Financial

Inclusion: Issues
& Constraints

By Kanika Aggarwal
Summer Intern

About Financial Inclusion

Delivery offinancial servicesat affordable
costs to sections of disadvantaged and lowincome segments ofsociety
Creating a platform for inculcating the habit
to save money
Providing formal credit avenues
Plug gaps and leaks in public subsidies and
welfare programmes

An overview of Financial Inclusion

Services

MAJOR MILESTONES IN FINANCIAL INCLUSION IN INDIA

1956
1967
1968
1969
1971
1975
1982
1992
1998

Nationalization of Imperial Bank of India.

Policy of social control over banks.
Setting up of National Credit Council.
Introduction of Lead bank scheme.
Establishment of priority sector lending norms.
Establishment of Regional Rural Banks
Establishment of NABARD
Launching of Self Help Groups Linkage Programme.
NABARD sets a goal for linkage one million SHGs by 2008.

2000
2004
2007

Establishment of SIDBI foundation for micro credit

Setting up of Khan Commission by RBI.
Proposed bill on Microfinance Regulation introduced in parliament.

2008
2009

Rangarajan Committee report instituted by NABARD.

Raghuram Rajan Committee Report set up by Planning Commission.

2011
2012

Malegam Committee Report by Reserve Bank of India.

Microfinance Institutions (Development and Regulations) Bill by
Finance Department, Government of India.
Revised Guidelines on Financial Literacy Centres.

2012

Financial Inclusion: Issues &

Constraints
OBJECTIVES OF THE STUDY
To examine the extent of availability and access
of financial services
Identify the major constraints faced in the
access of financial services
To examine the growth of financial inclusion and
assess the issues and challenges in financial
inclusion in Punjab

RESEARCH METHODOLOGY
SURVEY
Primary as well Secondary data
Primary data collection through the
questionnaire and interactions
Secondary data collected through various
journals and websites

Pictures

Status of Financial Inclusion in

India

Inclusix Score
50.1
35.4

2009

Growth trends in Banking services

Bank Branches

Credit Accounts

Deposit Accounts
16.80%

13.50%

12.60%

11.50%

7.80%

8.30%

6.30%

8.30%

8.40%

5.60%

1.70%
-2.00%

2010

2011

2012

2013

37.6

2010

40.1

2011

42.8

2012

2013

Progress of No frill Accounts

Regional Level:
80

76

70
60

48.2

50

44

40.2

39.7

40
30
20
10
0

South

West

North

Inclusix Score

East

North-east

State level:

CRISIL Inclusix score for states

YEAR WISE DEPOSITS AND ADVANCES-RATIO OF SCBs IN PUNJAB

ITEMS

2009

2010

2011

2012

2013

DEPOSITS

128450

153737

172622

190376

219663

ADVANCES

84123

118906

138347

150300

169657

65.49%

77.34%

80.14%

78.95%

77.24%

71.13%

75.17%

77.12%

77.71%

76.89%

PERCENTAGE OF ADVANCES
TO DEPOSITS (PUNJAB)

PERCENTAGE OF ADVANCES
TO DEPOSITS (INDIA)

PRIMARY RESEARCH
SAMPLING UNIT
Sample consisted of respondents in the rural and semi urban areas
Three districts of Punjab namely Ropar, Mohali and Patiala

SAMPLE SIZE:
300 respondents
2 villages selected in each district . 50 respondents in each village

SAMPLING PROCEDURE:
Multi-stage sampling has been used
SAMPLE DESIGN:
Data has been presented with the help of bar graph, pie charts, line
graphs etc.

District/
Village

PROFILE OF THE VILLAGES AND

SAMPLE SELECTED

Total
Pop.

Working
Pop.

Work Profile as per Census 2011

Agr

LL

SE

Others

Sample Distribution

Agr

LL

SE

Total sample
size

Others

PATIALA

100

Kallo Majra

852

272

21

27

218

11

27

50

Pabri

1457

509

156

96

253

19

21

50

ROPAR
Ramgarh
Dakala

100
414
646

148
208

8
65

0
21

0
2

140
120

24
20

3
5

5
4

18
21

MOHALI
Kumbhra
Mataur

50
50
100

4224
4634

1455
1983

80
48

Agr
- Agriculture
Self Employed

55
14

LL

41
24

1279
1897

4
2

4
2

- Landless Labourer

9
6

SE

33
40

50
50

Data Analysis & Interpretation:

1. Age Distribution
Age Distribution

<30

31-40

41-50

51-60

61-70

70 & Above

ROPAR(100)

13

16

32

19

14

MOHALI(100)

23

32

18

19

PATIALA(100)

18

27

38

11

OVERALL(300)

29

51

52

67

78

25

Percentage

9.67%

17%

17.33%

22.33%

26%

8.33%

1. Age Distribution
350
300
71 & Above
61-70
51-60
41-50
31-40
<30

250
200
150
100
50
0

Ropar

Mohali

Patiala

Overall

2. Family Size and Earning Members

District

Family Size
Less
than 3

3-6

ROPAR
4
63
MOHALI
7
71
PATIALA
3
66
OVERAL
14
200
L
Percentag 4.67% 66.67
e
%

7-10

24
18
21
63

Averag
e
More Family
than
Size
10

9
4
10
23

21% 7.67%

6.18
5.01
6.39
5.86

No. Of Earning
Averag
Members
e no. of
0
1
2
More earnin
than 2
g
membe
rs
5
4
2
11

55
63
71
189

23
27
19
69

17
6
8
31

3.67% 63
%

23
%

10.33
%

1.52
1.35
1.33
1.4

3. Literacy Level
Education level School
High
Dropout School

Sr.
Graduate
Secondary

Post
Graduate

ROPAR (100)

61

26

10

MOHALI (100)

45

30

17

PATIALA (100)

45

35

16

OVERALL
(300)
PERCENTAG
E

151

91

43

15

14.33%

5%

0%

50.33% 30.33
%

Overall Literacy Level

14%

5%
50%

30%

School Dropout
High School
Sr. Secondary
Graduate
Post Graduate

4. Occupation
OCCUPATION DISTRIBUTION

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

ROPAR
MOHALI
PATIALA

Earnings and Pattern

EARNINGS

PATTERN

Category

ROPAR

19

38

33

MOHALI

29

32

21

13

38

41

11

PATIALA

23

35

27

15

26

40

29

OVERALL

71

105

81

36

85

11

113

73

18

3.67%

37.67%

24.33
%

6%

Percentage 2.33% 23.67%

Category A: Upto 50000

35%

Daily Weekly Monthl Half Irregula

y
Yearly
r
21
4
32
38
5

27% 12% 28.33

%

B: 50000-100000

C: 100000-200000

D: 200000-400000

E: 400000 and above

Earnings and Pattern

120

100

80

Category
Category
Category
Category
Category

60

40

20

ROPAR

MOHALI

PATIALA

OVERALL

A
B
C
D
E

5. Occupation and Literacy level

School
High
Sr.
Graduate
Dropout School Secondary

Post
Graduate

Agriculture
Landless
labourer

57
17

20
8

1
1

2
1

0
0

Self Employed
Others

12
65

13
50

5
36

3
9

0
0
Others

School Dropout
High School
Sr. Secondary
Graduate
Post Graduate

Self Employed

Landless Labourer

Agriculture
0

10

20

30

40

50

60

70

6. Per capita income

EARNINGS

ROPAR (100)
MOHALI (100)
PATIALA (100)
OVERALL (300)

2
5
0

19
29
23

38
32
35

33
21
27

8
13
15

71

105

81

36

Per capita
income
2,10,750
2,00,250
2,25,750
2,11,833.33

120

PER CAPITA INCOME

100

80

Category
Category
Category
Category
Category

60

40

20

ROPAR

MOHALI PATIALA OVERALL

A
B
C
D
E

230000
225000
220000
215000
210000
205000
200000
195000
190000
185000

PER CAPITA
INCOME

7. Literacy level and per capita income

Education level

School
Dropout
61

High
School
26

Sr.
Secondary
10

Graduate

MOHALI (100)

45

30

PATIALA (100)

45

OVERALL (300)
PERCENTAGE

ROPAR (100)

Post
Graduate
0

Per capita
income
2,10,750

17

2,00,250

35

16

2,25,750

151

91

43

15

2,11,833.33

50.33%

30.33%

14.33%

5%

0%

8. Land Holding
No. of persons
holding land

Average land
holding

ROPAR

79

3.47

MOHALI

30

3.66

PATIALA

67

4.87
90
80
70
60

No. of persons
holding land
Average land
holding

50
40
30
20
10
0

ROPAR

MOHALI

PATIALA

9. Occupation and Per capita Income

Occupation
Agr

LL

SE

Others

Per capita
income

ROPAR (100)

44

39

2,10,750

MOHALI (100)

15

73

2,00,250

PATIALA (100)

30

13

48

2,25,750

OVERALL (300)

80

27

33

160

2,11,833.33

BANKING HABITS

1. % of Earnings being saved

Earnings being saved

Per capita
monthly
savings

0-5%

5-10%

10-15%

15% and above

60

30

5,268.75

15,806.25

26,343.75

11,327.81

51

33

(Taken as 25% for

wt. Avg.)
52,687.5
7

Per capita Income: 2,00,250

PATIALA (100)

5,006.25
39

15,018.75
42

25,031.25
16

50,062.5
3

13,266.56

Per capita Income: 2,25,750

OVERALL (300) (%)

5,643.75
50%

16,931.25
35%

28,218.75
10.67%

39,5062.5
4.33%

25,679.06

Per capita Income:

2,11,833.33

5,295.83

15,887.49

26,479.16

52958.33

13,327.84

ROPAR (100)
Per capita Income: 2,10,750

MOHALI (100)

60
50
40
30
20
10
0

ROPAR
MOHALI
PATIALA

2. Number and type of bank accounts

Type of Bank A/c

ROPAR
MOHALI
PATIALA
OVERALL

Savings A/c
115
116
130
361

PMJDY
15
17
15
47

Average no.
of Bank A/c

People with no
Bank A/c

1.3
1.33
1.45
1.36

5
5
2
12

3. Number of Bank accounts and per capita Income

and Savings
Per Capita Income
(Yearly)

Per Capita Savings

(Yearly)

Average No. of
bank accounts

ROPAR (100)

2,10,750

11,327.81

1.3

MOHALI (100)

2,00,250

13,266.56

1.33

PATIALA (100)

2,25,750

25,679.06

1.45

OVERALL (300)

2,11,833.33

13,327.84

1.36

4. PACS Members, Average loan on KCC card and

average loan per acre

Average loan on KCC Card

Average loan per acre of land
97656

56933

16407

ROPAR

52500

14344

MOHALI

20052

PATIALA

PACS
Member
s

KCC
Holders

Average
Loan
outstanding
on Card

Average
land
holding

Average
loan
outstanding
per acre

ROPAR

68

68

56,933.82

3.47

16,407.44

MOHALI

52,500

3.66

14,344.26

PATIALA

63

63

97,656.82

4.87

20,052.73

5. Frequency of transactions

Frequency of transactions in a month

Average no.
of
0-2
2-4
4-6
More than 6
(taken as 8 for transactions
in a month
wt. Avg.)
ROPAR
MOHALI
PATIALA
Total (%)

47
58

21
25

19
10

13
7

3.09
2.89

33

38

21

3.16

46%

28%

16.67%

2.67%
Frequency of transactions in a month
60

0-2
2-4
4-6
6 and more

50
40
30
20
10
0

ROPAR

MOHALI

PATIALA

6. Number of bank accounts and frequency of

transactions
Average no. of bank
accounts
ROPAR (100)

1.3

Average no. of
transactions in a
month
2.96

MOHALI (100)

1.33

2.32

PATIALA (100)

1.45

3.08

CREDIT DETAILS

1. Source of Borrowing:
Source of Borrowing
Banks

Moneylenders

Friends

Others

ROPAR (100)

20

10

14

28

No
Loan
28

MOHALI (200)

33

15

14

35

PATIALA (100)

47

21

20

OVERALL (300)

100

29

49

39

83

33.33%

9.67%

16.33%

13%

27.67%

Percentage

100
90
80
70
60
50
40
30
20
10
0

Source of Borrowing
Banks
Moneylenders
Friends
Others
No Loan

2. Source of Borrowing and Income level

Income
Level

Banks

Category A
Category B
Category C
Category D
Category E

2
16
32
35
15

400000 and above

200000-400000

Banks
Moneylenders
Friends/Relatives
Others
No loan

100000-200000

50000-100000

Upto 50000
0

10

15

20

25

30

35

Source of Borrowing
Moneylender Friends
Others
s
4
10
9
3
3

1
15
19
12
2

0
7
18
9
5

No Loan
0
23
27
22
11

3. Literacy Level and source of borrowing

School Dropout
High School
Sr. Secondary
Graduate
Post Graduate
Total

Banks
37
38
16
9
0
100

Source of Borrowing
Moneylenders
Friends
Others
22
36
28
5
12
8
2
1
3
0
0
0
0
0
0
29
49
39

No loan
28
28
21
6
0
83

Post Graduate
Graduate

Banks
Moneylenders
Friends
Others
No loan

Sr. Secondary
High School
School Dropout
0

5 10 15 20 25 30 35 40

FINANCIAL SERVICES

1. Insurance and Government Pension

Insurance
ROPAR
MOHALI
PATIALA
OVERALL

Govt. Pension

Yes

No

Yes

No

40
38
57
135

60
62
43
165

11
12
19
42

89
88
81
258 % of respondents having Insurance and Govt. Pension
Insurance

Govt. Pension
57

40

38
11

ROPAR

12

MOHALI

19

PATIALA

2. Insurance and Literacy Level

Education Level

School dropouts
High School
Sr. Secondary
Graduate
Post Graduate
Total
Total no. of Respondents
No. of respondents having Insurance
55

42

29

151

91

43

15

Total no. of
Respondents

No. of respondents
having Insurance

% of
respondents
having
Insurance

151
91
43
15
0
300

55
42
29
9
0
135

36.42%
46.15%
67.44%
60%
45%

3. Insurance and Income level

Income Level

Category A
Category B
Category C
Category D
Category E

Total No. of
Respondents

No. of
Respondents
having
Insurance

% of
respondents
having
Insurance

7
71
105
81
36

2
19
48
47
19

28.57%
26.76%
45.71%
58.02%
52.77%
Income level and Insurance
Total No. of respondents
No. of respondents having Insurance
71
7 2

19

105

48

81

47

36

19

4. Social Security Schemes

ROPAR (100)
MOHALI (100)
PATIALA (100)
OVERALL(300)

PMAPY

PMSBY

PMJJBY

Per capita
Income

1%
6%
2%
3%

28%
43%
48%
39.67%

17%
29%
30%
25.33%

2,10,750
2,00,250
2,25,750
2,11,833.33

Social Security Schemes

120
100

PMAPY
PMSBY
PMJJBY

80
60
40
20
0

ROPAR

MOHALI

PATIALA

OVERALL

5. Financial Literacy Camps

Attended FLC
ROPAR (100)
MOHALI (100)
PATIALA (100)
OVERALL (300)
Percentage

Yes

No

23
28
32
83
28%

77
72
68
217
72%

Attended FLC
Yes

No
28%

72%

6. Education level and Financial Literacy camps

Total no. of
respondents

No. of
respondents
attended FLC

% of
respondents
attended FLC

School
Dropouts

151

27

17.88%

High School
Sr. Secondary
Graduate
Post Graduate

91
43
15
0

28
17
11
0

30.76%
39.53%
73.33%
Total no. of respondents
No. of respondents attended FLC
Post Graduate 0
Graduate
Sr. Secondary
High School
School Dropouts

15

11
43
91
151

17
28
27

MAJOR ISSUES AND

CONSTRAINTS
Lack of Financial Awareness
Low Level of Literacy
Low level of Income
Lack of trust
Time constraints
Land Selling
Duplicity of KCC
High rate of Interests

 Easier availability of Credit from informal

sources
Tedious Procedure
No knowledge about BC Model
No time to attend Financial Literacy camps
Large family size and lesser earning members
Anxious about taking loans
Savings at home
Low presence of insurance and pension
services
Less number of banks in villages

RECOMMENDATIONS
AND
SUGGESTIONS

Exclusive mass financial literacy and awareness

designed and customised to achieve financial
inclusion
Banks and other organisations should take a
proactive role in spreading financial literacy.
More of financial literacy camps should be
organised
Timings of Financial Literacy camps may be
suited to the timings of such beneficiary
Financial literacy programmes must be tuned

 Financial literacy programmes should be

included in the school curriculum
Private Banks, Insurance companies and other
financial service providers may concentrate
more on the village people
Exclusive social security programmes for target
groups
Banks may make use of PACS as business
correspondents
Adequate infrastructure such as digital and
physical connectivity, uninterrupted power
supply, etc. should be available

Thank
You