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To,
The coordinator
School of Management Studies
Indira Gandhi National Open University (IGNOU)Maidan Garhi
New Delhi 68.
Subject:- Submission of Project Report MS 100PP No. 72721
Dear Sir/ Madam,
Please find enclosed with this letter following documents:-
Certificate of Originality duly signed and verified by the
project guide and myself.( bound in Project Report)
Original Copy of approval letter of Project proposal (M.S
100) (bound in project Report).
Bio- Data of the Project supervisor duly signed and
verified by him.
Remuneration bill of the supervision duly signed
verified by him.
Thanking You in anticipation for your kind consideration and
early response.
Yours Faithfully
R.S Rathore
Enrollment No. 032081763
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EVALUTION OF FINANCIAL INCLUSION OF
SOCIETY BY PUBLIC SECTOR BANKS:
A CASE STUDY OF PUNJAB NATIONAL BANK IN
UTTARAKHAND
Project Report (MS 100)
(P.P. No. 72721)
To be Submitted to IGNOU in fulfillment of the requirement
for the award of Degree of Master in Business Administration (MBA)
(Banking & Finance)
By
RAJENDRA SINGH RATHORE
(Chief Manager Punjab National Bank)
En. No. 032081763
UNDER THE SUPERVISION OF
Dr. K. R. JAIN, D. Litt.
Associate ProfessorFaculty of CommerceD.A.V (P.G) COLLEGE
DEHRADUN (UTTARAKHAND)
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SCHOOL OF MANAGEMENT STUDIES
INDIRA GANDHI NATIONAL OPEN UNIVERISTY
MAIDAN GARHI NEW DELHI
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CONTENTS
Sl. No. Page No.Abstract (i)
Certificate of Originality (ii)
Acknowledgement (iii)
Copy of Approved Synopsis (iv)
Scope and Plan of the Research Work (v)
CHAPTER ONE
An Introduction of Banking 1-21
1. History of Banking
2. Indian Banking Scenario
3. An overview Punjab National Bank
CHAPTER TWO
Concept of Financial Inclusion 22-35
1. Background
2. Who need to be included?
3. Financial Inclusion
4. Committee on Financial Inclusion
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CHAPTER THREE
Data Analysis and Interpretation 36-57
1. Introduction2. Selection Branches
3. Collection of Data
4. Analysis of Data
5. Questionnaire and Response
CHAPTER FOUR 58-63
Evaluation of Financial Inclusion of Society by Punjab National
Bank in Dehradun District
CHAPTER FIVE
. Concluding Observations & Suggestions 64-73
1. Observations
2 Suggestions for Banks, Governments and Society
3 Summary of Observations and Recommendation
4 Conclusion
Annexure
I Summary of Questions and Response
II Questionnaire
III Bibliography
IV Supervisors Resume
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ABSTRACT
In an Organized Society Economic Development is considered to be most
important Indicator of human Development.
The country like India where disparities in wealth and Economic
Development are more visible the Government can not remain silent spectator
to such Discrimination. The vast majority of people in India are reported to
have no access to formal source of credit. National Sample Survey
Organization has conducted a survey (2003) and reported that 51.4% of
Farmer and 78.2% non farmer house holds did not have access to credit from
formal sources. These sections are termed as financially excluded people.
The severity of this magnitude has prompted Government to take some
affirmative action. A committee on Financial Inclusion was set up under the
Chairmanship of Dr. C. Rangrajan (Economi\Advisor to Prime Minister of
India) which had submitted various recommendations and the same have been
accepted by the Government. Reserve Bank of India in line with Policies of
Government has taken up the agenda of Financial Inclusion. A wide spread
exercise throughout the country, at grass root level, has been undertaken by
the banks for this purpose.
Punjab National Bank has very strong footings in the Indo Gengatic Belt. The
bank has taken up Financial Inclusion agenda in the Northern States including
the state of Uttarakhand. Dehradun is the lead District of the bank in the State.
The Financial Inclusion project is under implementation in the District. The
study conducted is an attempt to evaluate the progress made by the bank using
the questionnaire and survey of respondents from the project area.
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CERTIFICATE OF ORIGINALITY
This is to certify that this project work entitled EVALUATION
OF FINANCIAL INCLUSION OF SOCIETY BY PUBLIC SECTOR
BANKS A CASE STUDY OF PUNJAB NATIONAL BANK IN
UTTARAKHAND is an original work of RAJENDRA SINGH
RATHORE and is being submitted for partial fulfillment of MBA
(Banking & Finance) Degree to INDIRA GANDHI NATIONAL OPEN
UNIVERSITY New Delhi. This research project has not been submitted
to INDIRA GANDHI NATIONAL OPEN UNIVERSITY New Delhi or any
other University/Institute for the fulfillment of the requirement of
course of study.
Signature of Project Guide Signature of Student
Dr. K. R. Jain, D. Litt. Rajendra Singh Rathore
Associate Professor (Chief Manager)
Department of Commerce (Punjab National Bank)
D.A.V (P.G) College, Dehradun, En. No. 032081763
Uttarakhand
Date: 20-05-2011
Place: Dehradun
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ACKNOWLEDGEMENT
The present study entitled Evaluation of Financial Inclusion of Society by
Public Sector Banks : A Case Study of Punjab national Bank in Uttarakahd is
aimed at making an evaluation of Financial inclusion project undertaken by Punjab
National Bank in Dehradun District .
The study has been mainly conducted through Questionnaire and data collected
through respondents with the help of various branches of Punjab National Bank
working in the District I have been extremely fortunate to received unstained co-
operation from Punjab National Bank staff and guidance from the Higher
Management .
I sincerely acknowledge the contribution of my guide Dr. K.R Jain
Associate Professor in Deptt. Of Commerce, D.A.V (PG) college, Dehradun who
helped me with his critical insights into my study. His help was always available to
render valuable advice and needful suggestions
I also express my heartfelt gratitude to my parents, family members
(Sanghmitra, Aditya ) friends (H.K Ghai ) and colleagues for providing me moral
support to accomplish this project in time.
I also take this opportunity to express my sincere feelings to my wife Smt
Krishna Shekhawat for her active support at home and making the environment
conducive to carry out this study.
I take this opportunity to convey my thanks to all those who have contributed
and helped me in the present work. I acknowledge the inspiration and guidance that
I received from bank employees and faculty members of IGNOU in pursuit of this
study
Date :20-05-2011 Rajendra Singh RathorePlace: Dehradun Enrollment No.
032081763
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COPY
OFAPPROVE
D
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SYNOPSIS
EVALUATION OF FINACIAL INCLUSION OF SOCIETY BY
PUBLIC SECTOR BANKS A CASE STUDY OF PNB IN
UTTARAKHAND
PROJECT MS 100
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Submitted to the Indira Gandhi National Open University
for partial fulfillment of the award of the
Master Degree in Business Administration
Specialized in Banking Sector & Finance
Feb 2011
By
Rajendra Singh Rathore
Enrollment No. 032081763
Under
Dr. K.R JAIN, D.Litt.
(Associate Professor , Department of Commerce
DAV (PG ) College , Dehradun , Uttarakhand )
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School of Management Programme Studey Indira Gandhi national Open
University
Maidan Garhi ,New Delhi -100 068 ,INDIA | www. ignou.ac.in
CONTENTS
S.No TOPIC PAGE
NO.
1. An Introduction of Indian Banking Sector 1-4
2. An Overview of Punjab National Bank 4-7
3. The Concept of Financial Inclusion 7-9
4. Objectives of Project work 9
5. Research Methodology of Project Work 9-10
6. Hypothesis of Project Work 116.1 H0 (Null Hypothesis)
6.2 HA (Accepted Hypothesis)
7. Scope and Plan of The Project Work 11-12
8. Need and Expected Contribution of the Project Work 12-13
8.1 Need of the Project Work
8.2 Expected contribution
8.2.1 Contribution to the Government
8.2.2 Contribution for the Bank
8.2.3 Contribution for the Society
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9. Limitations of The Project Work 13
10 Bibliography of the Project Work 14
11 Annexure (Resume of Supervisor) 1
EVALUATION OF FINACIAL INCLUSION OF SOCIETY BY
PUBLIC SECTOR BANKS-
A CASE STUDY OF PNB IN UTTARAKHAND
1. AN INRODUCTION OF INDIAN BANKING SECTOR
1.1 General Definition
Bank is a Greek word which is derived from Banca. Bank as per oxford
English dictionary is a place where money is deposited, withdrawn and loans
are given. This simple definition describes bank in a crude form. The Purpose
of bank is to mobilize savings effectively and allocate the same efficiently
among the ultimate users of Funds i.e investors. The Banking Sector bringstogether the savers and investors.
1.2 Functions of The Bank
Traditionally Banks are supposed to perform the following functions .
- Accepting the Deposits from the person who have surplus of it.
- Lending the money to the person /entities who are in need of money.
- Providing payment and remittance services.
- Providing services like safe deposit vaults, safe custody of articles.
- Providing services of payments of utility Bills like telephone,
Electricity etc.
1.3 The Composition Of Indian Banking System.
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In India Banks can be broadly classified into following categories :-
Public Sector Banks
Public sector Banks are those Banks which are owned and controlled by
Govt. of India and where majority share holding is with GOI. Presently thelimit prescribe for any bank to be classified as public sector bank is minimum
51% share holding of Govt. of India. This sector includes Nationalized banks
state bank Group and Regional Rural Banks.
Private Sector Banks
Private sector Banks are those banks where more then 50% share
holding is with Indian Nationals/Corporate Entities.
Co operative Banks
These banks are in co-operative sector and managed by different co-
operatives spread all over the length and breadth if India Governed by
cooperative acts of different states and union territories.
Foreign Banks
These Banks are either incorporated outside India and /or where
majority holding is with foreign nationals /bodies.
In India the Banking System may be represented in Diagrammatic fromas under Role of Bank:
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1.4 Role Of Banks
Now a days Bank have assumed very vital role in Indian Economy andthese are back bone of the financial system of the nation. They not only
provide safe and secure place to deposit the surplus money of the customer
but the much needed financial support to the Individuals firms corporate
entities and public sector corporations is provided by the Banking system.
Reserve Bank of India
(Regulatory and Monetary Authority)Central Bank
Central Bank
Regional Rural
Banks
Banks
Public
Sector Banks
Banks
Developmental
Banks
Banks
Co-operative
Banks
Banks
Commercial
Banks
Banks
Nationalized
Banks
Bank
Banks
State Bank
Group
Group
State Bank
of India
Of India
Associate
Banks
Banks
Private Sector
Banks
Banks
Foreign
Indian
State Co-operative
Banks
Banks
District Co-operative
Banks
Banks
Primary Credit
Society
Society
National Bankfor Agriculture &RuralDevelopment (NABARD )- Refinance toBanks forAgriculture &RuralDevelopmentactivities
SmallIndustriesDevelopmentBank (SIDIBI)Refinance forSSI to Bank
Export ImportBank(EXIM) BankRefinance forExport Import toBank
National Housing
Bank (NHB)
Refinance forHousing to Bank
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Banks also provide a secure and reliable payment /Remittance system which
is essential for a stable economy.
Indian Financial sector is dominated by Nationalized banks followed
by. Private and foreign Banks these banks are supporting Agriculture,manufacturing and services sectors. We can say that all three sectors of
Indian Economy namely primary Secondary and Territory Sectors are
heavily dependent upon banks. So far these have been adequately supported
by these institutions (Particularly Public Sectors banks have been proven to
be effective change agents for the eradication of poverty in our country. All
the poverty alleviation programmes such as Swarn Jayanti Gram Swarojgar
Yojna (SGSRY) and Swarn Jayanti Sahari Rojgar Yojna (SJSRY) for Rural
and Urban areas respectively. Prime Ministers Employment Generation
programme (PMEGP) (For Rural & Urban areas) are being implemented by
the Banks Mahatma Gandhi National Rural Employment Guarantee Act(MNREGA) is also being implemented successfully with the help of Banks. In
the post liberalization Era (After implementation of Narshimam Committee
I&II) public Sector Bank have shown a remarkable change. They are being
highly customer focused and adopting fast track approach. They have become
futuristic with large scale implementation of Information technology solutions
and knowledge upgradation of existing work force. These Banks are
reorienting their strategies to stay competitive in the era of stiff competition.
The center of focus is customer understanding their needs and launching
product according to their choice for their delight. All these initiatives havehelped public sector Bank to remarkably improve their bottom line. Healthy
growth in the size of their balance sheet with lesser amount of Non
performing Assets (NPAs) are their strong areas.
2. AN OVERVIEW OF PUNJAB NATIONAL BANK
2.1 Historical Background and Present State:-
Punjab National Bank (PNB) is the largest nationalized bank and
second largest bank in India In terms of total Business figures as on 31-03-
2010 Total Deposits Rs 249330 crores and total advances as Rs 186601crores taking total Business to Rs 435931 crores with year on year Growth
(Y.O.Y) of 22.30 % .As on 31-12-2010 the deposit have crossed Rs
300,000 crores mark and total business of the bank has crossed whopping
sum of Rs 5,00,000 crore plus.
It is the only largest commercial bank in India which has never been under
control of any Business/Industrial House. It was founded by the Great
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Freedom fighters for the furtherance of cause of freedom. It was The Bank of
the Indians By the Indians and For The Indians with 100% Deshi Capital. It
was founded on 13th April 1895 (Baisakhi) with its Head Quarter at Lahore.
Punjab Keshri Lala Lajpat Rai was its founding member. After partition itshead office was shifted from Lahore to Delhi. The Bank has BANKING
FOR THE UNBANKED as its Mission.
2.2 Operational Structure of PNB:-
The present structure may be depicted in Diagrammatic form
As discussed above head office is the apex policy making Authority for the
Bank and it forms policies according to Reserve Bank of India and Govt. of
India policy Guidelines. The Bank has following Division at Head office forsmooth implementation of polices Formed by Board of Directors. According
to their role these have been categorized following categories .
Head Office(7- Bhikhaiji Cama
PlaceNew Delhi)
New Delhi
Circle Offices65 officesacross
all over India
Branches5200 plus spreadall over the length& Breadth ofcountry withConcentration inIndogengitic Belt
Formulation of Policies
and overall
Administrative Control
through DifferentDivisions
Guiding and Controlling
the branches for
implementation of the
Policies formed by Head
office
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Business Divisions
Compliance Division
Corporate Marketing Division
Credit Administration Division
Credit Card Division
Financial Inclusion Division
Government Business Division (GBD)
International Banking Division (IBD )
Micro Small and Medium Enterprises Division (MSME)
Priority Sector and lead Bank Division ( PSLB)
Resources Mobilization Division
Retail Assets Division
Treasury Division
Support DivisionsBoard and Coordination Division
General Administration Division
Human Resources Division
Personnel Administration Division
Information Technology Division
Law Division
Management Advisory Service Division
Management Information System Division
Organizational & Strategic Planning Division (OSPD )
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Pension and Provident Funds Division
Printing and Stationary Division
Strategic Planning an d Business Process Reengineering Division
Control Divisions
Credit Audit and Review Division
Finance Division
Inspection and Audit Division
Risk Management Division
Management Audit and Review Division
2.3Functional Hierarchy
Each Division at Head office is headed by General Manager and assisted by
Deputy General Manger, Assttt. Gen. Manger, Chief Manger , Senior Manger
etc. Similarly circles are Headed by General Manager/ Dy General Manger
and assisted by Asstt. General Manger /Chief Manger , Sr. Manger,Managers and Officers. Head office Division monitor and guide the circle
offices in their respective field. Similarly at circle level different department
are created which co- ordinate with concerned Head Office Division and in
turn guide the branches and Monitor their progress in the respective segment.
3 THE CONCEPT OF FINANCIAL INCLUSIONThe term Financial Inclusion is popular in Indian Financial Circles. This is
Especially after the Reserve Bank of India announced a series of measures. In
its credit policy for 2006-2007 it has directed banks to include the excluded
population in the banking net. Extending the reach of formal financial
institutions among the poorest of poor should mean taking them out of theclutches of money lenders.
If we define Financial Inclusion we may say that this is a process of
ensuing access to financial services and timely and adequate credit, where
needed by vulnerable groups such as weaker section and low income groups at
an affordable cost.
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Thus by Financial Inclusion (FI) we mean delivery of banking services
and credit at an affordable cost to vast section of disadvantaged and low
income groups, The various financial services includes savings, loans,
payments, remittances and financial counseling / advisory services by formalfinancial system.
The term Financial Inclusion is perceived in different way in different
context. One view is that access to credit may be treated as Financial Inclusion
where as fl where as other view includes the services extended by the
Financial Institutions. This means that it is all about finance and money but
the ultimate object is to abolish the state of social exclusions in the economy.
The concept may be understood in a simple diagrammatic from as
under This is an ideal situation where an individual belonging to lowest strata
of society is provided with above types of services then we can say that the
real objective are fulfilled with In the letter and spirit. To begin with this maybe started from opening of no-frill bank account with some amount of
overdraft facility inbuilt in system. For which no documentation is required to
be fulfilled by the beneficiary except for the opening of account with known
your customer (KYC) compliance.
The term Financial Inclusion has gained momentum in the recent past
world over as we see that benefits of economic development have not
percolated to the lowest start a of society and without this economic
development is meaningless.
Financial Inclusion
Bank A/c
Financia
l Advice
Saving
s
Affordable
Credit
credit
Payment
and
Remittances
Insuranc
e
Financial
Inclusion
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In India nearly 29 percent of our population (292 millions) is living
below poverty line .To make of our economic development sustainable it is
very important that vast pool of human resources is brought in to main stream
of economic activities. That is why Financial Inclusion has got special role toplay . This concept has found mention in our National Planning during
Eleventh Five Year plan for the first time
Now a days it has become a common agenda for all the banks operating
in rural and semi urban areas in particular. Separate Divisions/Department
have been created at apex level of every Bank. RBI has also accorded top
priority to this agenda. A Deputy Governer is entrusted to monitor the pace of
implementation of project by Commercial Banks. RBI is assisted by National
Bank for Rural Development (NABARD) which is monitoring the pace of
implementation by Regional Rural Bank and cooperative Banks.
4. OBJECTIVES OF THE PROJECT WORK
The main objective of the study is to analyze the Financial Inclusion
of the society by the Public Sector Banks in Uttarakhand particularly in case
of Punjab National Bank . To achieve the main objective of the project work,
there will be some secondary objectives which are as under -
To study the over all position of PNB in Financial Inclusion.
To study the changing trends and progress of Banking system with
reference to Financial Inclusion.
To identify the major challenger faced by banks in Financial Inclusion
in Uttarakhand.
To suggest measures regarding effective use of Financial Inclusion by
Banking Sector in Uttarakhand
To suggest measures to government and Banks to sustain the benefits
of Financial Inclusion for the Society .
5 RESEARCH METHOD OLOGY OF THE PROJECT WORK
5.1Research Design
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Descriptive Research Design is used as the characteristics of the
customers of PNB and their perception about Benefits of Financial Inclusion
project. How the project is beneficial to them in particular and society in
General is determined and described.5.2 Collection of Data
The Project work will be based on Primary & Secondary Data.
Primary Data
The primary data shall be collected through Questionnaire/,Survey in
the project area , Interviews & discussion with beneficiaries, Bank officials
and govt. officials working in different Government department in the area.
Secondary Data
The secondary data shall be collected from following sources:
Annual report of PNB
News Bulletin
Monthly Review
Report published by PNB
Books Research papers, Articles in magazines News paper
Internet sites
Proceedings of Meetings etc.
5.3 Sampling Design Judgmental sampling will be used in the study as the sample will be selected
on the individual judgment of the Researcher out of the entire target group.
5.4 Study Area The Area of Dehradun District being served by PNBbranches shall be covered
5.5 Sample size- Around 50 persons including NGOs, Govt. Officers shall
be contacted and information will be collected.
5.6 Data Analysis and InterpretationThe data will be analyzed will be appropriate graphical representation of the
data such as tables, figures and charts etc. would be appropriately used as an
where required.
5.7 Tool and technique :-- Following tools and techniques are supposed to
be used in data analysis an interpretation
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-Questionnaires
-Bar graphs
-Pie chart
6 HYPOTHESIS OF THE PROJECT WORK
6.1 Ho (Null Hypothesis )
Financial Inclusion project is not good for the society.
The commitment of Banks to cover the entire population under
bank net is not there.
Financial Inclusion is neither viable nor beneficial for the bank.
The financial information, results found are not helpful
6.2 HA (Accepted Hypothesis)
Financial Inclusion project is good for the society
There is strong commitment of the banks to cover the entirepopulation under Bank net
Financial Inclusion project is viable and feasible for all the stake
holders.
The financial information, results found are very helpful.
7 SCOPE AND PLAN OF THE PROJECT WORK
7.1 Scope of the Project Work
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The study could give the project scenario for a new successful strategy
with proper implementation of the plan. The features of scope are as
under:
The study could give an idea of net work expansion of banks in Rural
area for the better implementation of the Financial Inclusion Project.
The study could give insight in to the Financial Inclusion Model and its
impact on the target group.
The study is expected to give feed back about the approach of different
stake holders, their roles and responsibilities in the implementation of
the project.
7.2 Plan of the Project Work
The plan of project work will be divide in the following five
chapters
Chapter-I An Introduction of Banking
Chapter-II Concept of Financial Inclusion
Chapter-III Data Analysis and InterpretationChapter-IV Evaluation of Financial Inclusion of society by PNB in Dehraun
Distt.
Chapter-V Concluding Observations and Suggestions
8. NEED AND EXPECTED CONTRIBUTION OF THE PROJECT
WORK:
The discussion has revealed that banking has grown leaps and Bounds so has
the economy but still 290 Million of people are living below poverty line. This
high levels of poverty is a big question mark on our economic development.
To make this development sustainable the growth should be inclusivetherefore this project is of vital importance for Central & State Governments
and public at large.
8.1 Expected contributionThe study is expected to contribute to all the
three stake holders central and state governments, society and banks.
8.2.1 Contribution to the Central & State Governments
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The study will bring to the fore issues which require direct intervention
from central & state Government in the field of framing policies for such
other project and their dovetailing (integration of financial inclusion with
Unique Identity project (UID) )
Taking corrective action in the schemes aimed at improving the living
standard of the down trodden strata of society
Deciding the level of govt. intervention in co-ordination of financial
inclusion project amongst Bank Development Agencies and people at
large.
In Judging the performance of banks in this particular field.
Contribution to the Bank
The bank had launched the project in Dec. 2008 with much fun fare. The
study is expected to bring to the knowledge of bank that.
Upto what extent its object of 100% Financial Inclusion in the project area
has been achieved.
What are the critical constraining factors in the successful implementation
of the project ?
What kind of support is needed from the Govt agencies /Department for
100% success of the project. ?
Which types of scheme are to be framed at bank level to make the project
result oriented?
Contribution to the Society
The object of the project to bring to the fore the importance of financial
inclusion. For the overall well being of the society at large and to use thevast pool of human Resource as a tool of the economic Development so
that society will come to know.
Whether this project has brought some perceptible charge in the locality?
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Whether the people of commend area are feeling involved in national main
stream of economy.
Whether the financial Inclusion project can help the people to shun theviolence so that socio economic fabric can be strengthened.
9 LIMITATIONS OF THE PROJECT WORK
An study in any field is small step and it can not be ultimate. It always
leaves room for improvement. The limitation of one study serve as a basis for
the further research in that direction. Every researcher has the Endeavour to
ensure that TRUE picture is brought out but there may be some limitations
related to the study these are enumerated as under :-
The study is limited to little available relevant literature.
Bank do not divulge informations ( due to concept of secrecy )
Questionnaire are not responded timely as the researcher has no authority
to compel respondent to give answer.
Assistance of clerical support staff is not made available timely.
Thus it can be concluded that despite of above limitations of theproject a sincere effort will be made to minimize them and to make
work more useful for the Banks , Financial Institutions and other
stakeholders.
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SCOPE
&PLAN OF THE
RESEARCH
WORK
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Chapter I
INTRODUCTION OF
BANKING
1- HISTORY OF BANKING
2- INDIAN BANKING
SCENARIO3- AN OVERVIEW OF PUNJAB
NATIONAL BANK
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Chapter I
INTRODUCTION OF BANKING
1- History of Banking - The word bank was borrowed from high
German banc, bank(Meaning Bench, counter) To Bancaas old Italian word.
This word was borrowed by French as baque and this was borrowed by
Middle English as Bank.
The Earliest evidence of money changing activity was depicted on a silver
Greek drachem coin from ancient Hellenic colony presented in the British
museum in London. The coin snows a Bankers table (Trapeza) laden with
coins, a pun on the name of the city. In Modern Greek word the Trapeza
means the same old Bank and table.
Banking in modern form can be traced to medieval Italy. The rich citiesin the northern Italy, like Florence, Venice and Genoa. Were the first to have
banks. The earliest known state Deposit BankBanco di san Giorgio (Bank of
sant Geoge) was founded in 1407 at Genoa Italy.
Bank as per oxford English dictionary is a place where money is deposited,
withdrawn and loans are given. This simple definition describes bank in a
crude form. The Purpose of bank is to mobilize saving effectively and allocate
the same efficiently among the ultimate users of Funds i.e. investors. The
Banking Sector brings together the savers and investors.
2. Indian Banking Scenario Globally Banks have become
Backbone of Economies. Indian Economy is not exception to it.
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2.1 History Established in 1786 the General Banks of India was first
Bank to be established in India followed by Bank of Hindustan (1790) both
these banks are non-existent now. The State Bank of India is Oldest Bank in
existence in India. It was named as State Banks of India after Independence of
our Nation. Earlier it was known as Imperial Bank of India. The Imperial
Bank was formed in 1921 after amalgamation of three Presidency Banks i.e.
The Bank of Madras, Bank of Bombay and Bank of Bengal (it was oldest
amongst three and was formed in June 1806 as Bank of Calcutta)
In 1838 Union Bank was established by merchants of Calcutta but it
failed in 1848. Allahabad Bank is the oldest joint stock bank which started its
functioning in 1865. Prior to this the bank of Upper India was established in
1863 but it failed in 1913.
Foreign banks too started to arrive, particularly in Calcutta, in the
1860s. The Comptoire dEscompte de Paris opened a branch in Calcutta in
1860, and another in Bombay in 1860; branches in Madras and Puducherry,
then a French colony, followed. HSBC established itself in Bengal in 1869.
Calcutta was the most active trading port in India, mainly due to the trade of
the British Empire, and so became a banking center.
The first entirely Indian joint stock bank was the Oudh Commercial
Bank (1881) but it failed in 1958. The next was the Punjab National Bank
established in Lahore in 1895, which has survived to the present and is now
one of the largest banks in India.
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Around the turn of the 20 th Century, the Indian economy was passing
through a relative period of stability. Around five decades had elapsed since
the Indian Mutiny, and the social, industrial and other infrastructure hadimproved. Indians had established small banks, most of which served
particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indian Joint stock banks. All these
banks operated in different segments of the economy. The exchange banks,
mostly owned by Europeans, concentrated on financing foreign trade. Indian
joint stock banks were generally under capitalized and lacked the experience
and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, In respect of banking it seems we
are behind the times. We are like some old fashioned sailing ship, divided by
solid wooden bulkheads into separate and cumbersome compartments.
The period between 1906 and 1911, saw the establishment of banks
inspired by the Swadeshi movement. The Swadeshi movement inspired local
businessmen and political figures to found banks of and for the Indian
community. A number of banks established then have survived to the present
such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda,
Canara Bank and Central Bank of India.
The fervor of Swadeshi movement lead to establishing of many private
banks in Dakshina Kannada and Udupi district which were unified earlier and
known by the name South Canara (South Kanara) district. Four nationalized
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banks started in this district and also a leading private sector bank. Hence
undivided Dakshina Kannada district is known as Cradle of Indian Banking.
During the First World War (1914-1918) through the end of the second World
War (1939-1945), and two years thereafter until the independence of India
were challenging for Indian banking. The years of the First World War were
turbulent, and it took its toll with banks simply collapsing despite the Indian
economy gaining indirect boost due to war-related economic activities. At
least 94 banks in India failed between 1913 and 1918 as indicated in the
following table:
Years Number of banks
that failed
Authorized capital
(Rs. Lakhs)
Paid-up Capital
(Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1
2.2 Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab
and West Bengal, paralyzing banking activities for months. Indias
independence marked the end of a regime of the Laissez-faire for the Indian
banking. The Government of India initiated measures to play an active role in
the economic life of the nation, and the Industrial Policy Resolution adopted
by the government in 1948 envisaged a mixed economy. This resulted into
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greater involvement of the state in different segments of the economy
including banking and finance. The major steps to regulate banking included:
The Reserve Bank of India, Indias central banking authority, wasnationalized on January 1, 1949 under the terms of the Reserve Bank of
India (Transfer to Public Ownership) Act, 1948.
In 1949, the Banking Regulation Act was enacted which empowered
the Reserve Bank of India (RBI) to regulate, control, and inspect the
banks in India.
The Banking Regulation Act also provided that no new bank or branch
of an existing bank could be opened without a license from the RBI,
and no two banks could have common directors.
2.3 Nationalization
Despite the provisions, control and regulations of reserve Bank of India,
banks in India except the State Bank of India (SBI), continued to be owned
and operated by private persons. By the 1960s, the Indian banking industry
had become an important tool to facilitate the development of the Indian
economy. At the same time, it had emerged as a large employer, and a debate
had ensued about the nationalization of the banking industry.
The Government of India issued ordinance and nationalized the 14
largest commercial banks with effect from the midnight of July 19, 1969.
Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer of Undertaking) Bill. And it
received the presidential approval on 9 August 1969.
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A second dose of nationalization of 6 more commercial banks followed
in 1980. The stated reason for the nationalization was to give the governmentmore control of credit delivery. With the second dose of nationalization, the
Government of India controlled around 91% of the banking business of India.
Later on, in the year 1993, the government merged New Bank of India with
Punjab National Bank. It was the only merger between nationalized banks and
resulted in the reduction of the number of nationalized banks from 20 to 19.
2.4 Liberalization
The next stage for the Indian banking has been set up with the proposed
relaxation in the norms for Foreign Direct Investment, where all Foreign
Investors in banks nay be given voting rights which could exceed the present
cap of 10%, at present it has gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers,
till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go
home at 4) of functioning. The new wave ushered in a modern outlook and
tech-savvy methods of working for traditional banks. All this led to the retail
boom in India. People not just demanded more from their banks but also
received more.
Currently banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. In terms of quality of assets
and capital adequacy, Indian banks are considered to have clean, strong and
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transparent balance sheets relative to other banks in comparable economies in
its region; The Reserve Bank of India is an autonomous body, with minimal
pressure form the government. The stated policy of the Bank on the IndianRupee is to manage volatility but without any fixed exchange rate-and this has
mostly been true.
The banking sector in India may be depicted in diagrammatic form as
under.
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Reserve Bank of India(Regulatory and Monetary Authority)
Central Bank
Commerci
al BanksRegional
Rural BanksCo-operative
Banks
Developmental
Banks
Public SectorBanks
PrivateSector Banks
State Co-operative Banks National Bank for
Agriculture & RuralDevelopment
(NABARD)
Refinance to Banks
for Agriculture &
Rural Development
activities Loans
Developmentactivities
Nationaliz
ed Banks
State Bank
Group
India
n
Foreig
n
District Co-
operative Banks
Primary Credit
Society
State Bankof India
Associat
e Banks
Small Industries
Development Bank of
India (SIDBI)
Refinance for SSI to
Bank
Export Import Bank
(EXIM) Bank
Refinance for Export
Import to Banks
National Housing
Bank (NHB)
Refinance for
Housing to Banks
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3. An Overview of Punjab National Bank
PNB was founded in the year 1895 at Lahore (presently in Pakistan) as an off-
shoot of the Swadeshi Movement. Among the inspired founders were Sardar
Dayal Singh Majithia, Lala HarKishan Lal, Lala Lalchand, Shri Kali Prosanna
Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, Lala Dholan
Dass. Sardar Dayal Singh Majithia was the founder Chairman.
With a common missionary zeal they set about establishing a national bank;the first one with Indian capital owned, managed and operated by the
Indians for the benefit of the Indians. The Lion of Punjab, Lala Lajpat Rai,
was actively associated with the management of the Bank in its formative
years. The first Board of 7 Directors comprised of Sardar Dayal Singh
Majithia, who was also the founder of Dayal Singh College and the Tribune;
Lala Lalchand one of the founders of DAV College and President of its
Management Society: Kali Prosanna Roy, eminent Bengali pleader who was
also the Chairman of the Reception committee of the Indian National
Congress at its Lahore session in 1900; Lala Harkishan Lal who became
widely known as the first industrialist of Punjab; EC Jessawala, a well known
Parsi merchant and partner of Jamshedji & Co. of Lahore; Lala Prabhu Dayal,
a leading Rais, merchant and philanthropist of Multan; Bakshi Jaishi Ram, an
eminent Civil Lawyer of Lahore; and Lala Dholan Dass, a great banker,
merchant and rais of Amritsar. Thus a Bengali, Parsi, a Sikh and a few Hindus
joined hands in a purely national and cosmopolitan spirit to found this Bank
which opened its doors to the public on 12 th of April 1895. They went about it
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with a Missionary Zeal. Lala Harkishan Lal, the first secretary to the Board
and Shri Bulaki Ram Shastri barrister at Lahore, was appointed Manager.
A Maiden Dividend of 4% was declared after only 7 months of operation.
Lala Lajpat Rai was the first to open an account with the bank which was
housed in the building opposite the Arya Samaj Mandir in Anarkali in Lahor.
His younger brother joined the Bank as a Manager. Authorised total capital of
the Bank was Rs. 2 lakhs, the working capital was Rs. 20000. It had total staff
strength of nine and the total monthly salary amounted to Rs. 320.
The first branch outside Lahore was opened in Rawalpindi in 1900. the Bank
made slow, but steady progress in the first decade of its existence. Lala Lajpat
Rai joined the Board of Directors soon after, in 1913, the banking industry in
India was hit by a severe crisis following the failure of the peoples Bank of
India founded by Lala Hakishan Lal. As many as 78 banks failed during this
crisis. Punjab national Bank survived. Mr. JH Maynard, the then Financial
Commissioner, Punjab, remarked... Your Bank survived no doubt due to
good management. It spoke volumes for the measure of confidence reposed
by the public in the Banks management.
The years 1926 to 1936 were turbulent and loss ridden ones for the banking
industry the world over. The 1929 Wall Street crash plunged the world into asevere economic crisis.
It was during this period that the Jalianwala Bagh Committee account was
opened in the Bank, which in the decade that followed, was operated by
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Mahatma Gandhi and Pandit Jawaharlal Nehru. The five years from 1941 to
1946 were ones of unprecedented growth. From a modest base of 71, the
number of branches increased to 278. Deposits grew from Rs. 10 crores to Rs.62 crores. On March 31. 1947, the Bank officials decided to leave Lahore and
transfer the registered office of the Bank to Delhi and permission for transfer
was obtained from the Lahore High Court on June 20, 1947.
PNB was then housed in the precincts of Sreeniwas in the salubrious Civil
Lines, Delhi. Many a staff member fell victim to the widespread riots in the
discharge of their duties. The conditions deteriorated further. The Bank was
forced to close 92 offices in West Pakistan constituting 33 percent of the total
number and having 40% of the total deposits. The Bank, however, continued
to maintain a few caretaker branches.
The Bank then embarked on its task of rehabilitating the displaced account
holders. The migrants from Pakistan were repaid their deposits based upon
whatever evidence they could produce. Such gestures cemented their trusts in
the bank and PNB became a symbol of Trust and a name you can bank upon.
In 1951, the Bank took over the assets and liabilities of Bharat Bank Ltd. And
became the second largest bank in the private sector. In 1962, it amalgamated
the Indo-Commercial Bank with it. From its dwindled deposits of Rs. 43crores in 1949 it rose to cross the Rs. 355 crores mark by the July 1969. Its
number of offices had increased to 569 and advances from Rs. 19 crores in
1949 to Rs. 243 crores by July 1969 when it was nationalized.
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Since inception in 1895, PNB has always been a Peoples bank serving
millions of people throughout the country and also had the proud distinction
of serving great national leaders like Sheri Mahatma Gandhi, SarvshiriJawahar Lal Nehru, Gobind Ballabh Pant, Lal Bahadur Shastri, Rafi Ahmed
Kidwai, Smt. Indira Gandhi etc. amongst other who banked with it.
PNB has always responded enthusiastically to the nations needs. It has been
earnestly engaged in the task of national development. In the process, the bank
has emerged as a major nationalized bank.
3.1 Journey of Progress
1895: PNB established in Lahore.
1904: PNB established branches in Karachi and Peshawar.
1939: PNB acquired Bhagwan Dass Bank Limited.
1947: Partition of India and Pakistan at Independence. PNB lost its premises
in Lahore, but continued to operate in Pakistan.
1960: PNB amalgamated Indo-Commercial Bank Limited (Established in
1933) in a rescue.
1961: PNB acquired Universal Bank of India.
1963: The Government of Burma nationalized PNBs branch in Rangoon
(Yangon).
1965: After the Indo-Pak war the government of Pakistan seized all the offices
in Pakistan of Indian banks, including PNBs head office, which may
have moved to Karachi. PNB also had branches in East Pakistan
(Bangladesh).
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1969: The Government of India nationalized PNB and 13 other major banks
on 19th July, 1969.
1978: PNB opened a branch in London.1988: PNB acquired Hindustan Commercial Bank Limited in a rescue.
1993: PNB acquired New Bank of India, which the Government of India had
nationalized in 1980.
1997 : Joint venture in Everest Bank Ltd, Kathmandu, Nepal.
1998: PNB set up a representative office in Almatty, Kazakhstan.
2003: PNB took over Nedungadi Bank (established in 1899), the oldest
private sector bank in Kerala. It was incorporated in 1913 and in 1965 had
acquired selected assets and deposits of the Coimbatore National Bank. At the
time of the merger with PNB, Nedungadi Banks shares had zero value, with
the result that its shareholders received no payment for their shares.
2006 : A wholly owned UK subsidiary of PNB established in London on 13
April 2006 as Punjab National Bank (International) Ltd. (PNBIL).
2010: On 27th January, 2010 a joint venture in Bhutan as DRUK PNB Bank
Ltd.
2010: The bank has acquired 63.64% Stake in JSC Dana Bank, Kazakhstan on
13th December 2010.
The bank has its presence in Dubai, Alamatty, (Kazakhstan) Singapore, Oslo
(Norway), Kabul, and United States of America, China etc.
3.2 The Present State
Punjab National Bank (PNB) is the largest nationalized bank and second
largest bank in India In terms of total Business figures as on 31-03-2011 Total
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Deposits are over Rs. 313000 Crores and total advances over Rs. 243000
Crores taking total Business to over Rs. 556000 Crores. The Bank has
BANKING FOR THE UNBANKED as its mission.The Business growth of the Bank for last five year has been tremendous
which is evident from the figures mentioned below:
Year (Ending 31
March)
2007 2008 2009 2010 2011
(Rs. in Crores)
Deposits
140000 166000 210000 249000 312899
Advances 97000 120000 155000 187000 242106
Total Business 236000 286000 365000 436000 555005Net Profit 1540 2049 3091 3905 4433
The data shown above clearly indicates that in the last five year bank has
increased its deposits by over to 223% where has the advances have grown by
over 250% and the growth in total business reported is over 237% similarly
the profit has grown by more then 286%.
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3.3 Operational Structure of PNB:-
The present structure may be depicted in Diagrammatic form
As discussed above head office is the apex policy making Authority for the
Bank and it forms policies according to Reserve Bank of India and Govt. of
India policy Guidelines. The Bank has following Divisions which are
responsible for implementation of the policies framed by Board of Directors.
According to their role these have been categorized as under.
3.3. 1- Business Divisions
Compliance Division
Corporate Marketing Division
Head Office
(7-Bhikhaiji Cama Place
New Delhi
Formulation of
Policies and overall
Administrative
Control through
Different Divisions
Circle Offices 65 officesacross all over India Guiding and
controlling the
branches for
implementation of
the Policies formed
by Head office
Branches 5200 plus spread all
over the length & Breadth of
country with Concentration in
Indogengitic Belt
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Credit Administration Division (CAD)
Financial Inclusion Division (FID)
Government Business Division (GBD)
International Banking Division (IBD)
Micro Small and Medium Enterprises Division (MSMED)
Priority Sector and lead Bank Division (PSLBD)
Resources Mobilization Division (RMD)
Retail Assets Division (RAD)
Treasury Division
3.3. 2-Support Divisions
Board and Coordination Division
General Administration Division (GAD)
Human Resources Division (HRD)
Personnel Administration Division (PAD)
Information Technology Division (ITD)
Law Division
Management Advisory Service Division (MASD)
Management Information System Division (MISD)
Organizational & Strategic Planning Division (OSPD)
Pension and Provident Funds Division
Strategic Planning and Business process Reengineering Division
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3.3. 3- Control Divisions
Credit Audit and Review Division (CARD)
Finance Division (FD)
Inspection and Audit Division (IAD)
Integrated Risk Management Division (IRMD)
Management Audit and Review Division (MARD)
3.4 Functional Hierarchy
Each Division at Head office is headed by General Manager and
assisted by Deputy General Manager, Asstt. Gen. Manager, Chief Manager,
Senior Manager etc. Similarly circles are Headed by General Manager/ Dy.
General Manager and assisted by Asstt. General Manager/ Chief Manager, Sr.
Manager, Managers and Officers. Head office Division monitor and guide the
circle offices in their respective field. Similarly at circle level different
department are created which co-ordinate with concerned Head Office
Division and in turn guide the branches and Monitor their progress in there
respective segment.
4- Functions of Banks
Traditionally Banks are supposed to perform the following functions.
- Accepting the Deposits from the person who have surplus of it.
- Lending the money to the person/entities that are in need of money.
- Providing payment and remittance services.
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- Providing services of payments of utility Bills like telephone,
Electricity etc.
- Off-late Banks have made there in EPFTOS (Electronic Funds transfer atpoint of sales) Sphere and related areas now a days banks are providing
wide range of services and a Bank account is considered in dispensable
by most individuals, Businesses and even Governments.
5- Channels Of Services By Banks
The services of banks are available through various channels the most
important few are
Brick and Mortar Bank (Traditional Branch with fixed place.
ATM (Automated Teller Machine) That dispenses cash (and some
times receives it also) without human intervention. Some ATMs
provide additional services also.
Online Banking/Internet Banking Customers perform their
transfer banking operations from their Home/Business Place by
using Internet.
Mobile Banking Use of ones Mobile to conduct Banking
transition.
Mail Banking Banks accept E-mails from their costumers and
provide them required services.
Call-Centers- Banks have setup 24x7x365 call-centers to help their
costumers.
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Video Banking It is mainly used for professional consultations via
remote video/audio connection.
7Relationship Banking In case of high net worth account holders
Banks designate individual Officer as relationship manager to cater
to the Banking needs of the respective account holder.
6- Categorization Of Banks
Banks may be categorized on the basis of ownership or the business
module adopted.
(A) Ownership Categorization - According to ownership we may
classify Banks in to following three broad categories
(i) Private Banks These Banks are generally owned by share holders as
a joint stoke company. Profit is the supreme objective of such Banks.
These Banks are mainly present in developed and developing Countries.(ii) Co-operative Banks Ownership ofSuch Banks is with co-operatives
and only share holder members of co-operatives can avail benefits of
services of these Banks. Such Banks are present mainly in communist
countries and in the countries which have adopted the model of mixed
economy.
(iii) Government Banks These Banks are owned by the Government of
the particular country with or without some private share holding. Central
Bank of each country is owned by Government of that Country. India is
amongst the top countries where economy is dominated by the presence of
Government Banks.
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Categorization on the Basis of Business Modules - According to this
criterion the Banks may be Categorize as under.
(i) Central Banks/Regulators(ii) Commercial Banks (Retail/Corporate)
(iii) Development Banks
(iv) Investment Banks
(i) Central Banks/Regulators These Banks are Bankers to
the Governments and Banks. Regulatory and supervisory
functions along with monetary policy formulation are their basic
job. Example of such banks is Reserve Bank of India, Federal
Reserve of America etc.
(ii) Commercial Banks (Retail/Corporate) Most of the
Banks functioning in the world fall under this category. The
whole range of services required by individuals, Businesses,
Industries, Governments etc are fulfilled by these Banks through
general Banking Services Branches, Specialize branches like
Large/Mid Corporate branches (which cater to the needs are
Large/Mid Corporate segment of economy), Retail
assets/Business branches (Their focus is on Retail Business
segment of Economy) Similarly special Agricultural Finance
branch (Focus on Agriculture Sector), Serve the respective
segment with greater focus.
(iii) Development Banks These Banks are established to cater
to the needs of specified sector of economy/Society i.e. Housing,
Industry, Rural Development, Infrastructure, etc. e.g. (National
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Banks for Agricultural and Rural Development (NABARD), for
Agricultural and Rural Development, Small Scale Industries
Development Bank (SIDBI) for Small Scale Industries, NationalHousing Bank (NHB) for Development of Housing Sector are
example of such Banks in our Country.
(iv) Investment Banks These Banks are basically active in
providing consultancy to Large Business Groups and
Providing/arranging credit for their business requirements, advice
on their portfolio and its management etc.
In this chapter the origin and History of banking in General and
Indian Banking in particular has been Discussed. Punjab National Bank
is the second largest bank in India. Present study has been conducted
about the progress made by the bank under Financial Inclusion
programme by the branches of the bank in Dehradun District. A
summarized view of Punjab National Bank its History, Functional
Structure and present Business level have been discussed separately. In
the next chapter the concept of Financial Inclusion will be discussed.
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CHAPTER TWO
Concept
of
Financial Inclusion
1. Background
2. Who need to be included?
3. Financial Inclusion
4. Committee on Financial
Inclusion
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Chapter-II
CONCEPT OF FINANCIAL INCLUSION
1- Background
Access to finance, especially by the poor and vulnerable groups is a
prerequisite for employment, economic growth, poverty reduction and social
cohesion. Further, access to finance will empower the vulnerable groups by
giving them an opportunity to have a bank account, to save and invest, toinsure their homes or to credit, thereby facilitating them to break the chain of
poverty.
In its landmark research work titled Building Inclusive Financial Sectors for
Development (2006), more popularly known as the Blue Book, the United
Nations (UN) had raised the basic question: why are so many bankable
people unbaked? An inclusive financial sector, the Blue Book says, would
provide access to credit for all bankable people and firms, to insurance for
all insurable people and firms and to savings and payment services for
everyone.
Financial inclusion, thus, has become an issue of worldwide concern,
relevant equally in economies of the under-developed, developing and
developed bringing to the fore the need for development strategies that touch
all lives, instead of a select few.
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Experience has shown that in the initial phase of real and financial sector
reforms, there is need to build in adequate provisions ensuring that the
economically weak segment of population have increased participation in theprocess of economic growth and social development. Reforms in financial
systems, therefore, need to be complemented by measures that encourage the
institutions, instruments, relationships and financing arrangements to be
properly geared for providing sound, responsive financial services to the
majority of the people who do not have such access.
2- Who Needs to be Included?
The essence of financial inclusion is in trying to ensure that a range of
appropriate financial services is available to every individual and enabling
them to understand and access those services. Apart from the regular form of
financial intermediation, it may include a basic no frills banking account for
making and receiving payments, a savings product suited to the pattern of
cash flows of a poor household, money transfer facilities, small loans and
overdrafts for productive, personal and other purposes, etc.
However, inclusive finance does not require that everyone who is eligible
uses each of these services, but they should be able to choose to use them, if
they so desired. To this end, strategies for building inclusive financial sectors
have to be creative, flexible, and appropriate to the national situation and if
necessary, nationally owned.
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For promoting financial inclusion, we have to address the issue of exclusion
of people who desire the use of financial services, but are denied access to the
same. In countries with a large rural population like India, financial exclusionhas a geographic dimension as well. Inaccessibility, distances and lack of
proper infrastructure hinder financial inclusion. Vast majorities of population
living in rural areas of the country have serious issues in accessing formal
financial services.
3- Financial Inclusion
A diagrammatic view may be depicted as under
However, the term financial inclusion is perceived in different ways under
different contexts. There is a view that only access to credit is treated as
Savings
Bank
Accounts
Financial
Advice
Insurance
Payment and
Remittance
AffordableCredit
Financial
Inclusion
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financial inclusion whereas the other view includes all the services extended
by the financial institutions. That apart, financial inclusion by the banks and
other institutions must target, apart from personal / private investmentrequirements of individuals and groups, the universal public investment
requirements necessary for development of infrastructure, social sector
services, public utilities and productive forces / capacity building efforts, etc.
Thus, financial inclusion may well be all about money and finance, but with
the ultimate objective of directly abolishing the state of social exclusion in the
economy.
The segregation between institutional and non-institutional sources of credit
was recognized, as indebtedness to the moneylender cannot be a sign of
financial inclusion. Rather it has to be seen as a sign of exclusion as a major
part of this segment would have been denied access to institutional credit.
Viewed form the angle of indebtedness, nearly 49% of the farmer households
in the country was indebted of which, 27% to formal sources and 22% to
informal sources. Can this be interpreted to mean that this 22% were in need
of bank credit, but denied? Of the remaining 51% of farm households who are
not indebted at all, 78% were small and marginal farmers who would,
definitely, welcome access to credit on reasonable terms. Only the remaining
segment may not require any form of external support.
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4- Financial Inclusion Working Definition
Based on the above discussion, the following working definition of Financial
Inclusion may be given as under.
Financial inclusion may be defined as the process of ensuring access to
financial services and timely and adequate credit where needed by vulnerable
groups such as weaker sections and low income groups at an affordable cost.
Holding a bank account itself confers a sense of identity, status and
empowerment and provides access to the national payment system. Therefore,
having a bank account becomes a very important aspect of financial inclusion.
Further, financial inclusion, apart from opening and providing easy access to a
No Frills account, should also provide access to credit, perhaps in the form of
a General Credit Card (GCC) or limited OD against the no frills account. It
should encompass access to affordable insurance and remittance facilities. It
should also include credit counseling and financial education / literacy. While
financial inclusion, in the narrow sense, may be achieved to some extent by
offering any one of these services, the objective of comprehensive financial
inclusion would be to provide a holistic set of services encompassing all of
the above.
A Survey was conducted by National Sample Survey Organization (NSSO) in
the year 2003 to assess situation of Indebtedness of farmer households. The
out come of survey is depicted as under.
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State / Region
Non-indebted
farmer HHs @ State / Region
Non-indebted
farmer HHs @Number
in Lacs %
Number
in Lacs %
Northern 53.21 48.7 West Bengal 34.53 49.9
Haryana 9.11 46.9 Central 158.29 58.4
Himachal Pradesh 6.03 66.6 Chhatisgarh 16.50 59.8
Jammu & Kashmir 6.43 68.2 Madhya Pradesh 31.09 49.2
Punjab 6.38 34.6 Uttar Pradesh 102.38 59.7
Rajasthan 1.15 94.1 Uttaranchal 8.32 92.8
North Eastern 28.36 80.4 Western 47.92 46.3Arunachal Pradesh 1.15 94.1 Gujarat 18.20 48.1
Assam 20.51 81.9 Maharashtra 29.72 45.2
Manipur 1.61 75.2 Southern 44.11 27.3
Meghalaya 2.44 95.9 Andhra Pradesh 10.84 18.0
Mizoram 2.44 95.9 Karnataka 15.52 38.4
Nagaland 0.51 63.5 Kerala 7.82 35.6
Tripura 1.19 50.8 Tamil Nadu 9.93 25.5
Eastern 126.39 60.0 Group of UTs 0.99 66.9
Bihar 47.42 67.0Jharkhand 22.34 79.1 All India 459.26 51.4
Orissa 22.09 52.2
As per NSSO data, 45.9 million farmer households in the country (51.4%), out
of a total of 89.3 million households do not access credit, either form
institutional or non-institutional sources. Only 27% of total farm households
are indebted to formal sources (of which one-third also borrow from informal
sources.) In other words, 73% of farm households do not have access to
formal credit sources. For purposes of this analysis, financially excluded
households will be defined as those not having any debt to formal credit
sources.
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Level of Non-indebtedness: Across Marginal / Small Farmer Households
It can be seen from the table below that 87% of all non-indebted farmhouseholds belong to the marginal (70.6%) and small (17.1%) farmer
categories. The NSSO estimates of the year 2003 show that only around 45%
of marginal farmer households (viz., up to 1 ha.) had access to both
institutional and non-institutional credit. There are no data to show the
position of finance extended exclusively to marginal farmers who account for
66% of all farm holdings remain by and large excluded from the formal
financial system and by rough approximation, only around 20% of these
households access credit from formal banking sources.
Category of
farmer HH
Size class of
land owned
(Ha)
Total
farmer HHs
(no. lakh)
Non-
indebted
farmer HHs
(no. lakh)
Incidence of
exclusion by
both formal
and non
formal
sources (%)
Proportion
of non-
indebted
HHs. (%)
Marginal
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Large 10.00+ 7.76 2.60 33.6 0.6
All sizes 893.50 459.26 51.4 100.0
Incidence of financial exclusion among all non-cultivator households was
estimated at 78.2% which comprises of 78.8% of agricultural laborer
households, 71.4% of artisans and 79.7% of other rural households. Out of
5.96 crore non-cultivator households about 4.66 crore were estimated to be
financially excluded. Exclusion was the highest for others category (2.44
crore), followed by agricultural laborer households (1.67 crore) and artisans
(0.55 crore) as detailed below:
Households Agricul-tural
laborers
Artisans Others Total non-
cultivators*
Number of households (crore) 2.12 0.77 3.06 5.96
Number of households facing
financial exclusion (crore)
1.67 0.55 2.44 4.66
Incidence of financial exclusion
(%)
78.80 71.40 79.70 78.20
Agricultural laborers, artisans, others (as per National Classification of Occupations, 1968)
Data based on AIDIS Report on Household Indebtedness in India (59th round), NSSO
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According to Basic statistical returns of scheduled Commercial Banks (2005)
(including RRBs), there were 77 million credit accounts and 467 million
deposit accounts. Of the credit accounts, 98% were extended to individuals(including partnership, proprietary concerns and joint families). Of the deposit
accounts 28% were term deposits while 72% were current or savings deposits.
Having known the extent of exclusion it is observed that overall development
of the society depends upon the extent of benefit reached to the lower strata of
the society. This makes financial inclusion project as a vital instrument for
sustainable development of our country.
A beginning in the Sphere of Financial Inclusion was made first in 1992 by
NABARD when it had started the Self Help Group (SHG) linkage programme
on a pilot basis. The pilot project was designed as a partnership model
between three agencies, viz, the SHGs, banks and NGOs. This was reviewed
by a working group in 1995 that led to the evolution of a streamlined set of
RBI approved guidelines to banks to enable SHGs to open bank accounts,
based on a simple inter-se agreement. This was coupled with a commitment
by NABARD to provide refinance and promotional support to banks for the
SHG Bank Linkage Programme.
Initially there was a slow progress in the programme up to 1999 as only32,995 groups were credit linked during the period 1992 to 1999. Since then
the programme has been growing rapidly and the number of SHGs financed
increased from 81,780 in 1999-2000 to more than 6.20 lakh in 2005-2006 and
6.87 lakh in 2006-07. Cumulative progress (in absolute number terms) by
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taking total SHGs finance works out to 29.25 lakhs as on 31 March 2007.
SGHs are now emerging as an effective credit delivery channel for mid-
segment clients such as share croppers and tenant farmers as their loanrequirements are much larger. The comparative position of progress made my
Banks in Financing of SHGs up to financial year 2008-09 is as under.
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5- SHG Groups Financed By Banks
Year 2005-06 2006-07 2007-08 2008-09 2009-10
Estimated
No. of Groups
Financed
6.20 Lacs 11.05
Lacs
12.28
Lacs
16.09
Lacs
21.10
Lacs
Source Status of Micro Finance in India 2008-09 (NABARD Magazine)
The data reveals that a steady progress has been made by the banks in the
period of 4 years but a vast potential is still to be explored.
For developing an effective model for share croppers and tenant farmers
NABARD had introduced a pilot project for formation and linking of Joint
Liability Groups (JLGs). A JLG is an informal group comprising 4 to 10
individuals coming together for the purposes of availing bank loan either
singly or through the group mechanism against mutual guarantee.
The magnitude of severity of exclusion from the angle of access to credit had
prompted Government of India to set up a committee on financial inclusion
under the Chairmanship or C. Rangrajan Economic advisor to the Prime
Minister of India. The Committee had submitted its report to the government
of India. Most of the recommendations of the committee have been accepted
by the Government. The major recommendation of the committee includes
(i) Formation of National Rural Financial Inclusion Plan
(NRFIP) The target for NRFIP could be to provide access to comprehensive
financial services to at least 50% (55.77 million) of the excluded rural
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cultivator and non-cultivator households, across different States by 2012 thru
rural/ semi urban branches of Commercial Banks (CBs) and Regional Rural
Banks and (RRBs). The remaining households, with such shifts as may occurin the rural/urban population, have to be covered by 2015.
(ii) Constitution of Financial Inclusion Funds
(a) Financial Inclusion Promotion & Development Fund, (corpus Rs. 500
crore) with NABARD, for meeting the cost of developmental and promotional
interventions.
(b) Financial Inclusion Technology Fund, (corpus Rs. 500 crore) with
NABARD to meet the cost of Technology up gradation.
(iii) Role of Business Facilitators (BF) / Business Correspondents (BC)
The Committee suggested well defined roles for BCs/BFs to achieve 100%
financial inclusion in time bound schedule.
Similarly the committee had also given its recommendations on the role of
Commercial Banks, Regional Rural Banks, Co-operative Banks, Micro
Financing Institutions and Micro Insurance Institutions which have been
accepted by Government of India / Reserve Bank of India.
It is evident that the financial system in India has grown rapidly in the last
three decades and more. The functional and geographical coverage of the
system is truly impressive. Nevertheless, data do show that there is exclusion
and that poorer sections of the society have not been able to access adequately
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financial services from the organized financial system. There is an imperative
need to modify the credit and financial services delivery system to achieve
greater inclusion.
The concept of Financial Inclusion has been discussed in this chapter.
The Definition extent of exclusion its magnitude in India and importance
have also been discussed in detail.
In the next chapter the Basis of selection of Research Data their analysis
and interpretation will be discussed.
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CHAPTER THREE
Data Analysis
&
Interpretation
1. Introduction
2. Selection Branches3. Collection of Data
4. Analysis of Data
5. Questionnaire and Response
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Chapter III
DATA ANALYSIS AND INTERPRETATION
The term Financial Inclusion has been in vogue since the early nineties. When
NABARD first-time introduced the concept of Self Help Group in 1992 on the
lines of Bangladesh Gramin Bank Model. This project was basically meant for
woman empowerment. Guiding force behind the Self Help Group Movement
was helping the Rural Women to help them Selves and to provide an
opportunity to them to carry on some economic activities while performing all
their family and social responsibilities. This concept has gained momentum in
the current century.
Financial Inclusion has been given priority by Bankers first time in 2006-07when Reserve Bank of India had taken it as a major agenda for
implementation by the Banks. Performance of Commercial Banks is also
evaluated on the basis of there progress under Financial Inclusion. Therefore
every bank has started major drive for Financial Inclusion.
Punjab National Bank is the second largest bank in India. It has got strong
presence in the Indo-Gengetic belt. The bank is lead bank of Dehradun
District of the State of Uttarakhand.
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A major Financial Inclusion drive was undertaken by the bank in the district
on 24th December 2008. On that day a program was organized at Harbatpur in
the gracious presence of the than Governor of Uttarakhand H.E. Shri B.C.Joshi. Dr. K.C. Chakraboty was the chairman of the bank at that time and he
was also present on that occasion.
There are two channels of Financial Inclusion in the Bank.
(i) Normal Channel Itincludes opening of no fill accounts, of
individuals and Group accounts of Self Help Groups (SHGs) etc. by
the branches through their staff and some times with the help of
Government agencies. Presently this system is working well through
out the bank.
(ii) Business Correspondent (BC) Channel In this channel the
Bank appoints a Business correspondent who is responsible for
opening of accounts and Disbursal of credit to the beneficiaries,
under this model branch is selected by the BC. The representatives
of the BC are provided with point of sale machine (POS Machine).
They go to the village motivate the villages and open their account
by obtaining necessary documents. The process of account opening
is done at centralized bank office of the bank. In Punjab National
Bank a dedicated server for Financial Inclusion has been installed at
there office. The accounts opened by BC are uploaded in this server.
The account holder is provided with a Biometric card to conduct is
transaction. In this model the branch of the bank is not actively
involved as neither the account is opened in the branch non payment
is made through it. The payment to customer in this model is made
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through POS transaction by Biometric Card of the accountholder
and this process is done by representative of BC at the Door step of
customer.
In our present study we have selected samples from first channel of Financial
Inclusion due to following Reasons
- The BC model was adopted by the bank in December 2008 so the
relative data are not available for more then 2 years.
- The BC model is in nascent stage and it has yet to stabilize as the
employee turn over of the BC has been found to be very high and
representatives have not been able to establish their credentials amongst
the villagers.
- The BC model has been adopted on a Pilot basis and only limited area
of the District is covered under the project.
Looking to these constraints the present study has been conducted to
evaluate the progress made by bank under Normal Channel.
1. Selection of Branches
The study was conducted during the second half of April 2011 to first half of
May 2011. The branches of Punjab National Bank were selected from
different Development blocks in such a manner that almost every
Geographical Direction of the District is covered. 10 Branches were selected
and a uniform sample size of 10 respondents was chosen for the purpose.
The Names of Branches are as under:
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Name of Branch Name of the Block Sample
Size
1. Bahuwala Sahaspur 102. Dakpatthar Vikasnagar 10
3. Dhakrani Vikasnagar 10
4. Doiwala Doiwala 10
5. Harbartpur (Sahaspur) Sahaspur 10
6. Mal Devta Raipur 10
7. Nagthat Kalsi 10
8. Naya Gaon Sahaspur 10
9. Prem Nagar Sahaspur 10
10. Vikas Nagar Vikasnagar 10
2. Collection of Data
The Data was collected through a common questionnaire and personal
Response of the Respondents was recorded by the Researcher with the help of
staff of the respective Branches.
In all 25 questions were asked from the Respondents. (Copy of questionnaire
enclosed). The Responses received have been summarized in response sheet.
An additional effort has also been made by seeking response from the
Incumbents of the selected Branches and Government officials (Co-
coordinating the Financial Inclusion agenda from Government side).
Summary of their views is being appended here under.
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3. Analysis of Data The Analysis of Data as per questionnaire is as
under- 78% of the Respondents were Males and remain 22% were females.
- The Average Age of Respondents is 38.5 years.
- The Average size of family of Respondents is 5.4 members / family.
- All respondents were dealing with PNB.
- 94% of the respondents reported that there was clear lack of support
from Non Governmental organizations (NGOs) and Government
Agencies. Only 6% have acknowledged some nominal support form
them. All the branch incumbents were uniform on there view that this
project is bankable provided other stake holders are willing.
- All the branch incumbents have reported that they have not been
provided specific training for such projects.
- All the branch incumbents have reported that the level of intervention
of NGOs is very low where as that of government agencies also require
improvement.
- The government officials have reported that specific duties are not
assigned to the employed and there is multiplicity of tasks which
dampen there enthusiasm.
- The government officials have also reported involvement of some
politicians in administrative matters which hampers the process ofdecision making.
- The government officials have also reported the lack of training input.
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Q. 1- What is your occupation?
(i) Farmer
(a) Small / Marginal(b) Other Farmer
(ii) Small Business / Self employment
(iii) Others
Occupational distribution of
Respondents
56%
22%
22%
Farmer
Small Business -
Self Employed
Others
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Catagory of Respondent Farmers
89%
11%
Small - Marginal
Farmers
Other Farmers
56% of the Respondents were farmers of which 89% were small / marginal
farmers and remaining 11% were amongst the category of other farmers.
22% of the respondents were engaged in small Business and self
employment activities. The remaining 22% were earning their livelihood
through labor and other activities
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Q. 2- What is the educational qualification of Respondent?
(a) Ill literate
(b) Up to 12
th
class(c) Above 12th class
26% of the respondents were ill literate while 58% were those who have
taken formal education and studied up to School level. 16% of
Respondents were Educated in Colleges.
Educational Qualifications of
Respondent
58%
16%26%
Illlitrate
Upto 12th
Above 12th class
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Q. 3- Are you Below Poverty line (BPL) or Above Poverty Line
person?
(a) BPL(b) APL
Economic Status of Respondents
64% of the respondents belong to Below Poverty Line category while 36%
were in the income level which is above Poverty Line.
APL-36%
BPL-64%
A
P
L
B
PL
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Q. 4- What is the monthly income of Family?
(a) up to Rs. 3000
(b) >3000 to Rs. 5000
(c) >5000 to Rs. 10000
(d) > Rs. 10000
Monthly Income of Respondents
68
6
14 12
0
10
20
30
40
50
60
70
80
Upto Rs.
3000
>3000 to
Rs. 5000
>5000 to
Rs. 10000
More than
Rs.10000
Series1
68% of the respondents were earning monthly income up to Rs. 3000/-
while 6% were getting monthly income between Rs. 3000-5000/-, 14% of
the selected group was earning more then Rs. 5000 to 10000 in month and
the remain 12% were such people whose income is over Rs. 10000 per
month.
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Q. 5 Is your Home electrified?
a) Yes
b) No
It was observed that 94% of the respondent have electrified houses were as
6% of them were living without electricity connection in their homes.
Status of Electrification of
Respondents Houses
94%
6%
Electrified - YES Electrified - NO
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Q. 6 Your Home is?
(a) Hut(b) Semi Pucca
(c) Pucca
HUT Semi Pucca Pucca
S16
48 46
Type of Respondents' Homes
6% of the respondents were living in Huts. 46% had semi pucca house in
their name while remaining 48% belonged to the category where Pucca
house was available for their living.
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Q. 7 Do you have Animals?
Yes
No
Yes
No
S1
68
32
0
20
40
60
80
Animal Holding of Respondents
Yes
No
68% of the respondents were having either Milch or Draft animals where
as 32% did not own any animal.
Q. 8 which kind of Animal you have?
(a) Milch Animal
(b) Draft Animal
.
0 50 100
Milch
Animal
Draft
Animal
Kind of Animal Holding of
Respondents'