the customers

%ash transactions at base branch is free for the first ? transactions of a monthG Thereafter

in the month& /s. 21 per transaction

(ll anywhere banking transactions chargeable at normal charges as published from time

to time

Interest is payable half$yearly

4ree Ouarterly statement& free monthly e$mail statement on request

Money Multiplier 4acility shall not be available to the customers

'ENERA# CON-ITIONS FOR NO)FRI##S SAIN'S PRO-$CT

The account is available only for resident Indians above the age of ;= years. The account is

not available to individuals in the capacity of *U4 ,artas. /Is and foreign nationals will

not be offered this product. (ll general terms and conditions applicable to savings bank

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accounts as published on the I%I%I 3ank website at www.icicibank.com for the establishment

of a relationship and the opening and operating of accounts are applicable to this account.

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ICICI PARTICICPATES IN PRA-"AN !ANTRI JAN)-"AN &OJANA

Opens one lak0 accounts under t0is pro2ramme

Aims to cross :* million accounts by end o/ t0is /iscal

Ne -el0i( I%I%I 3ank& IndiaFs largest private sector bank& announced its participation in the

transformational financial inclusion mission& radhanMantri )an 5han-ojana 6M)5-7& by

opening one lakh basic savings bank deposit accounts.

The 3ank has opened these accounts through a special drive& across its network of more than

>&A11 branches. Under this scheme& the 3ank offers each account holder a passbook& a /uay

5ebit %ard with an accidental cover and literature on banking facilities at the time of opening

anaccount.

The I%I%I !roup has always been a catalyst in India9s growth. De have a vision of a strong

and prosperous India. ( key element of this vision has always been financial inclusion& which

is integral to creating opportunity for all sections of society and achieving inclusive growth.

I%I%I 3ank has been working on a comprehensive financial inclusion plan over the last four

years. The radhanMantri )an 5han-ojana inspires us to renew our commitment to the goal

of financial inclusion with even greater vigour and focus.

Today through our network& we cover appro#imately ;


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showcased the process of remitting through mobile wallets. This service allows urban

migrants to send money back to their families in a transparent and convenient manner.

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FINANCIA# INC#$SION STRATE'&

I%I%I 3ankFs financial inclusion strategy encompasses rapid e#pansion in the rural markets&

leveraging its strengths in technology and delivering relevant products and services to the

rural and unbanked population through its multi$channel network.

Reac0in2 rural India(To provide branch banking services to its rural customers&

I%I%I 3ank added more than A&AB> branches& out of which& more than


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%*(T"/ >Introduction to

o 4rill (8c

Page | 58


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C0apter *8

NO FRI## AGC


Introduction and Meaning of o 4rill (8c

"ligibility ' omination

4eatures ' 3enefits

"ase of ,-% orms ' orms 3y /3I

5ocuments /equired 4or o 4rill (8c

Terms ' %onditions of o 4rill (8c

/3I replaces o 4rill (8c with 3asic Savings (8c.


INTRO-$CTION(

In :11


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!EANIN'(

9o 4rills 9account is a basic banking account. Such account requires either nilJ minimum

balance or very low minimum balance. %harges applicable to such accounts are low. Services

available to such account are limited.

In what can be described as a watershed (nnual olicy Statement& the /3I in :11


67/128

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>0o is it /orH

This account& too& is basically for the low$income group. %hildren or students who are

beginning to learn to save can also benefit from this account.

(s of now& other than a salary accounts which offer Eero balance option& all banks have a

minimum balance requirement for normal savings account.

>0o O//ers No Frill AGcH

State$owned banks have responded quickly to /3I9s suggestions& and a few private and

foreign banks have followed suit. The State 3ank of India is offering a 9no$frills9 account to

anyone whose monthly income is /s


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E#I'IBI#IT&(

The o 4rills (ccount is available for resident Indian.

"ligibility0 ensioners& agriculture labourers& employees of unorganiEed sector& member

of S*!& self$employed person& students& rural folk etc.

ot$ "ligible$Institutions& organiEation& /I& bank staff

ero minimum balance requirement i.e. you can maintain this account without any

minimum or average balance requirement.

NO!INATION(

omination facility available for bank deposits

There can be only one ominee for a deposit account whether held singly or jointly

( person legally empowered to operate a minor9s account can file a nomination on behalf

of the minor (pplicants can make nomination by filling up the 4orm prescribed under the 3anking

%ompanies 6omination7 /ules ;2=< The nomination details can be changed during the subsistence of the account relationship

by filling up the 4orm prescribed under the 3anking %ompanies 6omination7 /ules ;2=< 4or more details approach your bank

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FEAT$RES 3 BENEFITS(

(dult Individuals can open account.

4irms 8 )oint accounts not eligible

Simplified ,now -our customer norms to be complied

S3 no$frill account to be opened with minimum ero balances at all branches& subject to

compliance of all other terms and conditions.J

4ree 5ebit %um (TM card issued at all %3S branches6(nnual %harges applicable fromne#t year7

Dithdrawals through (TMs ' branch withdrawals $ ma# : per month.

o third party withdrawals

omination facility is available ' compulsory.

Interest ?.11 H p.a. Interested will be calculated on daily products basis from

1>.1


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There is also a provision for 3asic Saving 3ank 5eposit (ccount& it is operational for a

year and requires renewal.

Total credits in the account should not e#ceed /s.;& 11&1118$ in a year.

(ny number of accounts in a family can be opened under this scheme.

There is no restriction on entries for deposit of %ash8%heques in the account.

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EASE OF %&C NOR!S(

The /3I has also eased the 9know your customer9 6,-%7 norms to keep the procedural

hassles involved in opening a bank account to the minimum. This is to enable those belonging

to low$income groups to open bank accounts without documents of identity and proof of

residence.

In such cases& banks can take the individual9s introduction from an e#isting account holder on

whom the full ,-% procedure has been completed and has had satisfactory transactions with

the bank for at least si# months. The photograph and address of the prospective account

holder need to be certified by the person who introduces him8her.

These simplified ,-% norms are applicable for those who intend to keep balances not

e#ceeding /s =2

53@5.(M+.o. AA 8;?.1;.11;8:1;1$;; dated )anuary :A& :1;;& foreign remittances are not

to be allowed to be credited into a 9small account9& unless the identity of the client is fully

established through the production of officially valid documents& as referred to in sub$rule 6:7

of rule 2 of the rules notified by the !overnment of India under the revention of Money

+aundering (ct. In view of the above& customers holding accounts under the category 9o

4rills (ccount9 are hereby requested to submit copies of identity and address proof to the

3ank& and get their accounts converted into a regular Savings (ccount if they are e#pecting

receipt of foreign remittance credits in their account.

In the absence of submission of valid Identity and address proof& we will be constrained to

return any foreign remittance received in the account.

lease contact the branch staff for further clarifications and details.

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-OC$!ENTS RE$IRE-(

Application Form3 : P0oto2rap0s

Proo/ o/ identity 5any o/ t0e /olloin2 6 /or indi.iduals

assport

( %ard

"mployee identity card

5riving +icense

(ny other valid proof

Proo/ o/ address 5any o/ t0e /olloin26

"lectricity bill 6 should not be older than three months7

Telephone bill

/ation card

Statement of account from e#isting bank

Income 8 wealth ta# assessment

5ocument 8 communication issued by !@I 8 State !overnment8 +ocal 3ody

(ny other valid proof.

TER!S 3 CON-ITIONS(

The account is required to be introduced by another account holder maintaining

satisfactory account with bank for at least for si# months and is fully ,-% complied. hotographs of the perspective customer who proposes to open the account and also his

address is certified by the introducer. The bank may charge the customer service charges as decided from time to time for any

or all of the services rendered to the account holder after informing the customer. (ny government ta#es or dues that become contingent to the use of the facilities e#tended

by the bank by regulation will be debited to the customerFs account. The bank reserves its right with absolute discretion to revise the fees8charges related to

the account from time to time.

3alance in o 4rill (ccounts should not e#ceed /s. IT" =BASIC SAIN'S AGC?

(ccording to the /3I notification& with a view to doing away with the stigma associated with

the nomenclature no$frillsF account and making the basic banking facilities available in a

more uniform manner across the banking system& it has been decided to modify the guidelineson opening of basic banking no$frillsJ accounts. The no$frills account came with certain

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restrictions& which varied from bank to bank. Dhile some banks offered no$frills account to

individuals who earned below /s.;1& 111 per month& a few others offered this service to

individuals who maintained less than/s.


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But #imitations Remain

+ike the no$frills account& this account too provides basic services such as deposit and

withdrawal of cash at the bank branch and automated teller machines 6(TMs7 and electronic

payment channels such as Internet banking& among others& and requires minimal paperwork.

Though the limitations that were applicable on no$frills accounts have been removed& some

others have been introduced.

*ere& you can withdraw money only four times in a month& including withdrawals from

(TMs. (fter the first four withdrawals& you will either be charged a fee or will be denied

withdrawal& depending on the bank. (lso if you are a basic savings bank deposit account

holder& you will not be eligible to open any other savings bank deposit account in the same

bank. So if you had a savings bank deposit account in that bank& which you had opened with a

minimum balance amount& you will have to close it within >1 days from the date of opening a

basic savings bank deposit account.

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RBI REP#ACES =NO FRI## AGC >IT" =BASIC SAIN'S AGC?

%*(T"/ ?Introduction to

riority Sector

+ending

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77/128

C0apter *9

PRIORIT& SECTOR #EN-IN' 5PS#6

CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

Introduction and Meaning of S+

eed 4or S+

The Thrust (reas of S+6;2B27

Dhy S+ ' %hanging %riteria of S+ 6re ' ost 4orm eriod7

(reas under riority Sector

%urrent Targets in S+

/3I !uidelines on Deaker Sections

S+ ' 5ouble /epression

/3I /evises S+ orms


INTRO-$CTION(

The financial policy in India is influenced by the objective of restoring sectional balance

within credit disbursement and for channelling to the weaker sections within these sectors.

riority sector bank lending has been an instrument of this financial policy. The 3ank

%ompany (cquisition (ct ;2B2 leading to the ationaliEation of the ;? commercial banks

has implicitly made it clear in its preamble.

The banking system touches the lives of millions and has to be inspired by larger social

purpose and has to sub$serve national priorities and objectives such as rapid growth of

agriculture small scale industries and e#ports raising employment levels& encouragement of

new entrepreneur and development of backward regions. 4or this purpose it is necessary for

the !overnment to take direct responsibility for the e#tension and diversification of banking

services and forth working of a substantial part of the banking systemJ.

There has been a substantial reorientation of banking policy after the nationaliEation of banks

in ;2B2. This has been accomplished through social orientation of banking and administrative

intervention by way of stipulating targets& sub$targets& credit guarantee and refinance facilities

for financing the preferred sectors of the economy known as priority sectors& where

agriculture& small industries& small business and small transport operators& retail traders and

education were given priority status.

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!EANIN'(

riority sector lending is providing easy& adequate and timely credit to priority sectors that

otherwise would not receive easy finance. riority sector plays an important role in the

economic development of the country. Therefore the %entral government of any country givesthis sector priority 6first preference7 in obtaining loans from banks at a low rate of interest

.this is known as a Qriority Sector +endingJ. It is a policy of providing a specified portion of

bank lending to the important sectors of the economy. It includes agriculture& small$scale

industries& cottage sector& tiny sector& e#port sector and other small business firms. /3I was

the first to initiate priority sector lending scheme in India.

NEE- FOR PRIORIT& SECTOR #EN-IN'The objectives underlying the priority sectorlending relate to ensuring the assistance from the

banking system flows in an increasing measure to those sectors of the economy which

though contributing significant proportion of national product have not received adequate

support of institutional finance in the past. This inter$aliaimplied flow of required funds to

various sectors of the economy in accordance with the national planned priorities. The social

control on banks was imposed as a measure to employ prudently and socially desirable

channels with the objective of achieving economic growth combined with stability and social

justice.

"ven decades after independence& more than A1 percent of borrowing by cultivators was from

informal sector. +ending from commercialbanks was directed towards large industrial houses.

(griculturalsector& smallscaleindustriesand weakersectionswere more neglected because of

both risk factor and urban bias. (lthough co$operative sector was there to serve the needs of

agricultural sector it was unable to meet the credit demand of farm community. There was a

need for ensuring anequitable and purposeful distribution of credit keeping in view relative

priorities of developmental needs.

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T"R$ST AREAS OF PRIORIT& SECTOR #EN-IN' 5;+. 4inancing of loan accounts under priority sector may entail risk of default. *ence a

separate insurance scheme guaranteeing a part of the loan of commercial banks was

introduced in ;2A1 and the 5I%!% of India was established. The provides deposit insurance

to the depositors up to a prescribed limit. The %orporation operates various credit guarantee

schemes relating to guarantee support to eligible credit institutions for their priority sector

advances to small borrowers and small scale industries.

?. riority sector lending implies deliberate diversion of funds of the banks from the other

sectors and that too at lower interest. To mitigate the ill effects of this on bank resources and

on profitability the schemes of refinance were formulated by (3(/5 in particular. Its

advances about ?:Hto ?


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>"& PRIORIT& SECTOR #EN-IN'H

4ocus on /ural 5evelopment by the government

%hannel resources to area that are deemed national priority

Inclusion of poor in economic growth of the country

SynchroniEe the bank lending according to national importance

C"AN'IN' CRITERIA OF PRIORIT& SECTORSIn the post nationaliEation of ;? commercial banks in ;2B2 period the /eserve 3ank of India

was compelled to lay down targets for lending to specified sectors. "ach major bank was

given targets for lending to these sectors. ( more comprehensive definition of priority sector

was adopted in ;2AA. These were mainly in terms of sectors. It was realiEed in the early ;2=1s

that even within priority sectors credit flow was more to the affluent sections. So the concept

of weaker section was adopted within priority sector. It was categorically stated that the

ma#imum benefit should be available to these weaker sections. 3y ;2=1s definition andquantitative targets had fully crystalliEed.

There emerged the political interference to make use of these developments for vote bank

politics for misuse of credit. (s a result neither banking institutions nor the neglected sectors

and sections were benefited. Thus the priority sector lending was effected. 4inancial sector

reform became imperative. Thus the arashimhan %ommittee suggested for bringing down

the priority sector target from ?1 percent to ;1 percent. This was not accepted by the

!overnment.

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T"E PRE AN- POST FOR! PERIO-

4ollowing are some of the major features of priority sector targets and classifications.

Targetsof?1& ;= and;1percentofnetbankcreditfortotalpriority sectorcredit&sub targets

ofagriculturalandweaker sections respectively remain same in both the periods. Targetsof;:percentofe#portcreditand;1percentofSSIcredit have been introduced for the

foreign banks which were not there earlier even for domestic banks. In the pre$reformperiodagriculturalcreditwasearmarkeddirectly forfarmers but majority of

whom& were small and marginal farmers. (gricultural credit was mainlyfor agricultural

purposes& production& storage and transportation of agricultural or allied product. In the post reform period ceiling of short term credit to be considered under priority sector

has been increased to /s. ; lakh. "arlier credit to plantation crop was restricted to only

small and marginal farmers& but it is given irrespective of siEe. In the categoryofdirectadvancestoagriculturenewacquisitionof jeeps& pick up vans&

minibuses& etc. *ave been included. These naturally will not be acquired by small and

marginal farmers. Indirect finance to agriculture was not a part of priority sector target earlier. ow finances

to dealers& commission agents& non$ banking financial companies& state electricity board

and investing in selected bonds and depositing in ape# level are not going to help farmers

directly

Inclusion of food and agro processing in the priority sector will give impetus and boost up

the production of food crops. Scope of small business under prioritysector has been e#panded to include business under

enterprises with original cost price of equipment used for the purpose of business up to

/s.;1lakhs from /s. : lakhs earlier. rofessionals like accountants and solicitors are included in priority sector. These are not

employment generating activities. They do not belong to weaker sections either. Transportand road network are included in priority sector.

*ousing was earlier e#clusively for very poor segments. ow the ceilings upto /s.


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The above changes in the post banker former a have led to the foll

lucky- financial inclusion - copy (1)

Documents