Rathore Sir

7/30/2019 Rathore Sir

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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'

Rathore Sir

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