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Perceptions on Banking Service in Rural India: An

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DOI: 10.1177/097300521200600206
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Perceptions on Banking Service in Rural India: An Empirical Study

Dhananjay Bapat
International Journal of Rural Management 2010 6: 303
DOI: 10.1177/097300521200600206
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Land Reform Management 303
International Journal of Rural Management, 6(2), 2010: 303–321

SAGE Publications z Los Angeles/London/New Delhi/Singapore/Washington DC
DOI: 10.1177/097300521200600206
PERCEPTIONS ON BANKING SERVICE

IN RURAL INDIA: AN EMPIRICAL STUDY
Dhananjay Bapat
The purpose of this paper is to assess the level of banking penetration in a

sample village and to find the relationship between bank accounts and related
factors, such as, occupation, income and asset-holding status. The findings
indicate that 75.2 per cent of the respondents have bank accounts and
26.7 per cent of the respondents avail credit facilities. Two-thirds of the
respondents have inclination to avail credit facilities for dairy and for other
business activities. Using chi square analysis, significant relationships were
established between bank account and relevant factors, such as, occupa-
tion, income and asset-holding pattern. While using logistic regression, we
find that having a bank account has a significant correlation with income.
The findings provide practical implications for bankers in terms of provid-
ing banking services in rural areas. The existing gap in credit facilities offers
manifold opportunities to bankers for providing various credit facilities. Since
the findings indicate that majority of the respondents show an inclination for
availing credit for dairy activities, suggestions are offered for tapping potential
customers. The article offers not only valuable suggestions to bankers and
academicians but also to the government and policy bodies for designing and
monitoring financial inclusion targets.
Keywords: Banking penetration, financial inclusion, strategic alliance, credit facilities
INTRODUCTION
The necessity of financial inclusion is urgent, particularly in the rural hinterland,
where the vast majority of the population of developing countries resides, but
these areas continue to remain excluded from formal banking facilities. Despite
the various attempts made by the government, the policy makers and also credit
institutions, most of the financial inclusion studies reveal that vast majority of
304 DHANANJAY BAPAT
the population remain outside the purview of the formal banking system. The
objective of the present study, based on respondents’ perception, is to find out
the extent of financial inclusion. As financial inclusion is concerned with pro-
vision of credit facilities, the study also covers the penetration of credit facilities.
In addition to assessing the current level of credit facilities, the study probes the
potential for facilitating the introduction (if absent) and deepening (if already
present) of credit facilities in the future. The study captures the customers’ profile
indicators, such as occupation, income levels, types of dwelling, asset-holding
status and education. The study also seeks to find out whether any correlation
exists between the respondents’ profile factors and their holding any type of bank
account. The following areas are explored in the study:
1. The status of financial inclusion in the sample village.

2. The gap between the various banking facilities, such as deposit and credit
facilities.
3. The scope for intake of credit facilities in the future.
For this purpose, the study captures various customer profile parameters and
verifies the relationship between these factors and the bank account holding
pattern.
LITERATURE REVIEW
Basu and Shrivastava (2005) indicate that India’s rural poor have very little access
to credit from formal sources. The findings are based on an exhaustive survey of
6,000 rural households, conducted by the National Council of Applied Economic
Research. The need for access to banking services has been emphasized since long.
The first Survey on Rural Indebtedness, conducted by the Reserve Bank of India
in the year 1951, documented that moneylenders and other informal sources met
90 per cent of the rural credit needs. The share of banks was just 1 per cent of the
total rural household debt during the period. A study by Bose (1998) indicates that
majority of the small cultivators in the less-developed countries are not regarded
as creditworthy by the formal financial institutions and are, therefore, forced
to borrow from moneylenders operating in the informal credit market, result-
ing in a vicious cycle of debt trap. Hence, since the 1950s efforts were made to
provide basic banking service to people in the rural areas. However, these efforts
have not led to desired results (Murty 2008; Sura 2006). The nationalization of
several Indian commercial banks in 1969 and again a few in 1980 was effected
with the major objective of providing financial assistance to people, especially
in rural areas. Bank nationalization resulted in the opening of branches even in
remote rural areas. Thus, between 1973 and 1985, the growth in the number
INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Banking Service in Rural India 305
of branches was 15 per cent. The liberalization of the Indian economy in the
1990s witnessed fresh developments, which included increased competition in
the banking industry, deregulation of the financial sector and new approaches to
microfinance, leading to the emergence of self-help groups.
The World Bank Rural Finance Access Survey (RFAS) of 2003 indicated that
41 per cent of the rural households have bank accounts and 21 per cent have some
access to formal credit avenues. Among formal credit sources available to rural
households, the commercial banks occupy the dominant position. The RFAS
further indicated that 66 per cent of the large farmers had fixed deposit accounts
and 44 per cent of them availed of bank credit facility. However, 70 per cent of
the marginal/landless farmers did not have bank accounts and, 87 per cent did
not have any access to credit from formal source. The lack of access to financial
sources is acute for the poor households. Wide regional disparities do exist with
regard to the accessibility to banking services. The uneven spread of branches
appears to be closely related with the geographical dispersion of population. In
fact, the Eastern and Central regions have more population per branch, and,
therefore, despite their low share in income, occupy the second and third pos-
itions respectively in terms of bank branch presence. The lesser developed and
low income Eastern, Central and North-eastern regions of India account for
54 per cent of the population, have 40.5 per cent of the total branches, but account
only for 20 per cent of the credit availed and 29 per cent of the deposits. Around
44 per cent of the respondent households, according to the survey, have borrowed
money from moneylenders. The major reasons for availing informal loans are to
meet family emergencies (29 per cent) and social emergencies (19 per cent). The
interest charged by moneylenders for loans averaged at 48 per cent per annum.
While the tenure of the informal loan appears to be short, the major attractions
are the flexibility of its repayment and the ease of its availability. Various factors
were identified for the limited banking access to rural customers. From the per-
spective of rural banking, advances to the rural customers posed high credit risk
and also involved high cost to a bank. The transaction cost is high due to several
factors, such as small loan sizes, high frequency of transactions, large geographical
spread and widespread illiteracy.
The concept of financial exclusion has also been studied even in developed
countries like the United Kingdom and the United States of America. Devlin
(2005) focused on important financial services such as bank account and incor-
porated different models and methods of investigation in his study. He used a
common model to compare and test influences for financial exclusion on a wide
range of services. His findings indicate that the most consistent and significant
influence on financial exclusion are borrowers’ employment status, household
income and housing mortgage, closely followed by marital status, age and level of
educational qualification. It is estimated that 12 million households in the United
States have no relationship with any traditional financial institutions. Among the

306 DHANANJAY BAPAT
lower income families, surveyed by the Federal Reserve Survey of Consumer

Finance, it is observed that 25 per cent are unbanked (Carr and Schuetz 2001). The
findings from other developing countries are more relevant for our study since it
attempts to capture similar dimensions in India. The Rural Community Banks
(RCBs) in Ghana are perceived to be fairly active in rural infrastructural devel-
opment, and have collaborated with NGOs (Non-governmental Organizations)
to help identify, mobilize and educate rural groups in the usage and benefits of
banking services. Both men and women are gradually cultivating the banking
habit. The study attempted to capture the perception of both genders and found
that the quality of financial advice, provision of information and service deli-
very areas need significant improvement. There were no significant differences
between both the genders in their perceptions and expectations of the banks’
services (Owusu-Frimpong 2008).
The study by Tiamiyu (1994) indicated that the female clients of People’s
Bank of Nigeria (PBN) generally perceived the bank to be a ‘success’ because it
improved women’s economic status, sharpened the political acumen and fulfilled
their psychological needs. Generally, perceptions of the clients from the urban
community did not differ much from those of their rural counterparts. The
Federal Government of Nigeria established the bank, and initiated the develop-
ment plans for ushering in the prosperity of Nigeria. Developing and developed
countries that intend to facilitate community development can learn from the
study of Tiamiyu (1994) on how to improve poor women’s lives by providing
them opportunities through credit disbursement.
Khazeh and Decker (1992) observed the determinants of consumers’ bank
selection factors through a study covering business school alumni and arrived at
22 factors that influenced their bank selection. Service charges, bank’s reputation,
interest rates, prompt service and friendly tellers were identified as the top five
determinants of their bank-selection decision. Effective advertising was rated the
lowest and, factors such as ATM availability and convenience were given lower
rating. Edris and Almahmeed (1997) found that the true determinants of bank
selection factors were more likely to be a function of both perceived importance of
bank attributes and the differences among banks in a given region with regard to
each of these attributes. Nielsen et al. (1998) conducted a survey to find out how
banking industry understands the needs of their business clients. Business firms
were found to place more importance on the banks’ willingness to accommodate
their credit needs, the efficiency of banking operations and bankers’ knowledge
about specific business requirements.
The findings by Phuong and Har (2000) indicate that the most important
criteria determining the bank selection by undergraduates are higher interest rate
for saving, convenient location and overall quality of services. These are followed
by the availability of self-banking facilities, charges on services provided by banks,

lower interest rate on loans, long operating hours, availability of student privi-
leges and recommendations by friends and relatives. The findings of a study by
Almossawi (2001) indicate that the chief factors determining the bank selection
are: bank’s reputation, availability of parking space, friendliness of bank personnel
and availability and suitable location of ATMs. Significant differences, however,
were observed between male and female students.
Devlin (2005) analyzed the customer choice criteria and identified two major
types of options, intrinsic and extrinsic. Intrinsic attributes are related to a par-
ticular service rather than generalization across services. Extrinsic attributes could
be related to service quality, corporate brand and relationship factors.
Hasanbanu (2004) studied the customer service in rural banks. He found that
the rural customers are not aware of the purpose for which loans are available
and how they can avail them. Customers generally do not know the complete
rules, regulations and procedures of the banks because the bank personnel do
not take interest in educating their customers. Sharma and Kaur (2004) studied
customer satisfaction in rural banks. They used the Likert scale and found that
rural customers are not satisfied with the strategies adopted by Grameen Banks
(Regional Rural Banks).
There has been success in rural banking through innovative models of
microfinance. A study by Rutherford (1998) indicates that capacity of the poor
of Bangladesh to save is surprisingly high. For the past so many years, innova-
tive forms of financial service have been developed successfully by micro-credit
institutions, bringing manifold benefits to millions of rural people and, at the
same time, it has brought profits to micro-credit organizations.
OBJECTIVE OF THE STUDY

The study attempts to assess the level of bank penetration in the sample village.
Usage of banking services is mainly for two major reasons: deposits (saving) and
credit (loans). The study aims at finding out the level of penetration for basic
banking services such as opening a bank account and availing credit facilities. Past
studies have assessed the level of banking penetration in various countries and
in India as well. Studies in India covered relatively less-developed villages. This
study covers a progressive village and attempts to ascertain the level of financial
exclusion. Financial inclusion is not only concerned with opening of a deposit
account but it also covers the broad range of services available, including clients
availing the credit services. Earlier studies were confined mostly to penetration
of banking services, including deposit and credit. In addition to the assessment of
banking services, this study also covers the propensity for availing credit facilities
in the future. Very few attempts were made in the past to establish relationship
between bank account and relevant customer profile factors. The present study,

308 DHANANJAY BAPAT
therefore, attempts to analyze the relationship between banking services and

various customer profile factors.
Accordingly, the major objectives of the study are to:
1. Analyze the rural customers’ perceptions on banking.

2. Assess the relationship between the level of penetration of banking service
and customer profile factors—such as education, occupation, income,
gender and asset-holding status, family status.
3. Suggest appropriate marketing strategies for banking services in the rural
areas.
METHODOLOGY
The study concentrated on perceptions of banking service on the basis of a ran-
domly selected village in Gujarat State. The respondents were carefully chosen by
contacting the villagers living in different localities. Accordingly, the main focus
of the research was to examine the perceptions of selected customers about the
various banking services in the village. It was decided to use a questionnaire for
collection of detailed information from the sample customers. Hence, a ques-
tionnaire was carefully drawn up, covering various aspects of banking services
in the rural areas. Questions also included aspects to capture the profile of the
samples. Initially, a pilot study was carried out on a small sample of individuals
in order to test the validity of questions and the capacity of the respondents to
understand and respond to them. Questions were also shared with field experts
and necessary modifications were incorporated in the final questionnaire.
The study was conducted in Ras Village of Gujarat State, India.
The Profile of Ras Village:
z Total Population – 6,555 (2001 Census)

z Scheduled Castes – 442
z Total Households – 2,300 Nos.
z Total Land under Village – 1,281 hectares
z Irrigated Land – 1,114 hectares
z Major Farmer Classification
{ Prosperous Farmers – 525
{ Big Farmers – 197
{ Small Farmers – 157
The Ras Village contributes much to the progress of the cooperative

movement—Amul. The village has a Government Community Health Centre
and a branch of a public sector bank. As on 31 March 2007, the total deposit

base was `250 million. The branch has, in fact, doubled the agriculture credit
during the last three years (2004–07). Non Resident Indians (NRIs) constitute
50 per cent of the bank’s deposit base.
The profile of the Village Cooperative Milk Society is given below.
z Recipient of ISO 9001 certification, indicating the Quality Management

System
z No. of members – 1,200
z No. of female members – 300
z Artificial insemination/annum – 2,000 (Nos.)
z Engaged in selling cattle feed
The sample village can be categorized as a progressive village as per Indian

standards, where its dairy activity has significantly helped in improving the
standard of living of the members and the general well being of the villagers.
The questionnaire sought information on the following aspects: ‘Having bank
account ’, ‘Credit facilities availed’, ‘Future propensity for credit facilities’, ‘Level
of satisfaction on various services’ and ‘Customer profile’. These aspects were
recorded on the basis of parameters such as: gender, monthly household income,
education, asset-holding status, occupation and type of dwellings. As regards asset-
holding status, the classification proposed by the National Council of Applied
Economic Research (NCAER) was selected for the study. Based on asset-holding,
the NCAER’s major classifications are as follows: Affluent, Well-Off, Climbers,
Aspirants and Destitute.
While considering the various parameters for customers’ bank satisfaction,
studies of bank selection factors provided a major help. In all, 22 factors were
included during the pilot study. Respondents showed difficulty in comprehend-
ing these factors, hence, these were reduced to seven major factors for the study.
The ‘Satisfaction’ index was rated by the respondents for the following aspects:
adequacy, timeliness, cost, security, convenience, friendly staff and banking
transaction.
The respondents were contacted at three major localities/habitat centres of the
village. On the basis of demographic information, stratified sampling was used
and 110 respondents were selected to be contacted and 104 responded. Based on
the information gathered during the survey, data analysis was undertaken using
SPSS Statistics 17.0.
SAMPLE PROFILE
The demographic profile reveals interesting aspects. The average age of the
respondents was 42 years—with a minimum of 21 and a maximum of 70 years
of age. Majority (91.4 per cent) of the respondents were male.

310 DHANANJAY BAPAT
The income classification of respondents is given in Table 1.
Table 1
Income
Income Breakup Per cent (%)

Less than 750 44.8
751–1500 28.6
1501–3000 15.2
3001–5000 4.8
5001+ 6.7
Total 100.0
Source: Field Study.
The majority of the respondents fall in the monthly income category of less
than `750 (44.8 per cent); this was followed by those who earn between `751–1500
(28.6 per cent) and `1501–3000 (15.2 per cent) monthly incomes. It is match-
ing with the rural profile—maximum individuals are generally to be found in
the lower-income bracket. Since respondents gave details of their household
incomes, there is a possibility of understating the amount. This is also the reason
for including the other demographic dimensions in the study.
Majority of the respondents are general graduates (38.1 per cent), indicat-
ing the higher number of educated people in the village (See Table 2). This is
followed by 31.4 per cent of the respondents who have studied up to fifth and
ninth standards.
Table 2
Education
Education Breakup Per cent (%)

Illiterate 14.3
Upto 4th standard 13.3
5th–9th standard 31.4
Graduate (General) 38.1
Graduate (Professional) 2.9
Total 100.0
In rural areas, agriculture is the major source of income. The occupation

closely related to agriculture is cultivation. Other occupations listed in the above
table are associated with non-agriculture activities. As shown in Table 3, wage
earners (46.7 per cent) constitute the major segment of respondents, followed
by cultivators (17.1 per cent).

Table 3
Occupation
Occupational Breakup Per cent (%)

Cultivator 17.1
Wage Earner 46.7
Salary Earner 6.7
Petty Shopkeeper 12.4
Businessman/Professional 7.6
Others 9.5
Total 100.0
The classification suggested by the NCAER is adopted by this study to group

respondents according to their asset holding. As observed from Table 4, the
majority of the respondents fall into ‘aspirants’ category (38 per cent) followed
by the well-off (22.9 per cent).
Table 4
Asset Holding
Asset-Holding Breakup Per cent

Affluent 2.9
Well-off 22.9
Climbers 16.2
Aspirants 38.1
Destitute 20.0
Total 100.0
FINDINGS AND DISCUSSION

Availability and reach of financial services have been the major areas of concern
for policy makers. Various surveys indicate that financial services have remained
outside the reach of the general public in the rural areas. Moreover, because of
the new banks’ concentration and focus being on the urban clients, a wide dis-
parity is observed in the penetration of banks between the urban and the rural
areas. Within banking services, mobilization of savings and lending are the major
activities. Saving deposits and credit accounts of rural customers indicate that
very few are availing credit services from banks.
Data regarding having bank account and availing credit facility from the bank
was captured during the survey (see Tables 5 and 6).

312 DHANANJAY BAPAT
Table 5
Bank Account
Bank Account Per cent

Yes 75.2
No 24.8
Total 100.0
Table 6
Avail Credit
Borrowed Per cent

Yes 26.7
No 73.3
Total 100.0
The above tables indicate that 75.2 per cent of the respondents have bank
accounts and 26.7 per cent have availed credit. The above data can be compared
with the RFAS study findings which reveal that 41 per cent of the rural house-
holds have bank accounts and about 21 per cent have availed credit facilities
from formal (bank) sources. The comparative analysis indicates that the level of
penetration of banking facilities in the rural area is much more than the RFAS
findings. The comparison confirms that the sample village can be considered as
a ‘progressive village’. Furthermore, the findings indicate that there is a wide gap
between customers holding bank accounts and those availing credit facilities from
them. Financial inclusion also means making available the financial services to the
disadvantaged group at an affordable price. There is ample scope for providing
credit services in rural areas. The dearth of financial inclusion can be acute in
remote villages, because of which the majority of the population largely depends
on informal sources for their credit requirements.
Hence, the following hypotheses may be tested:
Hypothesis 1a
There is no significant difference when we compare the data of respondents
holding bank accounts with that of RFAS’s finding. We conducted t test to find
out whether any significant difference exists with the RFAS benchmark.
The results of t test are as follows (see Table 7):

Table 7
One-Sample Test for Bank Account
Test Value = 1.59

95% Confidence
Sig. Mean Interval of the Difference
T df (2-tailed) Difference Lower Upper
Bank Account –8.089 104 .000 –.342 –.43 –.26
Source: Data Analysis.
The above results indicate that there is a significant difference when we

compare the results of the respondents holding bank accounts with that of RFAS
findings.
Similarly, we may test the following hypothesis.
Hypothesis 1b
There is no significant difference when we compare the data of respondents
availing credit facilities with that of RFAS findings.
The results of t test are as follows (see Table 8):
Table 8
One-Sample Test for Availing Credit Facilities
Test Value = 1.79

95% Confidence
Borrowed –1.307 104 .194 –.057 –.14 .03
The above results confirm that there is no significant difference when we

compare the findings with that of RFAS’s study. It indicates that there is no
significant improvement in the credit facilities despite the fact that respondents
hold bank account.
We may now assess whether significant differences exist between respondents
holding bank accounts and those availing credit facilities.
Hence, the following hypothesis may be tested.

314 DHANANJAY BAPAT
Hypothesis 1c
Based on our study, there is no significant difference between respondents hold-
ing bank accounts and those availing credit facilities.
The result of t test is as follows (see Table 9):
Table 9
One-Sample Test for Bank Account and Availing Credit Facilities
Test Value = 1.59

95% Confidence
Borrowed 3.305 104 .001 .143 .06 .23
Alternate hypothesis is accepted, indicating that there is a significant differ-

ence in respondents holding bank accounts and those availing credit facilities. It
is confirmed that there is a wide gap between basic deposit services and credit
facilities. Does it indicate that respondents do not need credit facilities?
We may also test the following hypotheses:
Null Hypothesis:
H2a There is no significant relationship between gender and bank account
H2b There is no significant relationship between household income and bank
account
H2c There is no significant difference between education and bank
account
H2d There is no significant difference between occupation and bank
account
H2e There is no significant difference between asset-holding status and
bank account
H2f There is no significant difference between house holding status and
bank account
Results of chi-square test are shown in the tables (A1–A12) given in the
Annexure.
Results obtained from Tables A1 to A12 indicate that alternate hypotheses

H2b, H2d and H2e are accepted at a significance level of 0.05, which proves

that there is a relationship between (a) household income and bank account;
(b) occupation and bank account and (c) asset-holding status and bank account.
Furthermore, we used these measures to find the strength of relationships. From
the afore mentioned, the relationship strength was observed to be moderate
[for example, household income (0.346); occupation (0.351); and asset-holding
status (0.302)].
We also analyze the relation between bank account and other variables using
logistic regression. The results are given in Tables 10 and 12.
As observed from Table 11, the omnibus test of model coefficient has a low
significance value. We can, therefore, conclude that the above model is valid. The
analysis on logistic regression indicates that, with the p value 0.005, bank account
has a significant relationship with income.
Table 10
Omnibus Tests of Model Coefficients
Chi-square df Sig.
Step 1 12.522 1 .000
Block 12.522 1 .000
Model 12.522 1 .000
Table 11
Variables in the Equation
B S.E. Wald df Sig. Exp (B)

Step 1∗ Income –.964 .340 8.044 1 .005 .381
Constant .480 .550 .759 1 .384 1.615
∗ Variable(s) entered on Step 1: income.
Table 12
Satisfaction Scores
Satisfaction Index N Minimum Maximum Mean Std. Deviation

Adequacy 79 1 5 4.01 .792
Timeliness 79 1 5 4.01 .870
Cost 79 1 5 4.03 .800
Security 79 1 5 4.14 .796
Convenience 79 1 5 4.08 .764
Staff 79 1 5 3.94 .952
Transaction 79 1 5 4.05 .799

316 DHANANJAY BAPAT
Customers’ perceptions of satisfaction in having bank accounts are shown in

Table 12.
Table 12 clearly indicates that customers have given higher satisfaction rat-
ings, which were rated on various parameters such as adequacy, timeliness, cost,
security, convenience, staff and transaction. Satisfaction scores were obtained on
a Likert scale of 1 to 5, where 1 indicated the least and 5 indicated the highest
satisfaction levels.
The survey covered the customers’ perceptions regarding the expectation of
loan. Results indicated that 66 per cent of the respondents showed inclination
for future credit facilities. We also assessed the type of loan, which will be given
first preference by the respondents. Respondents’ primary preference was for
cattle loan, followed by business loans and then housing loans.
CONCLUSIONS AND MANAGERIAL IMPLICATIONS

Attempts have been made to provide banking services for rural customers since a
very long time. The government, regulators and banks have taken various initia-
tives in this regard. However, these measures have not been able to really bring
about the desired changes in the banking habits of the rural people. Our survey
indicates that 75 per cent of the respondents have bank accounts. Opening/having
a bank account is considered as the beginning of the relationship with a bank.
Banks offer a bouquet of services to the rural customers. However, the study
reveals that only 26 per cent of respondents have borrowed money from the formal
banking system. There is a significant disparity between the respondents holding
bank accounts and those availing loans from the bank. The results of the current
study clearly indicate that there is ample scope for further penetration by banks
into rural areas and various avenues to market credit products to the customers.
The reasons for the low credit intake by the rural people can stem from two
major factors: (a) the supply side and (b) the demand side. The supply side can
be due to the inertia or lack of initiative on the part of the bank staff in making an
effort to extend facilities and/or due to the reduced interest on deposits offered
by the bank. The demand side can be due to the lack of interest of customers for
availing credit services from the bank on account of the demanding procedures
involved. This study attempts to examine whether the respondents are in need
of credit facilities. Two–thirds of the respondents indicate their inclination for
availing credit facilities in the future. Furthermore, respondents were asked to
indicate their preference for the type of loan they would want if it is offered to
them. As the cooperative credit system is well established and developed in the
village, majority of the respondents indicated the preference for cattle loan. Their
next preference was for business loans.
In Ras Village, a well-developed cooperative milk-collection system is in exist-
ence since many years. It will be beneficial for the bank to enter into a tripartite

agreement with prospective clients and the village cooperative milk-collection

centre. This will also help to mitigate the credit risk and repayment of bank loans
could be assured through the village cooperative set-up. The cooperative centre
can also help in identifying the potential customers who are keen to start dairy
activity. The village co-operative centre would also benefit by such an arrange-
ment, as it would increase its membership, resulting in corresponding increase
in milk output/supply and consequently the flow of profit as well. Further,
modern payment methods can also be introduced for reducing risks involved
in cash transactions. The RBI (Reserve Bank of India), the government, policy
makers and credit institutions are very keen to achieve financial inclusion and
the people benefitting from it.
This study has also analyzed the relationship between other customer variables
such as education, occupation, monthly household income, asset holding status
and type of dwelling (kutcha/pucca) and bank account of the respondents. The
results show significant correlation between the various variables studied. It is
obvious that an improvement in the household income and asset-holding status
of individuals can lead to a better bonding and strengthening of the relationship
with the banks. Banks can follow a segmentation approach in extending selective
banking services to identified individuals in rural areas. Banks can also initiate
income-generating schemes to improve their income levels and increase their
assets. All this will, in the long run, increase the confidence level between the
bank and its customers, thus leading to mutual benefit relationship. It is gratify-
ing to note that the respondents have given a score of ‘4’ on a scale of 1 to 5 on
the satisfaction rating index with regard to bank services.
As the survey was confined to only one village in India, it is possible that the
results may vary if an extensive research is undertaken in other villages. Further
research can pinpoint the reasons for variations. Based on the differing village
profile and demographic profile, it is suggested that banks should follow an
approach that suits local conditions rather than imposing uniformity. In this
sample village, there is an excellent cooperative milk society functioning with a
good network of members. This is the reason for majority of the respondents
indicating their inclination to avail cattle loans. Based on the unique profile of
each village and its special activities, it is possible that borrowers may have dif-
ferent loan requirements. While it is important to recognize similarities across
branches and villages, it is also critical to address the differences and cater to
their specific credit requirements. Then only financial inclusion will have the
desired impact and also the involvement from all the participants engaged in the
upliftment of the rural people.
Dhananjay Bapat is Assistant Professor at National Institute of Bank Management

(NIBM), Pune, India. He holds Ph.D. in Marketing from Sardar Patel University, Vallabh
Vidyanagar, Gujarat, India. E-mail: dhananjay1304@gmail.com

318 DHANANJAY BAPAT
ANNEXURE
Table A1
Bank Account ∗ Gender Cross Tabulation
Gender
Male Female Total
Bank Account Yes 71 8 79
No 25 1 26
Total 96 9 105
Table A2
Chi-Square Tests for Gender
Asymp. Sig. Exact Sig. Exact Sig.
Value Df (2-sided) (2-sided) (1-sided)
Pearson Chi-Square .985a 1 .321
Continuity Correction .346 1 .556
Likelihood Ratio 1.148 1 .284
Fisher’s Exact Test .446 .294
Linear-by-Linear .975 1 .323
Association
No. of Valid Cases 105
Table A3
Bank Account ∗ Monthly Household Income Cross Tabulation
Monthly Household Income
Less than 750 751–1500 1501–3000 3001–5000 5001+ Total
Bank Yes 28 26 13 5 7 79
Account No 19 4 3 0 0 26
Total 47 30 16 5 7 105
Table A4
Chi-Square Tests for Household Income
Value df Asymp. Sig. (2-sided)
Pearson Chi-Square 12.553 a
4 .014
Linear-by-Linear Association 9.322 1 .002
No. of Valid Cases 105

Table A5
Bank Account ∗ Education Cross Tabulation
Education
Up to 4th 5th–9th Graduate Graduate
Illiterate Standard Standard (General) (Professional) Total
Bank Yes 11 8 23 34 3 79
Account No 4 6 10 6 0 26
Total 15 14 33 40 3 105
Table A6
Chi-Square Tests for Education

Pearson Chi-Square 6.067 a
4 .194
N of Valid Cases 105
Table A7
Bank Account ∗ Occupation Cross Tabulation
Occupation
Wage Petty Businessman/
Cultivator Earner Salary Shop Professional Others Total
Bank Yes 17 31 7 12 6 6 79
Account No 1 18 0 1 2 4 26
Total 18 49 7 13 8 10 105
Table A8
Chi-Square Tests for Occupation

Pearson Chi-Square 12.918a 5 .024
Linear-by-Linear Association .252 1 .616

320 DHANANJAY BAPAT
Table A9
Bank Account ∗ Asset Holding Status Cross Tabulation
Asset Holding Status

Affluent Well off Climbers Aspirants Destitute Total
Yes 2 21 16 28 12 79
Bank Account
No 1 3 1 12 9 26
Total 3 24 17 40 21 105
Table A10
Chi-Square Tests for Asset Holding Status

Table A11
Bank Account ∗ House Cross Tabulation
House
Kutcha Pucca Total
Bank Account Yes 41 38 79
No 17 8 25
Total 58 46 104
Table A12
Chi-Square Tests for House Holding Status
Asymp. Sig. Exact Sig. Exact Sig.

Value df (2-sided) (2-sided) (1-sided)
Continuity Correction 1.397 1 .237
Fisher’s Exact Test .174 .118

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Perceptions on Banking Service in Rural India: An Empirical Study

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International Journal of Rural Management, 6(2), 2010: 303–321

PERCEPTIONS ON BANKING SERVICE

The purpose of this paper is to assess the level of banking penetration in a

Keywords: Banking penetration, financial inclusion, strategic alliance, credit facilities

1. The status of financial inclusion in the sample village.

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

lower income families, surveyed by the Federal Reserve Survey of Consumer

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

OBJECTIVE OF THE STUDY

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

therefore, attempts to analyze the relationship between banking services and

1. Analyze the rural customers’ perceptions on banking.

z Total Population – 6,555 (2001 Census)

The Ras Village contributes much to the progress of the cooperative

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

z Recipient of ISO 9001 certification, indicating the Quality Management

The sample village can be categorized as a progressive village as per Indian

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

The income classification of respondents is given in Table 1.

Income Breakup Per cent (%)

Education Breakup Per cent (%)

In rural areas, agriculture is the major source of income. The occupation

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Occupational Breakup Per cent (%)

The classification suggested by the NCAER is adopted by this study to group

Asset-Holding Breakup Per cent

FINDINGS AND DISCUSSION

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Bank Account Per cent

Borrowed Per cent

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Test Value = 1.59

The above results indicate that there is a significant difference when we

Test Value = 1.79

The above results confirm that there is no significant difference when we

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Test Value = 1.59

Alternate hypothesis is accepted, indicating that there is a significant differ-

Results obtained from Tables A1 to A12 indicate that alternate hypotheses

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

B S.E. Wald df Sig. Exp (B)

Satisfaction Index N Minimum Maximum Mean Std. Deviation

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Customers’ perceptions of satisfaction in having bank accounts are shown in

CONCLUSIONS AND MANAGERIAL IMPLICATIONS

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

agreement with prospective clients and the village cooperative milk-collection

Dhananjay Bapat is Assistant Professor at National Institute of Bank Management

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

INTERNATIONAL JOURNAL OF RURAL MANAGEMENT, 6(2), 2010: 303–321

Value df Asymp. Sig. (2-sided)

Value df Asymp. Sig. (2-sided)