PROJECT REPORT

ON
Study on Financial Inclusion in Banks
A Comparison between SBI Bank and ICICI Bank

Submitted by
MAJHI LUCKY NARASINGH
Roll No: - 09
T.Y.B.M.S.

UNDER THE GUIDANCE OF

PROF. MEGHA NAIR
Submitted to University of Mumbai in partial fulfilment
Of the requirements for the award of degree of
BACHELOR OF MANAGEMENT STUDIES

PATUCK GALA COLLEGE OF COMMERCE & MANAGEMENT

SANTACRUZ (E), MUMBAI- 400055
2015-2016

CERTIFICATE

This is to certify that the project titled STUDY ON FINANCIAL

INCLUSION IN BANKS. A COMPARSION BETWEEN SBI BANK AND
ICICI BANK is a true and satisfactory work done by Majhi Lucky
Narasingh, T.Y.B.M.S., &Roll No: 09. The reportI submitted to University of
Mumbai in partial fulfilment for the requirements of the award of the degree of
BACHELOR OF MANAGEMENT STUDIES for the academic year 20152016.

----------------------------------

-------------------------------------

Signature of Project Guide

Signature of External Examiner

----------------------------------------------------------------------Signature of Co-ordinator
Signature of Principal

DECLARATION
I MAJHI LUCKY NARASINGH, student of Patuck-Gala College of
Commerce & Management, T.Y.B.M.S. hereby declare that I have completed
the project on STUDY ON FINANCIAL INCLUSION IN BANKS. A
COMPARSION BETWEENSBI BANK AND ICICIBANK in the academic
year 2015-2016.
The subject matter contained in this project is a research work and most of the
work carried out is original and was done under the guidance of my project
guide PROF.MEGHA NAIR. The information submitted is true and original to
the best of my knowledge.

---------------------------------------MAJHI LUCKY NARASINGH

Roll no: - 09

ACKNOWLEDGEMENT
It is my earnest and sincere desire and ambition to acquire profound knowledge in the study
of Banking and Insurance. I have had considerable help to advice at very outset of this
Project. It is my pleasure to acknowledge the help and guidance that I had received from
those personnel and to thank them individually.
First of all, I expect my sincere thanks to Dr. (Mrs.) Meeta Pathade, I/C Principal for having
given me a chance to undergo the project work.
Secondly, I convey my sincere thanks to the Course Co-ordinator, Mrs Byshi Panikar for her
valuable suggestions and co-operation which helped me to complete the project successfully.
The completion of the project is a milestone in the life of the management student and its
execution is inevitable without the co-operation of the project guide. I am deeply grateful to
my project guide Prof. Megha Nair for her valuable ideas, required suggestions and
encouragement for refining this project study.
Finally, I thank all the staff members and my friends for their valuable support and
contribution to my project.

EXECUTIVE SUMMARY
Financial Inclusion is delivery of banking services of an affordable cost to the vast sections of
disadvantaged and low income groups. As banking services are in the nature of public good, it
is essential that availability of banking and payment services to the entire population without
discrimination is the prime objective of the public policy. The banking industry has shown
tremendous growth in volume and complexity during the last few decades. Despite making
significant improvements in all the areas relating to financial viability, profitability and
competitiveness, there are concerns that banks have not been able to include vast segment of
the population, especially the underprivileged sections of the society, into the fold of basic
banking services. Internationally efforts are being made to study the causes of financial
exclusion and designing strategies to ensure financial inclusion of the poor and
disadvantaged. The reasons may vary from country to country and hence the strategy could
also vary but lot of efforts are being made as financial inclusion can truly lift the financial
condition and standards oflife of the poorand the disadvantaged.
The objective of financial inclusion is to deliver banking services at an affordable cost to vast
sections of the low-income groups. Indian Finance Minister has set the ball rolling by
articulating the Government's decision to provide essential financial services like savings,
credit, micro insurance and remittance, for all villages with population over 2,000 by March
2012. Therefore, the present study attempts to find out the impact of financial inclusion on
daily wage earners.
At the end of March 2012, 50.8 million no frills account were opened by the banking system.
The banks have a challenge to keep these accounts operational. Banks were advised to
provide small over drafting these accounts, and up to March 2011 banks provided overdraft of
Rs.30.54crore.Nofrills account provides the opportunity for a common man to open banks
account. These accounts have no precondition and low minimum balance maintenance.RBI
initiated scheme of no frills accounting 2005 to improve financial inclusion and now RBI
taken necessary steps to develop the new bank branches to all rural area.

INDEX
Sr. No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14

Title
Financial Inclusion
Overview of SBI Bank
Overview of ICICI Bank
No Frill A/c
Priority Sector Lending
Social Security Schemes
SBI Bank vs. ICICI Bank
Analysis & Interpretation of Study
Objective of the Study
Research Methodology
Limitation of the Study
Recommendation & Suggestion
Conclusion
Bibliography

Pg. No.
08 - 23
25 - 37
38 - 52
54 - 62
64 -76
77- 93
95- 96
97 -99
106
106
107
109
110
111

CHAPTER 1
Introduction to
Financial Inclusion

Page | 1

Chapter 01
FINANCIAL INCLUSION
==================================================================

Introduction and Meaning of Financial Inclusion

Evolution of Financial Inclusion In India
The Present & Indian Scenario
Reasons for Financial Inclusion
Importance of Financial Inclusion
Need & Pillars of Financial Inclusion
Scope of Financial Inclusion
Institutions & Financial Inclusion
Initiatives for Financial Inclusion In India
RBI Initiatives for Financial Inclusion.

==================================================================

INTRODUCTION:
The World is moving at an amazing pace. Globalization has enabled the rise of global trade
leading to wealth generation in developed as well as developing countries. Wealth can be
created in any part of the world with a single click of the mouse. Developing nations, like
India have immensely benefited from the globalizing economy. Wealth has been pouring into
the country as investments (both direct and institutional). Wealth has been also generated by
Indian companies from global trade. This has directly affected the lives of many citizens in
our country. For many, there has been a dramatic increase in the disposable income. The
savings, consumption and investment patterns have changed in the past few years. This has
meant that there has been an increase in demand for many financial services from different
financial firms.
Since, there have been progressive reforms in the financial sector allowing for better and
easier facilities and options to the consumer. An increasing financially aware middle class
have realized the importance of financial services. Banks have streamlined and rationalized
themselves to meet up with the changing demands of the people. Banks have become partners
in growth for many offering them a safer and secure future.
However, not all the reforms in the financial services sector have still been able to bring in
the other half of Indias population who are un-banked. There are many reasons that
percolated into the lower strata of the society. It is easy to blame the capitalist are obvious for
Page | 2

this kind of financial exclusion. The new surge in the economy has not yet growth for this
sort of income disparities; however, the inefficiencies and the inadequacies of the government
and its policies are equally at fault for lack of reduction in poverty. Even after 60 years of
Indian independence, 1/3 of our population is still illiterate (let alone financially literate) and
at least 26% of the population still lives under the poverty line. There are many statistics,
which goes on to prove that for even a developing nation India has a long way to go.
Most of the un-banked or financially excluded population of India live in rural areas;
nevertheless there is also a significant amount of the urban population of India who face the
same situation even with easy access to banks. Many of the financially excluded in these
areas are illiterates earning a meagre income just enough to sustain their daily needs. For such
people, banking still remains an unknown phenomena or an elitist affair.
It is easier for them to keep their money at their house or with some money lenders and easily
make immediate purchases (which make up most of their expenditure) rather than to follow
the cumbersome process at banks. A lot of the financially excluded populations are at the
mercy of money lenders or pawn shop owners. They should be made a part of the formal
banking structure so that they could also have the benefits that the others enjoy. By making
them financially inclusive we are making their financial position less volatile. At the same
time, we are treating them on an equal par with other members of the population so that they
wouldnt be denied of access to a basic service such as banking.

Page | 3

Background:
Nationalisation of banks in India in 1969 and 1980 marked a paradigm shift in the focus of
banking from class banking to mass banking. The multi-agency approach consisting of
cooperatives, regional rural banks (RRBs), commercial banks, non-banking financial a key
institutions, etc. has played a key role in catering to the credit needs of rural population. Most
of these agencies have been acting not merely as financial intermediaries but also playing a
key developmental role. In the post nationalisation era, launching of SHG-Bank linkage
programme in 1992 and its success as one of the largest micro credit programmes in the
world could be considered as a landmark programme can be regarded as the most potent
initiative since independence for delivering financial services to the poor in a sustainable
manner.
Despite large scale deepening and widening of formal as also informal credit delivery system,
it is estimated that 45.9 million farmer households in the country (51.4%), out of a total of
89.3 million households do not access credit, either from institutional or non-institutional
sources.
Further, despite the vast network of bank branches, only 27% of total farm households are
indebted to formal sources (or which one-third also borrows from informal sources). One of
the benchmarks employed to access the degree of reach of financial services to the population
of the country, is the quantum of deposit accounts (current and savings) held as a ratio to the
adult population. In the Indian context, taking into the census of 2001 (ignoring the
incremental growth of the population thereafter), the ratio of deposit accounts (data available
as on March 31, 2004) to the total adult population was only 59% though this ratio in case of
Karnataka (65 %) is above the national average, the fact remains that the formal financial
institution in the state do not.

Page | 4

DEFINITION:
Defined by RBI:
Financial Inclusion Is the process of ensuring access to appropriate and services needed by
vulnerable groups such as weaker sections and low income groups at an affordable cost in a
fair and transparent manner by main stream Institutional players
Financial Inclusion, broadly defined, refers to universal access to a wide range of financial
services at a reasonable cost. These include not only banking products but also other financial
services such as insurance and equity products. Household access to financial services is
depicted
Financial inclusion denotes delivery of financial services at an affordable cost to the vast
sections of the disadvantaged and low-income groups. The various financial service0s include
credit, savings, insurance and payments and remittance facilities. The objective of financial
inclusion is to extend the scope of activities of the organized financial system to include
within its ambit people with low incomes.

MEANING:
Financial inclusion is delivery of banking services at an affordable cost to the vast sections of
disadvantaged and low income groups. Unrestrained access to public goods and services is
the sine qua non for an open and efficient society. Banking services are in the nature of public
good, it is essential that availability of banking and payment services to the entire population
without discrimination is the prime objective of the public policy.

Page | 5

EVOLUTION OF FINANCIAL INCLUSION IN INDIA

Policy makers have grabbed with the issue of reducing the scope of informal sector since
colonial times. Nicholson report (1895) was the first to highlight the need to establish
LAND BANKS as an alternative to dominance of money lenders. resulting , the
cooperative credit societies Act , 1904 was passed to provide , amongst other things , a legal
basis for cooperative credit societies .Even after 70 years of independence, a large section of
Indian population still remain unbanked. This malaise has led generation of FINANCIAL
INSTABILITY and pauperism among the lower income group who do not have access to
FINANCIAL products and services.
HISTORICAL PERSPECTIVE:

1954 : All-India Rural Credit Survey Committee report -suggested Multi-agency approach
for financing the rural and agricultural sector;

1963 : Formation of Agricultural Refinance Corporation

1969: Nationalization of 14 major Private Banks The flow of agricultural and rural
credit witnessed a rapid increase

1972Mandatory system of Priority Sector Lending (PSL)

1975 : Establishment of RRBs

1980 : Nationalisation of 6 more private banks

1982 : Establishment of NABARD through the transfer of RBIs agricultural credit

department Provision of bank credit under Govt. Sponsored Subsidy Schemes Linking
Agricultural Credit Targets at 18% with individual banks net bank credit

1990Implementation of the concept of Village level credit planning for 15 to 20 villages

allotted to each of rural, semi-urban and urban branches of PSBs and RRBs under Service
Area Approach

Formulation of potential linked credit plan for each district annually by NABARD

Page | 6

Agricultural Debt Relief Scheme and Financial Sector Reforms

SHG-Bank Linkage as the most suitable model in Indian context a/c to NABARD

2000-Reforms sharply focused on Agricultural credit

doubling the flow of agricultural credit implementation of agricultural credit package

Annual Special Agricultural Credit Plan

Page | 7

ON TRACKS OF NDA GOVERNMENT

Financial inclusion is expected to make significant changes in the economy, especially the
rural economy, which is expected to witness a revolution in availability of financial
instruments mainly because of which will operate through the banking system will also
ensure regularity of flow of liquidity in households and therefore opportunities for
investment.
PMJDY
Public sector banks
Private sector banks
RRBS

No. of Accounts
9.12
2.00
0.38

Zero balanced accounts

52.3%
52.1%
49.3%

Page | 8

THE PRESENT SCENARIO FINANCIAL INCLUSION

Financial inclusion, in the sense of extending banking products at an affordable cost to the
vast sections of disadvantaged and low income groups, is not new to India. For more than
three decades after nationalization of major commercial banks in 1969, Indian banking has
shown tremendous growth in volume and outreach resulting in increase in the total number of
branches of scheduled commercial banks from 8,321 in the year 1969 to 68,681 as at the end
of March 2006 and reduction of the average population per branch office from 64,000 to
16,000 during the same period. Public sector banks were in the forefront of reaching out to
sections that were once neglected and designing new, innovative loan products for agriculture
and small-scale industries sectors is an outstanding example in this regard.
There are, however, concerns that banks have still not been able to reach a vast segment of
the population and provide them with basic banking services. Growth has also not been
uniform across all the regions/ States of the country and there still continue to be wide gaps in
the availability of banking services in the rural areas. While from the policy angle none of the
earlier measures aimed at broad basing their clientele has been withdrawn, the banks might be
laying somewhat less emphasis on inclusive practices in view of the thrust on profitability.
Banks are working overtime to utilise their quota of branch licences before the end of this
financial year. It is good to see some large banks getting their act together to open fullynetworked branches and ATMs simultaneously across the country. Opening many branches
and ATMs on the same day requires meticulous strategy and well-coordinated efforts, which
by no means is a small achievement. This is a great effort by the banks to promote financial
inclusion, which is critical to promote equitable economic growth, as a large part of the
country is under banked.
A Financial Inclusion survey was conducted by World Bank in India between April-June,
2011 which included face to face interviews of 3,518 respondents. The sample excluded the
north-eastern states and remote islands representing approximately 10 per cent of the total
adult population. The results of the survey suggest that India lags behind developing countries
in opening bank accounts, but is much closer to the global average when it comes to
borrowing from formal institutions. In India, 35 per cent of people had formal accounts
versus the global average of 50 per cent and the average of 41 per cent in developing
economies. Over the period of five decades, there has been overall improvement in access to
formal sources of credit by the rural households.
Page | 9

INDIAN SCENARIO- FINANCIAL INCLUSION

The bank nationalization in India marked a paradigm shift in the focus of banking as it was
intended to shift the focus from class banking to mass banking. The rationale for creating
Regional Rural Banks was also to take the banking services to poor people. The branches of
commercial banks and the RRBs have increased from 8321 in the year 1969 to 68,282
branches as at the end of March 2005. The average population per branch office has
decreased from 64,000 to 16,000 during the same period. However, there are certain under
banked states such as Bihar, Orissa, Rajasthan Uttar Pradesh, Chhattisgarh, Jharkhand, West
Bengal and a large number of North-Eastern states, where the average population per branch
office continues to be quite high compared to the national average. As you would be aware,
the new branch authorization policy of Reserve Bank encourages banks to open branches in
these under banked states and the under banked areas in other states. The new policy also
places a lot of emphasis on the efforts made by the bank to achieve, inter alia, financial
inclusion and other policy objectives. One of the benchmarks employed to assess the degree
of reach of financial services to the population of the country, is the quantum of deposit
accounts (current and savings) held as a ratio to the adult population. In the Indian context,
taking into account the Census of 2001 (ignoring the incremental growth of population
thereafter), the ratio of deposit accounts (data available as on March 31, 2004) to the total
adult population was only 59%. Within the country, there is a wide variation across states. For
instance, the ratio for the state of Kerala is as high as 89% while Bihar is marked by a low
coverage of 33%. In the North Eastern States like Nagaland and Manipur, the coverage was a
meagre 21% and 27%, respectively. Northern Region, comprising the states of Haryana,
Chandigarh and Delhi, has a high coverage ratio of 84%. Compared to the developed world,
the coverage of our financial services is quite low. For instance, as per a recent survey
commissioned by British Bankers' Association, 92 to 94% of the population of UK has either
current or savings bank account.

Page | 10

REASONS FOR FINANCIAL INCLUSION

There are a variety of reasons for FI. In remote, hilly and sparsely populated areas with poor
Infrastructure, physical access itself acts as a deterrent.From the demand side, lack of
awareness, low-income/assets, social exclusion, illiteracy act as barriers. From the supply
side, distance from branch, Branch timings, cumbersome documentation and procedures,
unsuitable products, language, staffs Attitudes are common reasons for exclusion. All these
result in higher transaction cost apart from Procedural hassles. On the other hand, the ease of
availability of informal credit sources makes this Popular even if costlier. The requirements of
independent documentary proof of identity and address can be a very important barrier in
having a bank account especially for migrants and slum dwellers.
Gender issues: Access to credit is often limited for women who do not have, or cannot
hold title to assets such as land and property or must seek male guarantees to borrow.
Age factor: Financial service providers usually target the middle of the economically
active population, often overlooking the design of appropriate products for older or
younger potential customers.
Limited literacy: Limited literacy, particularly financial literacy, i.e., basic mathematics,
business finance skills as well as lack of understanding often constrains demand for
financial services.
Place of living: Although effective distance is as much about transportation infrastructure
as physical distance, factors like density of population, rural and remote areas, mobility of
the population (i.e., highly mobile people with no fixed or formal address), insurgency in
a location, etc., also affect access to financial services.
Psychological and cultural barriers: The feeling that banks are not interested to look
into their cause has led to self-exclusion for many of the low income groups. However,
cultural and religious barriers to banking have also been observed in some of the
countries.
Legal identity: Lack of legal identities like identity cards, birth certificates or written
records often exclude women, ethnic minorities, economic and political refugees and
migrant workers from accessing financial services.

Page | 11

 Social security payments: In those countries where the social security payment system is
not linked to the banking system, banking exclusion has been higher.
Bank charges: In most of the countries, transaction is free as long as the account has
sufficient funds to cover the cost of transactions made. However, there are a range of
other charges that have a disproportionate effect on people with low income.
Terms and conditions: Terms and conditions attached to products such as minimum
balance requirements and conditions relating to the use of accounts often dissuade people
from using such products/services.
Type of occupation: Many banks have not developed the capacity to evaluate loan
applications of small borrowers and unorganised enterprises and hence tend to deny such
loan requests.
Level of income: Financial status of people is always important in gaining access to
financial services. Extremely poor people find it difficult to access financial services even
when the services are tailored for them. Perception barriers and income discrimination
among potential members in group-lending programmes may exclude the poorer members
of the community.
Attractiveness of the product: Both the financial services/products (savings accounts,
credit products, payment services and insurance) and how their availability is marketed
are crucial in financial inclusion.
The major reasons were/are Absence of Technology; Absence of reach and coverage; Absence
of Viable Delivery Mechanism; not having an appropriate Business model and Rich have no
compassion for poor.

Page | 12

IMPORTANCE OF FINANCIAL INCLUSION IN INDIA

The policy makers have been focusing on financial inclusion of Indian rural and semi-rural
areas primarily for three most important pressing needs:
Creating a Platform for Inculcating the Habit to Save Money: The lower income
category has been living under the constant shadow of financial duress mainly because of
the absence of savings. The absence of savings makes them a vulnerable lot. Presence of
banking services and products aims to provide a critical tool to inculcate the habit to save.
Capital formation in the country is also expected to be boosted once financial inclusion
measures materialize, as people move away from traditional modes of parking their
savings in land, buildings, bullion, etc.
Providing Formal Credit Avenues: So far the unbanked population has been vulnerably
dependent of informal channels of credit like family, friends and moneylenders.
Availability of adequate and transparent credit from formal banking channels shall allow
the entrepreneurial spirit of the masses to increase outputs and prosperity in the
countryside. A classic example of what easy and affordable availability of credit can do
for the poor is the micro-finance sector.
Plug Gaps and Leaks in Public Subsidies and Welfare Programmes: A considerable
sum of money that is meant for the poorest of poor do not actually reach them. While this
money meanders through large system of government bureaucracy much of it is widely
believed to leak and is unable to reach the intended parties. Government is therefore,
pushing for direct cash transfers to beneficiaries through their bank accounts rather than
subsidizing products and making cash payments. This laudable effort is expected to
reduce governments subsidy bill (as it shall save that part of the subsidy that is leaked)
and provide relief only to the real beneficiaries. All these efforts require an efficient and
affordable banking system that can reach out to all. Therefore, there has been a push for
financial inclusion.

Page | 13

NEED OF FINANCIAL INCLUSION IN INDIA

(A GRAPHICAL REPRESENTATION)

PILLARS OF FINANCIAL INCLUSION

Page | 14

SCOPE OF FINANCIAL INCLUSION

The scope of financial inclusion can be expanded in two ways.
Through state-driven intervention by way of statutory enactments ( for instance the US
example, the Community Reinvestment Act and making it a statutory right to have bank
account in France).
Through voluntary effort by the banking community itself for evolving various strategies
to bring within the ambit of the banking sector the large strata of society.
When bankers do not give the desired attention to certain areas, the regulators have to step in
to remedy the situation. This is the reason why Reserve Bank of India is placing a lot of
emphasis on financial inclusion. In India the focus of the financial inclusion at present is
confined to ensuring a bare minimum access to a savings bank account without frills, to all.
Internationally, the financial exclusion has been viewed in a much wider perspective. Having
a current account / saving account on its own, is not regarded as an accurate indicator of
financial inclusion. There could be multiple levels of financial inclusion and exclusion. At
one extreme, it is possible to identify the super-included, i.e., those customers who are
actively and persistently courted by the financial services industry, and who have at their

Page | 15

disposal a wide range of financial services and products. At the other extreme, we may have
the financially excluded, who are denied access to even the most basic of financial products.
In between are those who use the banking services only for deposits and withdrawals of
money. But these persons may have only restricted access to the financial system, and may
not enjoy the flexibility of access offered to more affluent customers.Financial Inclusion
should include access to financial products and services like,
Bank accounts check in account
Immediate Credit
Savings products
Remittances & Payment services
Insurance Healthcare
Mortgage
Financial advisory services
Entrepreneurial credit

INSTITUTIONS AND FINANCIAL INCLUSION

Financial Institutions, both large and small have an important role to play in financial
inclusion. With their organized structure and effective management larger financial
institutions could act as mentors for small financial services firm by ensuring a strong
financial backing.
Commercial Banks: Commercial banks could act as an important part of the process to
achieve full financial inclusion. Especially with simplified savings bank accounts
(including no-frills account), relaxed KYC procedures, primary sector lending and even
microfinance.
Cooperative Banks: The Urban and Rural cooperative banks could cater to populations
that are generally neglected by the commercial banks. Their position allows them to reach
Page | 16

out to the people far easier than the more formal commercial banks. Since they are
operated by the members of the banks themselves, there would be more involvement from
the people of such cooperatives.
Regional Rural Banks: Through priority sector lending, KCCs and GCCS the RRBs
could ensure a steady flow of credit to the rural poor especially the marginal farmers. The
RRBs like the commercial banks can deal with the agencies like NGOs who are interested
in helping out the poor and the weaker sections.
Non-Banking Financial Companies (NBFCS): The NBFCs could include both large
and small financial firms which provide financial services. They could offer specific
financial products to the poor and low income people such as micro-insurance, microcredit, etc. The NBFCs could create financial awareness among the people by not only
offering alternative financial services but also spreading financial literacy by providing
financial advices.
Post Office Savings Bank: These along with their extensive network could offer wide
variety of small and micro financial services to the people. The Post Office Savings bank
could utilise their staff to deliver door-to-door service to the people.
Micro Finance Institution (MFIs): Micro Finance Institutions or MFIs are created with
the specific aim of extending financial services to the poor and the weaker sections of the
populations. A MFI could be independent or as in most cases are promoted by NGOs,
government agencies, NBFCs, commercial banks and other institutions. Micro Finance
Institutions have so far been the most successful at ensuring basic financial services to the
unbanked sections of the populations. Along with the SHG movement, the MFIs has
enabled the wealth generation in many underdeveloped rural as well as neglected urban
areas in India.
Non-Governmental Organizations (NGOs): NGOs could provide financial assistance to
the poor and the weaker sections through NGO promoted MFIs or by providing financial
advice. NGOs working the poor and the economically deprived can more closely analyse
their spending patterns and credit requirements. Commercial banks and other large
financial agencies can work closely with NGOs to ensure that the dealings with the poor
and the weaker sections turn out to be a fruitful activity not only for the people but also
for the lending agencies.

Page | 17

Page | 18

INITIATIVES FOR FINANCIAL INCLUSION IN INDIA

Financial inclusion in the Indian context implies the provision of affordable financial
services, viz., access to payments and remittance facilities, savings, loans and insurance
services by the formal financial system to those who tend to be excluded. In order to expand
the credit and financial services to the wider sections of the population, a wide network of
financial institutions has been established over the years. The organised financial system
comprising commercial banks, regional rural banks (RRBs), urban cooperative banks
(UCBs), primary agricultural credit societies (PACS) and post offices caters to the needs of
financial services of the people. Besides, MFIs, self-help groups (SHGs) also meet the
financial service requirements of the poorer segments. Furthermore, development to the
institutional framework in recent years has focussed on new models of expanding financial
services involving credit dispensation using multiple channels such as civil society
organisations (CSOs), nongovernment organisations (NGOs), post offices, farmers clubs, and
panchayats as business facilitators/correspondents. Specific financial instruments/products
were also developed in order to promote financial inclusion.
The broad strategy for financial inclusion in India in recent years comprises the following
elements:
Encouraging penetration into unbanked and backward areas and encouraging agents and
intermediaries such as NGOs, MFIs, CSOs and business correspondents (BCs)
Focussing on a decentralised strategy by using existing arrangements such as State Level
Bankers Committee (SLBC) and district consultative committee (DCC) and

strengthening local institutions such as co-operatives and RRBs

Using technology for furthering financial inclusion
Advising banks to open a basic banking no frills account
Emphasis on financial literacy and credit counselling
Creating synergies between the formal and informal segments

The objective of bringing financially excluded people within the fold of the banking sector
received renewed emphasis in 2005-06 as the term financial inclusion was explicitly used
for the first time in the Annual Policy Statement for 2005-06. It observed that there were
legitimate concerns in regard to the banking practices that tended to exclude rather than
attract vast sections of population, in particular pensioners, self-employed and those
employed in the unorganised sector

RBI AND FINANCIAL INCLUSION

Page | 19

As the central bank of the country, the Reserve bank of India has taken steps to ensure
financial inclusion in the country. It has tried to make banking more attractive to citizens by
allowing for easier transactions with banks. In 2004 RBI appointed an internal group to look
into ways to improve Financial Inclusion in the country. It came out with a report in 2005
(Khan Committee) and subsequently RBI issued a circular in 2006 allowing the use of
intermediaries for providing banking and financial services. Through such policies the RBI
has tried to improve Financial Inclusion. Financial Inclusion offers immense potential not
only for banks but for other businesses. Through an integrated approach the businesses, the
NGOs, the government agencies as well as the banks can be partners in growth. RBI has
realized that a push is needed to kick start the financial inclusion process.
Some of the steps taken by RBI include the directive to banks to offer No-frills account,
easier KYC norms, offering GCC cards to the poor, better customer services, promoting the
use of IT and intermediaries, and asking SLBCs and UTLBCs to start a campaign to promote
financial inclusion on a pilot basis. So far the campaign for 100% financial inclusion has been
said to be a success with many states now reaching near-total financial inclusion.
Policy Initiatives by Reserve Bank of India:
Keeping in view the tremendous scope for improving financial coverage, the RBI as a
proactive measure, has taken several initiatives to promote financial inclusion:
No-frills Accounts: The RBI in its annual policy statement for the year 2005-06 and also
in the midterm review of the policy (2005-06), exhorted the banks, with a view to
achieving greater financial inclusion, to make available a basic banking No-Frills
account either with nil or very minimum balances as well as charges that would make
such accounts accessible to vast sections of the population. The nature and number of
transactions in such accounts would be restricted and made known of transaction in such
accounts would be restricted and made known to customers in advance in a transparent
manner. All banks have been urged to give wide publicity to the facility of such NoFrills account. Banks are required to make available all printed used by retail customers
in the concerned regional language.
Overdraft Facilities in Saving Account: Banks are providing overdraft (OD) facility in
saving account and also Small Overdrafts in No-frills accounts. Banks have been advised
and directed to provide small OD in such accounts. Banks had provided 2.7 million ODs

Page | 20

amounting to Rs.1.1 billion till March 2012.The figures, respectively, were 0.6 million
and Rs.0.3 billion in March 2011
Overcoming Language Barrier: Large sections of the Indian population are not familiar
with English and Hindi, the languages mostly used in bank forms. Banks are therefore
required to provide forms pertaining to account opening disclosure etc. in the regional
language as well.
Simplification of Know Your Customer (KYC)
Norms and Guidelines: To open a Regular Account, a customer has to provide
documents on (a) Proof of identity, and (b) Proof of address, as per RBI guidelines. But
customers face difficulties in providing the requisite documentation for opening regular
bank accounts. Also, most rural inhabitants do not have any of the identity documents that
are required for account opening and compliance with Know Your Customer (KYC)
norms. For that reason, the account opening process has been simplified for people who
intend to keep balances not exceeding Rs.50,000 and whose total credit in all the accounts
taken together is not expected to exceed Rs.100,000 in a year. Small accounts can now be
opened on the basis of an introduction from another account holder who has satisfied all
the KYC norms. In addition to this, a Sub-Group of senior officers of some public sector
banks (PSBs), constituted by Department of financial services, has suggested uniform
KYC guidelines and a common list of documents, for guidance and adoption by the PSBs.
Simplification of Savings Bank Account Opening Form: To ease the opening of bank
account by the Migratory labor, street hawkers and other poorer sections of the society,
Simplified Account Opening Form has been designed. Banks have been requested to
put in place a system to enable the customer to fill the account opening form on an
online mode. This form contains sections for Small Accounts, Accounts with
Introduction and Basic Saving Bank Deposit Account.

Page | 21

 Financial Literacy Program: Financial Literacy Programs have been initiated by RBI to
improve financial education and literacy so that people will become aware about the basic
financial terms and services provided by banks and financial institutions. RBI provides
support to Financial Literacy and Credit Counseling Centers (FLCCs).The broad
objective of the FLCCs will be to provide free financial literacy/education and credit
counseling.
Simplified branch authorization: With the objective of facilitating uniform branch
growth, RBI has permitted banks to freely open branches in tier III to tier VI centres with
population less than 50,000 under general permission consent, subject to reporting (since
December 2009).On the other hand, banks can open branches in any centre rural, semiurban or urban in the North-east without applying for permission each time, again
subject to reporting.
General Credit Cards (GCCs): Banks have been advised to consider introduction of a
General Purpose Credit Card (GCC) facility up to Rs.25,000/- at their rural and semi
urban branches. The credit facility is in the nature of revolving credit entitling the holder
to withdraw up to the limit sanctioned. Based on assessment of household cash flows, the
limits are sanctioned without insistence on security or purpose. Interest rate on the facility
is completely deregulated. Banks had offered 2.1 million GCCs with an amount of Rs.42
billion by the end of March, 2012.The figures, respectively, were 1.7 million and Rs.35
billion as of March,2011.
One-Time Settlement: For all borrowers where the principal amount is less than
RS.25000/-, banks have been asked to offer a one-time settlement scheme. As there is
large number of such very small NFA s with banks, offer of such an OTS was expected
to restore borrowing relationship with the formal system and thereby obviate the need to
go back to the informal system. In case where the loans are under government sponsored
schemes the state level bankers committee (SLBC) was expected to evolve a suitable
policy.

Page | 22

 Kisan Credit Cards (KCCs): Kisan Credit Cards to small time farmers have been issued
by banks. As on March 2012, the total number of KCCs issued has been reported as 30
million with a total amount outstanding to the tune of Rs.2, 068 billion. The figure,
respectively, were 27 million and Rs.1, 600 billion on March, 2011.

Role of Government
State Governments can play a proactive role in facilitating Financial Inclusion. Issuing
official identity documents for opening accounts, creating awareness and involving district
and block level function arise in the entire process, meeting cost of cards and other devices
for pilots, undertaking financial literacy drives are some of the ways in which the State and
district administration have involved themselves.
India post is also looking to diversify its activities and leverage on its huge network of post
offices, the postmans intimate knowledge of the local population and the enormous trust
reposed in him. Banks are entering into agreements with India post for using post offices as
agents for branchless banking.

Initiative of State Government-Pictures of technology at work.

Page | 23

CHAPTER 2
Overview of SBI Bank
&
ICICI Bank

Page | 24

Chapter 02
OVERVIEW OF SBI

Overview
Introduction
Vision, Mission & Values
History of the bank
SWOT analysis of SBI Bank
Initiatives of SBI for Financial Inclusion

=================================================================

THE BANKER TO EVERY INDIAN

Page | 25

OVERVIEW:
State Bank of India is the largest and one of the oldest commercial bank in India, in existence
for more than 200 years. The bank provides a full range of corporate, commercial and retail
banking services in India. Indian central bank namely Reserve Bank of India (RBI) is the
major shareholder of the bank with 59.7% stake. The bank Total is capitalized to the 359.237
billion with the public holding (other than promoters) at 40.3%. SBI has the largest branch
and ATM Network spread across every corner of India. The bank has a branch network of
over 15004 branches (including subsidiaries). Including 157 foreign offices in 41 countries
around the world making it The Largest Banking and Financial Services Company in India,
correspondent relationship with 520 International banks in 123 countries. In recent past, SBI
has acquired banks in Mauritius, Kenya and Indonesia. The bank had total staff strength of
292,215 as on 31st January, 2013. Of this, 29.51% are officers, 45.19% clerical staff and the
remaining 25.30% were sub-staff. The bank is listed on the Bombay Stock Exchange,
National Stock Exchange, Kolkata Stock Exchange, Chennai Stock Exchange and
Ahmadabad Stock Exchange while its GDRs are listed on the London Stock Exchange. SBI
group accounts for around 25% of the total business of the banking industry while it accounts
for 35% of the total foreign exchange in India. With this type of strong base, SBI has
displayed a continued performance in the last few years in scaling up its efficiency levels. Net
Interest Income of the bank has witnessed a CAGR of 13.3% during the last five years.
During the same period, net interest margin (NIM) of the bank has gone up from as low as
2.9% in FY02 to 3.40% in FY06 and currently is at 3.32% bank. The introduction of this
scheme leads to strong protests and SBI faced with a prospect of losing its talented employees
and be left with less efficient employees (2012). Quality is our essence and we, at State Bank
of India, have always stressed on the Qualitative aspect. Consequently in this run for quality,
quantity has always pursued us. We look forward to reaching the zenith and reaffirm our
commitment to the process of sound nation-building.

Page | 26

INTRODUCTION
State Bank of India (SBI), with a 200 year history, is the largest commercial bank in India in
terms of assets, deposits, profits, branches, customers and employees. The Government of
India is the single largest shareholder of this Fortune 500 entity with 58.60% ownership. SBI
is ranked 59th in the list of 'Top 1000 World Banks 2015' by The Banker magazine.
The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later called
the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other banks (Bank
of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank of India. In
1955, the Reserve Bank of India acquired the controlling interests of the Imperial Bank of
India and SBI was created by an act of Parliament to succeed the Imperial Bank of India.
The SBI group consists of SBI and five associate banks. The group has an extensive network,
with over 22000 plus branches in India and over 190 offices in 36 other countries across the
world. As of 31st March 2015, the group had assets worth USD 432 billion and capital &
reserves in excess of USD 25 billion. The SBI has over 1/5th market share of the Indian
banking sector.
SBI's non- banking subsidiaries/joint ventures are market leaders in their respective areas and
provide wide ranging services, which include investment banking, life insurance, general
insurance, mutual funds, credit cards, factoring services, security trading, etc. making the SBI
Group a truly large financial supermarket and India's financial icon. SBI has arrangements
with over 1,600 various international / local banks to exchange financial messages through
SWIFT in all business centres of the world to facilitate trade related banking business,
reinforced by dedicated and highly skilled teams of professionals.

Page | 27

EMPLOYEES
SBI is one of the largest employers in the country having 228,296 employees as on 31st
March 2013, out of which there were 46,833 female employees (21%) and 2,402 disabled
employees (1%). On the same date, SBI had 43,550 Schedule Caste (19%) and 16,764
Schedule Tribe employees (7%). The percentage of Officers, Assistants and Sub-staff was
35%, 48% and 17% respectively on the same date.
Hiring drive: The bank hired 20,682 Assistants in FY 2012-13, from over 30 lakh applicants,
for expansion of the branch network and to mitigate staff shortage, particularly at rural and
semi-urban branches. In the same year, it recruited 847 probationary officers from around 17
lakh candidates which applied for officers position.
Staff productivity: As per its Annual Report for FY 2012-13, each employee contributed to
revenues of INR 944 Lacs and net profit of INR 6.45 Lacs
State Bank of India is a largest commercial Bank in India entity on the corporate scene having
diversified business interests that include Financial Institution.
The State Bank of India, the largest public sector bank of India, offered voluntary scheme
(VRS) to trim its workforce as recommended that the banking industry was overstaffed. SBI
implemented a VRS or the Golden Handshake system. The vast workforce that was once
regarded as one of SBIs strongest assets became a liability following the computerization of
the bank. The introduction of this scheme leads to strong protests and SBI faced with a
prospect of losing its talented employees and be left with less efficient employees (2012).
Quality is our essence and we, at State Bank of India, have always stressed on the Qualitative
aspect. Consequently in this run for quality, quantity has always pursued us. We look forward
to reaching the zenith and reaffirm our commitment to the process of sound nation-building.

Page | 28

CORE COMMITMENTS - OUR STRENGTH

Emotion

Discipline

Duty

No discrimination

Quality

Give respect

Self-respect

Truth

Collective Materialism

Absolute Honesty

WHAT: A commitment of State Bank of India to the genuine needs and rights of anybody &
everybody - Be it to a depositor, Share Holder, consumer.... all business associates and Sahara
India Family Members.
NEED: India needs effective consumer protection and protection of workers' genuine rights.
There are various agencies, promising protection & action. But no external body can provide
justice unless the company becomes 'QUALITY CONSCIOUS' WITH STRICTLY NO
DISCRIMINATION POLICY AND JUSTICE CONSCIOUSNESS as its very dominating
nature.
MOTTO: We not only believe but practice NO DISCRIMINATION, JUSTICE & HIGH
QUALITY - means enthusiastic, productive performance of duty "KARTAVYA' towards the
consumer', workers' genuine satisfaction.

AIM: To provide justice - be it a matter of the tiniest imperfection or injustice in our

COMMITMENT - products or services. Direct or indirect, short term or long term

Page | 29

VISION, MISSION & VALUES

Vision Statement:
"Become first in Customer Satisfaction"
Mission Statement:

To be prompt, polite and proactive with our customers.

To speak the language of young India.
To create products and services that help our customers achieve their goals.
To go beyond the call of duty to make our customers feel valued.
To provide service even in the remotest part of our country.
To offer excellence in services to those abroad as much as we do to those in India.
To imbibe state of the art technology to drive excellence.

Values Statement:

To always be honest, transparent and ethical.

To respect our customers and fellow associates.

To be knowledge driven.

To learn and share our learning.

Never take the easy way out.

Do everything we can to contribute to the community we work in.

To nurture pride in India

Page | 30

HISTORY OF SBI BANK

The origin of the State Bank of India goes back to the first decade of the nineteenth century
with the establishment of the Bank of Calcutta in 1806 in Calcutta. Three years later the bank
received its charter and was redesigned as the Bank of Bengal (2 January 1809). A unique
institution, it was the first jointstock bank of British India sponsored by the Government of
Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843)
followed the Bank of Bengal. These three banks remained at the apex of modern banking in
India till their amalgamation as the Imperial Bank of India on 27 January 1921. Primarily
AngloIndian creations, the three presidency banks came into existence either as a result of
the compulsions of imperial finance or by the felt needs of local European commerce and
were not imposed from outside in an arbitrary manner to modernize India's economy. Their
evolution was, however, shaped by ideas culled from similar developments in Europe and
England, and was influenced by changes occurring in the structure of both the local trading
environment and those in the relations of the Indian economy to the economy of Europe and
the global economic framework.
The State Bank of India, the countrys oldest bank and a premier in terms of balance sheet
size, number of branches, market capitalization and profits is today going through a
momentous phase of change and transformation the two hundred year old public sector
behemoth is today stirring out of its public sector legacy and moving with an ability to give
the private and foreign banks a run for their money.
The bank is entering into many new businesses with strategic tie ups Pension Funds, General
Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant
Acquisition, Advisory Services, structured products etc. Each one of these initiatives having a
huge potential for growth.
The bank is forging ahead with cutting edge technology and innovative new banking models,
to expand its rural banking base, looking at the vast untapped potential in the hinterland and
proposes to cover 100,000 villages in the next two years. At the end March, 2011, the total
number of branches was 13,542 while the number of ATMs stood at 20,084 across the
country.

Page | 31

Page | 32

SWOT ANALYISIS OF SBI

STRENGTHS:
SBI is the largest bank in India in terms of market share, revenue and assets.
As per recent data the bank has more than 13,000 outlets and 25,000 ATM centres.
The bank has its presence in 32 countries engaging currency trade all over the world.
The bank has a merged with State Bank of Saurashtra, State bank of Indore and the bank
is planning to go further acquisition in the current FY2012.
SBI has the first mover advantage in commercial banking service.
SBI has recently changed its vision and mission statements showing a sign of inclination
towards new age banking services.
Has a separate act for itself. Thus, a special privilege.
Biggest branch network in the country
First public sector to move to CBS.

WEAKNESS:
Huge amount of staff.
Expected to experience high level of attrition due to retirement of its top management.
Still carries the image of the old Govt. sector bank.
Lack of proper technology driven services when compared to private banks.
Employees show reluctance to solve issues quickly due to higher job security and
customers waiting period is long when compared to private banks.

Page | 33

 The banks spend a huge amount on its rented buildings.

SBI has the largest number of employees in banking sector, hence the bank spends a
considerable amount of its income in employees salary compensation.
In spite of modernization, the bank still carries the perception of traditional bank to new
age customers.
SBI fails to attract salary accounts of corporate and many government sector employees
salary accounts are also shifted to private bank for ease of operations unlike before.

OPPORTUNITIES:
SBIs merger with five more banks namely State Bank of Hyderabad, State bank of
Patiala, State bank of Bikaner and Jaipur, State of bank of Travancore and State bank of
Mysore are in approval stage.

Mergers will result in expansion of market share to defend its number one position.
SBI is planning to expand and invest in international operations due to good inflow of
money from Asian Market.

Since the bank is yet to modernize few of its banking operations, there is a better scope of
using advanced technologies and software to improve customer relations.

Young and talented pool of graduates and B schools are in rise to open new horizon to so
called old government bank.

Make better use of its CRM.

THREATS:

Page | 34

 Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35 in the
year FY2011.

This shows the reduce in market share to its close competitor ICICI.
Other private banks like HDFC, AXIS bank etc.
FDIs allowed in banking sector is increased to 49% , this is a major threat to SBI as
people tend to switch to foreign banks for better facilities and technologies in banking
service.

Other governments banks like PNB, Andhra, Allahabad bank and Indian bank are
showing
Customer prefer to switch to private banks and financial service providers for loans and
mortgages, as SBI involves stringent verification procedures and take long time for
processing.

INITIATIVES OF SBI FOR FINANCIAL INCLUSION

SBI LAUNCHES TINY SMALL ACCOUNTS
The objective of State Bank of India in the present day context is to ensure financial inclusion
of the whole population irrespective of areas and sectors. The 'inclusion' phenomenon cannot
be confined to few pockets of area and people. SBI's answer to financial inclusion is the 'SBI
Tiny project', which can in simple terms be defined as a Bank in a Box. The entire set up
consists of a cell phone which serves as POS machine, a finger print reader and a tiny printer,
all of which can be packed into a 10 inch by 10 inch box. All these work on rechargeable
batteries. SBI Tiny accounts (no frills accounts) are opened on the smart cards. The smart
card is akin to an e-purse and stores information about the customer, the account number,
finger prints as well as the balance in the account. The smart card can handle up to 16
accounts including loan accounts. This card is highly secure as it works on the bio-metric
validation of the customer. The card works on the Radio Frequency Identification (RFID)

Page | 35

technology. SBI is today using this technology in our smart cards which work in conjunction
with a mobile or a hand held connectivity device which works on Near Field Communication
Technology (NFC). Transactions are possible both in online and off line mode. It also permits
the real time updating of balances in the card. By issuing a smart card to the rural customer,
the cost of the transaction is reduced because we are dispensing with paper based transactions
and shifting the actual operation of transacting on the account away from the branch to
Customer Service Point / Provider (CSP) at the outlet in the location of the rural customer

EFFORTS
GROUP

OF SBI

FINANCIAL INCLUSION
Number of BC outlets
PMJDY Accounts:

As on 31.03.2015
57,575

As on 30.09.2015
58,571

Number (in crore)

3.33

4.45

1,296.57

2,932

7.29

8.50

4,415

5,931

Number (in crore)

14.17

12.09

Deposits (Rs in crore)

Financial Literacy Centres (FLCs)

38,973

29,414

No. of FLCs

212

219

No. of outdoor activities conducted

28,879

32,697

No. of persons participated in outdoor activities

17,39,313

21,62,818

No. of persons converted to customers

Rural Self Employment Training Institutes (RSETIs):

2,62,271

3,54,049

No. of RSETIs

117

116

No. of training programmes conducted

10,013

11,160

No. of youth trained

2,65,688

2,95,830

No. of candidates settled

1,34,317

139,805

% of settlement

50.55%

47%

Deposits (Rs in crore)

Total F.I. Accounts
Number (in crore)
Deposits (Rs in crore)
Transactions BCs Channel

Page | 36

Page | 37

FINANCIAL INCLUSION: HIGHLIGHTS FOR THE CURRENT YEAR

The Bank has set up 45,487 BC Customer Service Points (CSPs) through alliances
both at National and Regional level.

The Bank is offering various technological enabled products through Business

Correspondent (BC) channel, such as, Savings Bank, flexi RD, STDR, Remittance & SB-OD
facilities.

The Bank has achieved 100% coverage in 31,729 villages during FY14. The
cumulative coverage has gone up to 52,260 villages.

11,423 BC outlets have been set up in Urban/Metro centres which cater to the
requirements of migrant labourers, vendors, etc. During FY14, 226 lac remittance
transactions for Rs. 9,983 crore were registered through BC channel.

During FY 14, Bank has opened 1.50 crore Small accounts with simplified KYC.

The transactions volume through BC Channel has grown to Rs. 22,525 cr. during FY
14 as against Rs. 13,033 crore during FY13.

With a view to facilitate transactions through alternate channels, the Bank has issued
24 lac FI RuPay ATM Debit Cards to FI customers.

Linking of villages to branches through CSPs in a Hub and Spoke model has been
launched and 69,749 villages have been linked so far. A facility of depositing loan
repayments at 31,919 BC outlets has also been enabled.

Under Direct Benefit Transfer (DBT) Scheme, the Bank has handled 27.41 lac
transactions amounting to Rs. 505 crore as Sponsoring Bank in addition to 7.1 lac
transactions amounting to Rs. 98.61 crore as Receiving Bank. Overall 1.36 crore accounts
linked with Aadhaar across the country.

SBI is the sole Sponsoring Bank for DBT for LPG transactions which are processed
centrally for all the three Oil Marketing Companies. Over 8.98 crore transactions amounting
Rs 5,393 crore processed.

4.46 lac SHGs credit linked with credit deployment of Rs. 5,134 crore. Our market
share in SHGs is 22%.

Page | 38

Chapter 03

OVERVIEW OF ICICI
=========================================================

Overview
Introduction
Vision, Mission& Values
History of the bank
SWOT analysis of ICICI Bank
Initiatives of ICICI bank for Financial Inclusion

==================================================================

KHAYAAL AAPKA

Page | 39

OVERVIEW:
ICICI

Bank is

an

Indian

multinational banking and financial

services company

headquartered in Vadodara. As of 2014 it is the second largest bank in India in terms of assets
and market capitalization. It offers a wide range of banking products and financial
services for corporate and retail customers through a variety of delivery channels and
specialized subsidiaries in the areas of investment banking, life, non-life insurance, venture
capital and asset management. The Bank has a network of 3,800 branches and
11,162ATMs in India, and has a presence in 19 countries. ICICI Bank is one of the Big Four
banks of India, along with State Bank of India, Punjab National Bank and Bank of Baroda.
The bank has subsidiaries in the United Kingdom, Russia, and Canada; branches in United
States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International
Finance Centre; and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. The company's UK subsidiary has also
established branches in Belgium and Germany. In March 2013, Operation Red Spider showed
high-ranking officials and some employees of ICICI Bank involved in money laundering.
After a government inquiry, ICICI Bank suspended 18 employees and faced penalties from
the Reserve Bank of India in relation to the activity. The Bank is a financial services group
providing a range of banking and financial services including commercial banking, retail
banking, project and corporate finance, working capital finance, insurance, venture capital
and private equity, investment banking, broking and treasury products and services. Its
operating segments include Retail Banking, Wholesale Banking, Treasury, Other Banking,
Life Insurance, General Insurance and Others. Retail banking includes exposures of the Bank,
which satisfy the criteria of orientation, product, granularity and low value of individual
exposures for retail exposures laid down in Basel Committee on Banking Supervision
document International Convergence of Capital Measurement and Capital Standards: A
Revised Framework. Wholesale banking includes all advances of the Bank to trusts,
partnership firms, companies and statutory bodies. Treasury includes the entire investment
and derivative portfolio of the Bank.

Page | 40

Objective:
To assist in the creation, expansion and modernization of private concerns
To encourage the participation of internal and external capital in the private concerns
To encourage private ownership of industrial investment
ICICI Bank's Green initiative is to make healthy environment in the organization i.e. to
create intrapersonal skills among the customer and understanding between employees of
the organization.

INTRODUCTION:
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses.
In the 1990s, ICICI transformed its business from a development financial institution offering
only project finance to a diversified financial services group offering a wide variety of
products and services, both directly and through a number of subsidiaries and affiliates like
ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's universal banking strategy.

Page | 41

The merger would enhance value for ICICI shareholders through the merged entity's access to
low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services.
The merger would enhance value for ICICI Bank shareholders through a large capital base
and scale of operations, seamless access to ICICI's strong corporate relationships built up
over five decades, entry into new business segments, higher market share in various business
segments, particularly fee-based services, and access to the vast talent pool of ICICI and its
subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have been integrated in a single
entity.
ICICI BANK offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management or wealth management. The Bank currently has its
subsidiaries in the United Kingdom, Russia and Canada, branches in Unites States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre
and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. The banks UK subsidiary has established branches in
Belgium and Germany

Page | 42

VISION, MISSION& VALUES

Vision:
To be the dominant Life, Health and Pensions player built on trust by world-class people and
service. This we hope to achieve by:

Understanding the needs of customers and offering them superior products and service;

Leveraging technology to service customers quickly, efficiently and conveniently;

Developing and implementing superior risk management and investment strategies to

offer sustainable and stable returns to our policyholders;

Providing an enabling environment to foster growth and learning for our employees;

And above all, building transparency in all our dealings.

Mission:
Our mission is to become the best 'Customizable E-Learning and Applications Company' in
terms of quality, cost and delivery. The fundamental goal of the company is to raise the
practice as well as level of collaborative rapid E-Learning and Applications Development.
Through our products, services & solutions we facilitate the process of knowledge sharing
smoothly and in a cost effective manner.
Values:
The success of the company will be founded in its unflinching commitment to 5 core values -Integrity, Customer First, Humility, Passion and Boundary-less. Each of the values describes
what the company stands for, the qualities of our people and the way we work. Every member
of the ICICI Prudential team is committed to the 5 core values and these values shine forth in
all we do.
Boundary less I will treat organization agenda as paramount
Integrity What I do when nobody is watching me
Humility Openness to learn a change
Customer First Service excellence towards Internal and External Customers
Page | 43

 Passion Demonstrates infectious energy and enthusiasm

Page | 44

HISTORY OF ICICI BANK

ICICI Bank was established by the Industrial Credit and Investment Corporation of India
(ICICI) , an Indian financial institution, as a wholly owned subsidiary in 1994. The parent
company was formed in 1955 as a joint-venture of the World Bank, India's public-sector
banks and public-sector insurance companies to provide project financing to Indian industry.
The bank was initially known as the Industrial Credit and Investment Corporation of India
Bank, before it changed its name to the abbreviated ICICI Bank. The parent company was
later merged with the bank.
ICICI Bank launched internet banking operations in 1998.ICICI's shareholding in ICICI Bank
was reduced to 46 percent, through a public offering of shares in India in 1998, followed by
an equity offering in the form of American Depositary Receipts on the NYSE in 2000.ICICI
Bank acquired the Bank of Madura Limited in an all-stock deal in 2001 and sold additional
stakes to institutional investors during 2001-02. In the 1990s, ICICI transformed its business
from a development financial institution offering only project finance to a diversified
financial services group, offering a wide variety of products and services, both directly and
through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the
first Indian company and the first bank or financial institution from non-Japan Asia to be
listed on the NYSE.
In 2000, ICICI Bank became the first Indian bank to list on the New York Stock Exchange
with its five million American depository shares issue generating a demand book 13 times the
offer size. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger
was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court
of Gujarat at Ahmadabad in March 2002 and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002.In 2008, following the 2008 financial crisis,
customers rushed to ICICI ATMs and branches in some locations due to rumours of adverse
financial position of ICICI Bank. The Reserve Bank of India issued a clarification on the
financial strength of ICICI Bank to dispel the rumours

Page | 45

Page | 46

SWOT ANALYISIS OFICICI

STRENGHTS:
ICICI is the second largest bank in terms of total assets and market share

Total assets of ICICI is Rs. 4062.34 Billion and recorded a maximum profit after tax of
Rs. 51.51 billion and located in 19 countries

One of the major strength of ICICI bank according to financial analysts is its strong and
transparent balance sheet

ICICI bank has first mover advantage in many of the banking and financial services.
ICICI bank is the first bank in India to introduce complete mobile banking solutions and
jewellery card

The bank has PAN India presence of around 2,567 branches and 8003 ATMs

ICICI bank is the first bank in India to attach life style benefits to banking services for
exclusive purchases and tie-ups with best brands in the industry such as Nakshatra, Asmi,
and Ddamas etc.

ICICI bank has the longest working hours and additional services offering at ATMs
which attracts customers

Marketing and advertising strategies of ICICI have good reach compared to other banks
in India.

WEAKNESS:
Customer support of ICICI section is not performing well in terms of resolving complaints

There are lot of consumer complaints filed against ICICI

The ICICI bank has the most stringent policies in terms of recovering the debts and loans,
and credit payments. They employ third party agency to handle recovery management

Page | 47

There are also complaints of customer assault and abuse while recovering and the credit
payment reminders are sent even before the deadlines which annoys the customers

The bank service charges are comparatively higher

The employees of ICICI are bank in maximum stress because of the aggressive policies of
the management to win ahead in the race. This may result in less productivity in future
years

OPPORTUNITIES:
Banking sector is expected to grow at a rate of 17% in the next three years

The concept of saving in banks and investing in financial products is increasing in rural
areas as more than 62% percentage of Indias population is still in rural areas.
As per 2010 data in TOI, the total number b-schools in India are more than 1500. This can
ensure regular supply of trained human power in financial products and banking services
Within next four years ICICI bank is planning to open 1500 new branches

Small and non performing banks can be acquired by ICICI because of its financial
strength
ICICI bank is expected to have 20% credit growth in the coming years.

ICICI bank has the minimum amount of nonperforming assets

THREATS:

RBI allowed foreign banks to invest up to 74% in Indian banking

Government sector banks are in urge of modernizing the capacities to ensure the
customers switching to new age banks are minimized

HDFC is the major competitor for ICICI, and other upcoming banks like AXIS, HSBC
impose a major threat

In rural areas the micro financing groups hold a major share

Page | 48

Though customer acquisition is high on one side, the unsatisfied customers are increasing
and make them to switch to other banks.

Page | 49

INITIATIVES OF ICICI BANK FOR FINANCIAL INCLUSION

ICICI Bank Launches 20 Gramin Branches under Financial Inclusion Plan
ICICI Bank Limited, Indias largest private sector bank, said that it has started 20 new
Gramin branches across Rajasthan as part of its financial inclusion plan that aims at providing
banking services in unbanked villages. All these branches have been opened in small villages,
which were so far devoid of any banking facility. The ThikariaGramin branch is one of the 20
branches the Bank inaugurated in Rajasthan. The other Gramin branch in the same Dausa
district is at Nadari. Other branches opened in the state are at Pritampuri and BasriKhurd
villages in Sikar district; at Hudeel and Lalas villages in Nagaur district; at 22ML, 9ML,
Ghamurwali and Sanwatsar villages in Ganga Nagar district; at Bhawad, Danwara, Poonasar
and Jakhan villages in Jodhpur district; at Otwala and Alasan villages in Jalore district; at
Bhinyad and Kanasar villages in Barmer district and at Gudli and Sangwa villages in Udaipur
district.
With these launches, ICICI Bank has opened over 140 rural branches in Rajasthan, which is
one-fourth of the total number of rural branches across the country. The addition of these new
branches has increased the network of ICICI Bank in Rajasthan to more than 400 branches.
It is our constant endeavor to provide the entire gamut of financial services in rural and
remote areas, which include credit, savings, investments and insurance products. In line with
this approach, we have launched 20 Gramin branches, which will provide all basic banking
services in unbanked villages, which is a key part of our Financial Inclusion strategy.

Farmer finance through Kisan Credit Card (KCC) and Agri-term Loan (ATL) for the

cultivation and development of agricultural land.

Rural Business Credit (RBC) to meet working capital and term loan requirements of

business entities in rural and semi-urban areas.

Overdraft (OD) against fixed deposits (FD) under the Banks KisanKalpvriksh scheme for

rural customers.
Various basic savings accounts to the customers based on their profile and requirements.
Funding to several Self-Help Groups.
These branches also service business correspondents (BCs)

Page | 50

ICICI Bank has undertaken a wide range of initiatives in the last few years as part of its
financial inclusion agenda. In this state, ICICI Bank is also engaged in Electronic Benefit
Transfers (EBT) for disbursement of wages to the Mahatma Gandhi National Rural
Employment Guarantee Scheme (MGNREGS) workers. It has a wide distribution network to
service its rural and under banked customers.
ICICI Bank has 3,350 branches and over 10,900 ATMs spread across the country. The Bank
services its large customer base through a multi-channel delivery network of branches, ATMs,
call center and internet banking

EFFORTS OF ICICI GROUP

Direct Lending to the BOP through ICICI Bank's Microfinance Programme: With a
portfolio of Rs.9.6 billion and a client base of 3.5 million, ICICI Bank's micro finance
programme is one of the largest among private sector banks in India. Our micro finance
portfolio scaled up rapidly with the use of an innovative financing structure, the
"Partnership Model" (described under the section on innovations). The key social benefit
resulting from this financing structure has been the rapid scale-up of the operations of
smaller MFIs in India at a time when most of the industry faced severe capital
constraints.

Capacity Building for MFIs: Microfinance Practice at Social Initiatives Group

(MFSIG), MFI Strategy Unit (MSU) and the Emerging MFI Team: In 2007, there
were only 5 MFIs in India with a minimum base of 5, 00,000 customers. To universalise
access to finance, ICICI Group adopted a strategy to seek the development of many more
MFIs. The Emerging MFI Team, Social Initiatives Group and Centre for Microfinance at
Institute of Financial Management & Research (IFMR) work in collaboration in this area.
The Social Initiatives Group acts as a catalyst for the development of appropriate
channels, products and an environment that makes basic formal financial services
accessible to the poorest clients.. ICICI Prudential Asset Management Company launched
India's first Micro Systematic Investment Plan.

Page | 51

Beyond Microcredit: Micro-savings: Recognizing the need for easy savings facilities for
its low-income customers, ICICI Bank has launched a micro-savings facility under its
"business correspondent" model. A state-of-the-art solution based on a biometric-enabled
smartcard and a battery-operated authentication device developed by an ICICI partner,
Financial Information Network and Operations (FINO), the micro-savings product
provides access to a savings account with convenient features. The product combines
security, convenience (proximity, convenient opening times and minimal paperwork),
appropriate design (frequent deposits, small variable amounts and quick access) and
positive returns. The customer receives interest as in a regular savings account and can
maintain zero opening balance. The customer also gets doorstep banking through business
correspondents. Apart from this savings account, the bank also offers recurring and fixed
deposits to enable customers to avail of higher return on their savings. Today, ICICI Bank
works with 41 business correspondent partners operating out of 127 branches across the
country, serving over 77,000 customers.

Micro Insurance: ICICI Prudential Life Insurance's provision of micro-insurance

services has promoted financial security among the rural poor and increased their comfort
to avail credit facilities (micro-credit) for undertaking income-generating activities.
Increased credit worthiness results in availability of low cost capital that is employed in
entrepreneurial activities. Similarly, ICICI Lombard (www.icicilombard.com) provides a
range of non-life insurance products, including health, weather and cattle insurance to
help mitigate the impact of other contingencies such as illness and crop failure.

Government Welfare Schemes: The rural Indian economy is exposed to fundamental

risks and has limited access to risk mitigating solutions. In order to achieve significant
impact, it is critical to operate on a large scale with operational costs that are one tenth of
those in urban areas. To achieve this, ICICI Lombard has worked on the premise that the
governments' social and welfare initiatives can be outsourced for better implementation
and has focused on mass-based social and employee welfare schemes. ICICI Lombard has
structured need-based, cost effective insurance solutions for a number of state
governments and ministries of the Government of India covering around 89 million lives
for Personal Accident insurance and Health insurance.

Page | 52

NO FRILL A/C- THE SMALLEST DEPOSIT ALSO MATTER

ICICI Banks No Frills Account, places emphasis on the smallest of deposits. Our No Frills
Account is available to you without any minimum monthly average balance requirement.

The ICICI Bank Edge

The monthly average balance requirement for this account is nil

Free ICICI Bank VISA debit card

One chequebook of 15 leaves per annum free. You can request for additional cheque
books ( 15 leaves) at Rs. 30 (plus service tax as applicable) per chequebook

Internet Banking facility is not available to the customers

Mobile Banking facility is not available to the customers

Cash transactions at base branch is free for the first 4 transactions of a month; Thereafter
in the month, Rs. 90 per transaction

All anywhere banking transactions chargeable at normal charges as published from time
to time

Interest is payable half-yearly

Free Quarterly statement, free monthly e-mail statement on request

Money Multiplier Facility shall not be available to the customers

GENERAL CONDITIONS FOR NO-FRILLS SAVINGS PRODUCT

The account is available only for resident Indians above the age of 18 years. The account is
not available to individuals in the capacity of HUF Kartas. NRIs and foreign nationals will
not be offered this product. All general terms and conditions applicable to savings bank

Page | 53

accounts as published on the ICICI Bank website at www.icicibank.com for the establishment
of a relationship and the opening and operating of accounts are applicable to this account.

Page | 54

ICICI PARTICICPATES IN PRADHAN MANTRI JAN-DHAN YOJANA

Opens one lakh accounts under this programme

Aims to cross 20 million accounts by end of this fiscal

New Delhi: ICICI Bank, Indias largest private sector bank, announced its participation in the
transformational financial inclusion mission, PradhanMantri Jan DhanYojana (PMJDY), by
opening one lakh basic savings bank deposit accounts.
The Bank has opened these accounts through a special drive, across its network of more than
3,700 branches. Under this scheme, the Bank offers each account holder a passbook, a RuPay
Debit Card with an accidental cover and literature on banking facilities at the time of opening
anaccount.
The ICICI Group has always been a catalyst in India's growth. We have a vision of a strong
and prosperous India. A key element of this vision has always been financial inclusion, which
is integral to creating opportunity for all sections of society and achieving inclusive growth.
ICICI Bank has been working on a comprehensive financial inclusion plan over the last four
years. The PradhanMantri Jan DhanYojana inspires us to renew our commitment to the goal
of financial inclusion with even greater vigour and focus.
Today through our network, we cover approximately 15,600 villages and have brought more
than 18.5 million unbanked people into the banking fold. We aim to open 2.5 million
accounts under the PradhanMantri Jan DhanYojana, thereby taking the total number of
accounts under our financial inclusion program to more than 20 million.
The Bank conducted 1100 camps, in its branches and in villages. This special drive to
promote the PMJDY was spearheaded by senior officials of the Bank. The business
correspondents of ICICI Bank also participated in the camps conducted in the villages. The
account opening procedures were simplified, paper-less and opened on the basis of Aadhaar
identification. The Bank used innovative and engaging methods like comic books and
audio/video as a medium for financial literacy. They introduced basic concepts such as the
benefits of saving through banking products like savings accounts, fixed deposits and
recurring deposits. As part of its urban financial inclusion initiatives, the Bank also
Page | 55

showcased the process of remitting through mobile wallets. This service allows urban
migrants to send money back to their families in a transparent and convenient manner.

Page | 56

FINANCIAL INCLUSION STRATEGY

ICICI Banks financial inclusion strategy encompasses rapid expansion in the rural markets,
leveraging its strengths in technology and delivering relevant products and services to the
rural and unbanked population through its multi-channel network.

Reaching rural India: To provide branch banking services to its rural customers,
ICICI Bank added more than 75% of its new branches in rural and semi urban areas in fiscal
2014. The Bank has a robust network of 3,763 branches, out of which, more than 50% are in
rural and semi-urban areas. Furthermore, 450 of its branches are in unbanked villages. Last
fiscal, the Bank also launched Branch on Wheels, a mobile branch that travels through a
cluster of unbanked villages on a given schedule, thereby meeting the requirement of
customers across various villages and also delivering financial literacy. This year, the Bank
has launched Tab Banking for its rural customers to enable opening of savings accounts and
applying for loans, at their doorstep.

Access to banking: ICICI Bank has opened 18.5 million basic savings bank deposit
accounts so far, the highest by any private sector bank. It has reached out to over 15,600
villages through its branches and Business Correspondents (BC) network. It is a leading
provider of Electronic Benefit Transfer (EBT), having initiated EBT payment facilities in 72
districts across 13 states. The Bank is also a market leader in the Direct Benefit Transfers
(DBT) schemes with 40% share of the total banking transactions. As part of its urban
financial inclusion initiatives, ICICI Bank processed about 5 million domestic migrant
remittances last fiscal. This service allows urban migrants to send money back to their
families in a transparent and convenient manner. The Bank has tie-ups with several telecom
companies such as Vodafone, Tata Teleservices and Aircel to provide mobile money services
in rural geographies.
Access to credit: ICICI Bank offers a comprehensive product suite covering the entire
agricultural value chain including loans to seed/input dealers, crop loans, loans for farm
equipment, agricultural term loans for irrigation and dairy, farmer warehouse receipt finance
and loans to Self Help Groups (SHG). A key differentiator is that the Bank has taken banking
to the farmers, under its doorstep banking model where a dedicated group of 10,000
employees are deployed to offer loans and other products to customers.
Page | 57

CHAPTER 3
Introduction to
No Frill A/c

Page | 58

Chapter 04
NO FRILL A/C
==================================================================

Introduction and Meaning of No Frill A/c

Eligibility & Nomination
Features & Benefits
Ease of KYC Norms & Norms By RBI
Documents Required For No Frill A/c
Terms & Conditions of No Frill A/c
RBI replaces No Frill A/c with Basic Savings A/c.

==================================================================

INTRODUCTION:
In 2005-06, the RBI called upon Indian banks to design a no frills account, low minimum
balance maintenance account with simplified KYC (Know Your Customer) norms. To
understand the ramifications and the sheer magnitude of possibilities, think of the image of a
daily wage earner owning a deposit account in a bank. The idea is to have a level playing
field in its absolute sense. Low income groups having no access to formal banking systems
can well be brought under the umbrella of credit & savings key factors which form the basis
of financial inclusion. While there is no shortage of credit programs, the equally important
savings aspect can rightly be dubbed as the forgotten half of microfinance. No frills
savings accounts appear capable, at least on paper, to cater to the small and irregular income
flows of the poor.
The RBI has urged the banking community to introduce the no-frills account to bring a large
section of under-privileged people into the banking net. Even with 70,000 bank branches in
the country, a large section of the population continues to remain credit-starved. The no-frills
bank account is an innovative instrument to introduce the concept of banking to the underprivileged people. These no-frills accounts involve zero or a very low balance with limited
transaction facilities. The RBI has mandated all nationalized banks to help rope in the four
hundred million plus unbanked population into its Financial Inclusion Programme

Page | 59

MEANING:
'No Frills 'account is a basic banking account. Such account requires either nil minimum
balance or very low minimum balance. Charges applicable to such accounts are low. Services
available to such account are limited.
In what can be described as a watershed Annual Policy Statement, the RBI in 2005-06 called
upon Indian banks to design a no frills account a no precondition, low minimum balance
maintenance account with simplified KYC (Know Your Customer) norms. To understand the
ramifications and the sheer magnitude of possibilities, think of the image of a daily wage
earner owning a deposit account in a bank. The idea is to have a level playing field in its
absolute meaning. Low income groups having no access to formal banking systems can well
be brought under the umbrella of credit & savings key factors which form the basis of the
idea of financial inclusion. While there is no shortage of credit programs, the equally
important savings aspect can rightly be dubbed as the forgotten half of microfinance. No
frills savings accounts appear capable, at least on paper, to cater to the small and also
irregular income flows of the poor.
The no-frills savings bank account introduced by several commercial banks a few months ago
had all the potential to revolutionize India's rural agricultural economy, as well as usher in the
banking habit amongst a large number of the less privileged population. However, the product
was lost among a myriad of financial offerings and most banks have shown little verve and
vitality in marketing it.
Most banks, including some private sector banks, have started offering the basic savings
account facility. This account aims at providing normal banking services to all citizens of the
country. The basic savings account replaces the earlier no-frills account, which came with
nil or minimum charges and was meant for the low-income group.\

Page | 60

Page | 61

Who is it for?
This account, too, is basically for the low-income group. Children or students who are
beginning to learn to save can also benefit from this account.
As of now, other than a salary accounts which offer zero balance option, all banks have a
minimum balance requirement for normal savings account.
Who Offers No Frill A/c?
State-owned banks have responded quickly to RBI's suggestions, and a few private and
foreign banks have followed suit. The State Bank of India is offering a 'no-frills' account to
anyone whose monthly income is Rs 5,000 or less. Account-holders need to make an initial
deposit of Rs 50, and can maintain zero balances thereafter. The maximum amount one can
hold in this account is Rs 10,000. The bank also offers free ATM-cum-debit card and cheque
facility with this account.
Allahabad Bank and UCO Bank have also launched 'no-frills' accounts that require a
minimum balance of Rs 5. UCO Bank requires a minimum initial balance of Rs 250 if the
individual requires cheque books and ATM facilities.
Foreign banks too have jumped on to the bandwagon, though with a few frills. Deutsche
Bank's 'no-frills' account, for instance, needs a minimum balance of Rs 500. But the accountholder gets free quarterly consolidated account statements, free personalised payable-at-par
cheque books, and 3.5% interest per annum.

Page | 62

ELIGIBILITY:
The No Frills Account is available for resident Indian.
Eligibility: Pensioners, agriculture labourers, employees of unorganized sector, member
of SHG, self-employed person, students, rural folk etc.
Not- Eligible-Institutions, organization, NRI, bank staff
Zero minimum balance requirement i.e. you can maintain this account without any
minimum or average balance requirement.

NOMINATION:
Nomination facility available for bank deposits
There can be only one Nominee for a deposit account whether held singly or jointly
A person legally empowered to operate a minor's account can file a nomination on behalf
of the minor
Applicants can make nomination by filling up the Form prescribed under the Banking
Companies (Nomination) Rules 1985
The nomination details can be changed during the subsistence of the account relationship
by filling up the Form prescribed under the Banking Companies (Nomination) Rules 1985
For more details approach your bank

Page | 63

FEATURES & BENEFITS:

Adult Individuals can open account.
Firms / Joint accounts not eligible
Simplified Know Your customer norms to be complied
SB no-frill account to be opened with minimum Zero balances at all branches, subject to
compliance of all other terms and conditions.
Free Debit Cum ATM card issued at all CBS branches(Annual Charges applicable from
next year)
Withdrawals through ATMs & branch withdrawals - max 2 per month.
No third party withdrawals
Nomination facility is available & compulsory.
Interest @ 4.00 % p.a. Interested will be calculated on daily products basis from
03.05.2011 and will be credited in the A/c in August and February every year or at the
time of closing the A/c. Min. interest of Rs.1/- will only be credited.
Collection of cheques up to Rs. 5000/=into the account.
Free quarterly statement of account at Urban and Metro branches. Pass books at Rural &
semi-urban branches.
No penalty for not maintaining Min balance.
No charges for closure of account.(ATM Debit card to be surrendered)
Account can be converted into normal SB account by maintaining required minimum
balance.
Branch Managers are delegated to issue one cheque book free to literate account holders.
Page | 64

 There is also a provision for Basic Saving Bank Deposit Account, it is operational for a
year and requires renewal.
Total credits in the account should not exceed Rs.1, 00,000/- in a year.
Any number of accounts in a family can be opened under this scheme.
There is no restriction on entries for deposit of Cash/Cheques in the account.

Page | 65

EASE OF KYC NORMS:

The RBI has also eased the \'know your customer\' (KYC) norms to keep the procedural
hassles involved in opening a bank account to the minimum. This is to enable those belonging
to low-income groups to open bank accounts without documents of identity and proof of
residence.
In such cases, banks can take the individual's introduction from an existing account holder on
whom the full KYC procedure has been completed and has had satisfactory transactions with
the bank for at least six months. The photograph and address of the prospective account
holder need to be certified by the person who introduces him/her.
These simplified KYC norms are applicable for those who intend to keep balances not
exceeding Rs 50,000 in all their accounts taken together. The total credit in all the accounts
taken together should not exceed Rs 1 lakh in a year.
KYC NORMS BY RBI:
As per the Reserve Bank of India guidelines issued vide circular number RBI/2010-11/389
DBOD.AML.No. 77 /14.01.001/2010-11 dated January 27, 2011, foreign remittances are not
to be allowed to be credited into a 'small account', unless the identity of the client is fully
established through the production of officially valid documents, as referred to in sub-rule (2)
of rule 9 of the rules notified by the Government of India under the Prevention of Money
Laundering Act. In view of the above, customers holding accounts under the category 'No
Frills Account' are hereby requested to submit copies of identity and address proof to the
Bank, and get their accounts converted into a regular Savings Account if they are expecting
receipt of foreign remittance credits in their account.
In the absence of submission of valid Identity and address proof, we will be constrained to
return any foreign remittance received in the account.
Please contact the branch staff for further clarifications and details.

Page | 66

DOCUMENTS REQUIRED:

Application Form& 2 Photographs

Proof of identity (any of the following ) for individuals
Passport
PAN Card
Employee identity card
Driving License
Any other valid proof

Proof of address (any of the following)

Electricity bill ( should not be older than three months)
Telephone bill
Ration card
Statement of account from existing bank
Income / wealth tax assessment
Document / communication issued by GOI / State Government/ Local Body
Any other valid proof.\

TERMS & CONDITIONS:

The account is required to be introduced by another account holder maintaining
satisfactory account with bank for at least for six months and is fully KYC complied.
Photographs of the perspective customer who proposes to open the account and also his
address is certified by the introducer.
The bank may charge the customer service charges as decided from time to time for any
or all of the services rendered to the account holder after informing the customer.
Any government taxes or dues that become contingent to the use of the facilities extended
by the bank by regulation will be debited to the customers account.
The bank reserves its right with absolute discretion to revise the fees/charges related to
the account from time to time.
Balance in No Frill Accounts should not exceed Rs. 50,000/- at any given time.
Total credits into the account should not exceed Rs. 100,000 in any financial year

RBI REPLACES NO FRILL A/C WITH BASIC SAVINGS A/C

According to the RBI notification, with a view to doing away with the stigma associated with
the nomenclature no-frills account and making the basic banking facilities available in a
more uniform manner across the banking system, it has been decided to modify the guidelines
on opening of basic banking no-frills accounts. The no-frills account came with certain
Page | 67

restrictions, which varied from bank to bank. While some banks offered no-frills account to
individuals who earned below Rs.10, 000 per month, a few others offered this service to
individuals who maintained less thanRs.50,000 at any given point.
RBI asked banks to drop the no-frills tag from the basic saving accounts as the
nomenclature has become a stigma. It has asked the banks to provide zero balance facility in
the basic banking accounts along with ATM-cum-debit cards without any extra charge. The
central bank had introduced no-frills accounts in 2005 to provide basic banking facilities to
poor and promote financial inclusion. The accounts could be maintained without or with very
low minimum balance.
RBI has asked the banks to convert the existing no-frills accounts into Basic Savings Bank
Deposit Accounts While there will be no limit on the number of deposits that can be made in
a month, Basic Savings Bank Deposit Account holders will be allowed a maximum of four
withdrawals in a month, including through ATMs. This account shall not have the
requirement of any minimum balance...Further, no charge will be levied for nonoperation/activation of in-operative Basic Savings Bank Deposit Account, the RBI said.
As per the modified guidelines, the services available in these accounts will include receipt of
money through electronic payment channels or by cheques issued by government agencies.
This would also help those covered under the welfare schemes like MNREGA in receiving
payments.

Page | 68

But Limitations Remain

Like the no-frills account, this account too provides basic services such as deposit and
withdrawal of cash at the bank branch and automated teller machines (ATMs) and electronic
payment channels such as Internet banking, among others, and requires minimal paperwork.
Though the limitations that were applicable on no-frills accounts have been removed, some
others have been introduced.
Here, you can withdraw money only four times in a month, including withdrawals from
ATMs. After the first four withdrawals, you will either be charged a fee or will be denied
withdrawal, depending on the bank. Also if you are a basic savings bank deposit account
holder, you will not be eligible to open any other savings bank deposit account in the same
bank. So if you had a savings bank deposit account in that bank, which you had opened with a
minimum balance amount, you will have to close it within 30 days from the date of opening a
basic savings bank deposit account.

Page | 69

RBI REPLACES NO FRILL A/C WITH BASIC SAVINGS A/C

CHAPTER 4
Introduction to
Priority Sector
Lending

Page | 70

Chapter 05
PRIORITY SECTOR LENDING (PSL)
=========================================================
Introduction and Meaning of PSL
Need For PSL
The Thrust Areas of PSL(1969)
Why PSL & Changing Criteria of PSL (Pre & Post Form Period)
Areas under Priority Sector
Current Targets in PSL
RBI Guidelines on Weaker Sections
PSL & Double Repression
RBI Revises PSL Norms
==================================================================

INTRODUCTION:
The financial policy in India is influenced by the objective of restoring sectional balance
within credit disbursement and for channelling to the weaker sections within these sectors.
Priority sector bank lending has been an instrument of this financial policy. The Bank
Company Acquisition Act 1969 leading to the Nationalization of the 14 commercial banks
has implicitly made it clear in its preamble.
The banking system touches the lives of millions and has to be inspired by larger social
purpose and has to sub-serve national priorities and objectives such as rapid growth of
agriculture small scale industries and exports raising employment levels, encouragement of
new entrepreneur and development of backward regions. For this purpose it is necessary for
the Government to take direct responsibility for the extension and diversification of banking
services and forth working of a substantial part of the banking system.
There has been a substantial reorientation of banking policy after the nationalization of banks
in 1969. This has been accomplished through social orientation of banking and administrative
intervention by way of stipulating targets, sub-targets, credit guarantee and refinance facilities
for financing the preferred sectors of the economy known as priority sectors, where
agriculture, small industries, small business and small transport operators, retail traders and
education were given priority status.

Page | 71

MEANING:
Priority sector lending is providing easy, adequate and timely credit to priority sectors that
otherwise would not receive easy finance. Priority sector plays an important role in the
economic development of the country. Therefore the Central government of any country gives
this sector priority (first preference) in obtaining loans from banks at a low rate of interest
.this is known as a "Priority Sector Lending. It is a policy of providing a specified portion of
bank lending to the important sectors of the economy. It includes agriculture, small-scale
industries, cottage sector, tiny sector, export sector and other small business firms. RBI was
the first to initiate priority sector lending scheme in India.

NEED FOR PRIORITY SECTOR LENDING

The objectives underlying the priority sectorlending relate to ensuring the assistance from the
banking system flows in an increasing measure to those sectors of the economy which
though contributing significant proportion of national product have not received adequate
support of institutional finance in the past. This inter-aliaimplied flow of required funds to
various sectors of the economy in accordance with the national planned priorities. The social
control on banks was imposed as a measure to employ prudently and socially desirable
channels with the objective of achieving economic growth combined with stability and social
justice.
Even decades after independence, more than 70 percent of borrowing by cultivators was from
informal sector. Lending from commercialbanks was directed towards large industrial houses.
Agriculturalsector, smallscaleindustriesand weakersectionswere more neglected because of
both risk factor and urban bias. Although co-operative sector was there to serve the needs of
agricultural sector it was unable to meet the credit demand of farm community. There was a
need for ensuring anequitable and purposeful distribution of credit keeping in view relative
priorities of developmental needs.

Page | 72

THRUST AREAS OF PRIORITY SECTOR LENDING (1969)

The areas of the priority sector lending that has emerged in the period after the
nationalization of banks in 1969 is based on the following pillars.
1. The system of priority sector lending has envisaged setting up of targets and sub-targets
for financing of specific sectors. The share of priority sectors in total banks advances is40
percent. Sub-targets for agriculture and weaker sections are fixed at 18 percent and 10
percent of total advances respectively.
2. The interstate policy under priority sector and non- priority sector has been stipulated.
Concessional rates of interest for the priority sector advances andrelativelyhigher rate of
interest for other sectors have been special features. This isknown as cross subsidization
policy. Here thelosses arising onconcessional loans are met outof theprofits from other
loans.This has facilitated flow of credit to theweaker sections of the society and neglected
sections of the economy at relativelylowerrates of interest.
3. Financing of loan accounts under priority sector may entail risk of default. Hence a

separate insurance scheme guaranteeing a part of the loan of commercial banks was
introduced in 1970 and the DICGC of India was established. The provides deposit insurance
to the depositors up to a prescribed limit. The Corporation operates various credit guarantee
schemes relating to guarantee support to eligible credit institutions for their priority sector
advances to small borrowers and small scale industries.
4. Priority sector lending implies deliberate diversion of funds of the banks from the other
sectors and that too at lower interest. To mitigate the ill effects of this on bank resources and
on profitability the schemes of refinance were formulated by NABARD in particular. Its
advances about 42%to 45% of the ground level rural credit disbursed by banks.

Page | 73

WHY PRIORITY SECTOR LENDING?

Focus on Rural Development by the government

Channel resources to area that are deemed national priority
Inclusion of poor in economic growth of the country
Synchronize the bank lending according to national importance

CHANGING CRITERIA OF PRIORITY SECTORS

In the post nationalization of 14 commercial banks in 1969 period the Reserve Bank of India
was compelled to lay down targets for lending to specified sectors. Each major bank was
given targets for lending to these sectors. A more comprehensive definition of priority sector
was adopted in 1977. These were mainly in terms of sectors. It was realized in the early 1980s
that even within priority sectors credit flow was more to the affluent sections. So the concept
of weaker section was adopted within priority sector. It was categorically stated that the
maximum benefit should be available to these weaker sections. By 1980s definition and
quantitative targets had fully crystallized.
There emerged the political interference to make use of these developments for vote bank
politics for misuse of credit. As a result neither banking institutions nor the neglected sectors
and sections were benefited. Thus the priority sector lending was effected. Financial sector
reform became imperative. Thus the Narashimhan Committee suggested for bringing down
the priority sector target from 40 percent to 10 percent. This was not accepted by the
Government.

Page | 74

THE PRE AND POST FORM PERIOD

Following are some of the major features of priority sector targets and classifications.
Targetsof40, 18 and10percentofnetbankcreditfortotalpriority sectorcredit,sub targets
ofagriculturalandweaker sections respectively remain same in both the periods.
Targetsof12percentofexportcreditand10percentofSSIcredit have been introduced for the
foreign banks which were not there earlier even for domestic banks.
In the pre-reformperiodagriculturalcreditwasearmarkeddirectly forfarmers but majority of
whom, were small and marginal farmers. Agricultural credit was mainlyfor agricultural
purposes, production, storage and transportation of agricultural or allied product.
In the post reform period ceiling of short term credit to be considered under priority sector
has been increased to Rs. 1 lakh. Earlier credit to plantation crop was restricted to only
small and marginal farmers, but it is given irrespective of size.
In the categoryofdirectadvancestoagriculturenewacquisitionof jeeps, pick up vans,
minibuses, etc. Have been included. These naturally will not be acquired by small and
marginal farmers.
Indirect finance to agriculture was not a part of priority sector target earlier. Now finances
to dealers, commission agents, non- banking financial companies, state electricity board
and investing in selected bonds and depositing in apex level are not going to help farmers
directly
Inclusion of food and agro processing in the priority sector will give impetus and boost up
the production of food crops.
Scope of small business under prioritysector has been expanded to include business under
enterprises with original cost price of equipment used for the purpose of business up to
Rs.10lakhs from Rs. 2 lakhs earlier.
Professionals like accountants and solicitors are included in priority sector. These are not
employment generating activities. They do not belong to weaker sections either.
Transportand road network are included in priority sector.
Housing was earlier exclusively for very poor segments. Now the ceilings upto Rs.5lakhs
which can very well cover requirements of middle class people even in urban areas.
Education loan is considered under priority sector loan. Similarly consumption loan too is
covered by priority sector credit.

Page | 75

The above changes in the post banker former a have led to the following aspects of priority
sector credit by banks as of March 2001.
a) Agriculture (direct and indirect)
b) SSI(including the setting up of industrial estates and covering units with original cost of
plant and machinery not exceeding Rs.10 million)
c) Smallbusiness(originalcostofequipmentusedforthebusiness not exceeding Rs. 1 million and
a working capital of Rs. 50,000)
d) Small road and water transport operators owning 10 vehicles. e) Retail trades (up to
Rs.50000
f) Professional and self-employed persons (up to Rs. 50,000)
g) State sponsored organizations for scheduled castes and scheduled tribes.
h) Education (educational loans granted to individuals)
i) Housing loan (direct and indirect) up to Rs. 50,000.
j) Consumption loan under the consumption credit scheme for weaker sections.
k) Refinance by banks to RRBS.
l) Micro credit (direct and indirect)
m) Software industry (up to Rs. 10 million)
n) Agro and food processing sector and
o) Venture capital.

Page | 76

AREAS UNDER PRIORITY SECTOR

Page | 77

As per Reserve Bank of India, Priority sector includes the following:

Agriculture and Allied Activities, dairy, fishery, animal husbandry, poultry, bee-keeping

and sericulture.
Small scale industries (including setting up of industrial estates)
Small road and water transport operators (owning up to 10 vehicles).
Small business (Original cost of equipment used for business not to exceed 20 lakh)
Retail trade (advances to private retail traders up to 10 lakh)
Professional and self-employed persons (borrowing limit not exceeding 10 lakh of which
not more than Rs.2 lakh for working capital; in the case of qualified medical practitioners
setting up practice in rural areas, the limits are Rs.15 lakh and Rs.3 lakh respectively and

purchase of one motor vehicle within these limits can be included under priority sector)
State sponsored organizations for Scheduled Castes/Scheduled Tribes
Education (educational loans granted to individuals by banks)
Housing [both direct and indirect loans up to 5 Lakhs (direct loans up to Rs 10 lakh in
urban/ metropolitan areas), Loans up to Rs.1 lakh and Rs.2 lakh for repairing of houses in
rural/ semi-urban and urban areas respectively]
Consumption loans (under the consumption credit scheme for weaker sections)
Micro-credit provided by banks either directly or through any intermediary;
Loans to self-help groups(SHGs) / Non-Governmental Organizations (NGOs) for on
lending to SHGs Loans to the software industry (having credit limit not exceeding Rs 1
crore from the banking system)
Loans to specified industries in the food and agro-processing sector having investment in
plant and machinery up to Rs 5 crore.
Investment by banks in venture capital (venture capital funds/ companies registered
withSEBI)

Page | 78

CURRENT TARGETS IN PRIORITY SECTOR LENDING

In 1974, the banks were given a target of 33.33 % as share of the priority sector in the total bank
credit. As of March 2015, the domestic banks and foreign banks with 20 and more branches have
to disburse 40% of the Net Bank Credit (NBC) to Total Priority sector, out of which 18% should
be total agricultural advances. The Foreign banks have been given a target of 32% of the Net
Bank Credit to priority sector, however, there is no lower limit fixed for agriculture. Net Bank
Credit is the figure reported in the fortnightly return submitted to RBI by the Banks. But, the
outstanding deposits under the FCNR (B) and NRNR (Non-Resident Non-Reptriable Term
Deposit Account) Schemes are excluded from net bank credit for computation of priority sector
lending target/ sub-targets.
Current Priority Sector Targets
Type of Loan
Domestic banks and
Foreign banks with less
foreign banks with 20 or
than 20 branches
more branches
Total Priority Sector Advances
40 percent of NBC
32 percent of NBC
Total Agricultural Advances
18 percent of NBC
No target
SSI advances
No target
10 percent of NBC
Export credit
Export credit does not
12 percent of NBC
form part of priority sector
Advances to weaker sections
10 percent of NBC
No target
The Total Priority Sector target of 40 percent for foreign banks with less than 20 branches has
to be achieved in a phased manner as under:Financial Year

The Total Priority Sector as percentage of

ANBC or Credit Equivalent Amount of Off
Balance Sheet Exposure, whichever is higher

2015-16
2016-17
2017-18
2018-19
2019-20

32
34
36
38
40

The additional priority sector lending target of 2 percent of ANBC each year from 2016-17 to
2019- 20 has to be achieved by lending to sectors other than exports. The sub targets for these
banks, if to be made applicable post 2020, would be decided in due course.

PRIORITY SECTOR TARGETS

Objective of Priority Sector Lending targets

Page | 79

The overall objective of priority sector lending program is to ensure that adequate
institutional credit flows into some of the vulnerable sectors of the economy, which may not
be attractive for the banks from the point of view of profitability
Monitoring of Priority Sector Lending targets
To ensure continuous flow of credit to priority sector, there will be more frequent monitoring
of priority sector lending compliance of banks on quarterly basis instead of annual basis as
of now. The data on priority sector advances have to be furnished by banks at quarterly and
annual intervals as per revised reporting formats, the guidelines for which will be issued
separately.
Non-achievement of Priority Sector targets
Scheduled Commercial Banks having any shortfall in lending to priority sector shall be
allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF)
established with NABARD and other Funds with NABARD/NHB/SIDBI, as decided by the
Reserve Bank from time to time. For the year 2015-16, the shortfall in achieving priority
sector target/sub-targets will be assessed based on the position as on March 31, 2016. From
financial year 2016-17 onwards, the achievement will be arrived at the end of financial year
based on the average of priority sector target /sub-target achievement as at the end of each
quarter.
The interest rates on banks contribution to RIDF or any other Funds, tenure of deposits, etc.
shall be fixed by Reserve Bank of India from time to time. The misclassifications reported by
the Reserve Banks Department of Banking Supervision would be adjusted/ reduced from the
achievement of that year, to which the amount of declassification/ misclassification pertains,
for allocation to various funds in subsequent years. Non-achievement of priority sector targets
and sub-targets will be taken into account while granting regulatory clearances/approvals for
various purposes.

Page | 80

RBI GUIDELINES ON WEAKER SECTIONS:

RBI keeps issuing guidelines for the Priority sector lending. The overall target set by the RBI
for the priority sector lending is 40% of the adjusted net bank credit (ANBC) out of which
18% is fixed for agriculture sector and 10% for weaker sections of the society.

Weaker Sections:
Following have been defined by RBI have weaker sections of the society:

No.

Category

1.
2.

Small and Marginal Farmers

Artisans, village and cottage industries where individual credit limits do

3.

not exceed 1lakh

Beneficiaries under Government Sponsored Schemes such as National
Rural Livelihoods Mission (NRLM), National Urban Livelihood Mission
(NULM) and Self Employment Scheme for Rehabilitation of Manual

4.
5.
6.
7.
8.

Scavengers (SRMS)
Scheduled Castes and Scheduled Tribes
Beneficiaries of Differential Rate of Interest (DRI) scheme
Self Help Groups
Distressed farmers indebted to non-institutional lenders
Distressed persons other than farmers, with loan amount not exceeding 1

9.
10.
11.

lakh per borrower to prepay their debt to non-institutional lenders

Individual women beneficiaries up to 1 lakh per borrower
Persons with disabilities
Overdrafts up to 5,000/- under PradhanMantri Jan-DhanYojana (PMJDY)
accounts, provided the borrowers household annual income does not

12.

exceed 100,000/- for rural areas and 1,60,000/- for non-rural areas
Minority communities as may be notified by Government of India from

time to time.
In States, where one of the minority communities notified is, in fact, in majority, item (12)
will cover only the other notified minorities. These States/ Union Territories are Jammu &
Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep

Page | 81

PRIORITY SECTOR LENDING AND DOUBLE REPRESSION

Priority Sector lending in India has been made a salient feature of the banking in India mainly
due to the social and economic objectives that underlie PSL. However, banks are also required to
keep certain amount to maintain Statutory Liquidity Ratio (SLR) and from the remaining
disposable amount, 40 per cent is dedicated for the priority sector. Thus, large fraction of banks
resources causes the so called Double Repression on the banking system. The economic survey
has brought this issue to the forefront and has recommended the government to re-structure SLR
and Priority Sector Lending

RBI REVISES PRIORITY SECTOR LENDING NORMS

The Reserve Bank of India has revised the priority sector lending norms which direct banks
to lend to certain segments by prescribing targets as a percentage of their total business. The
new norms require banks to ensure that 8% of their loans go to small and marginal farmers.
New sectors like renewable energy and social infrastructure will get a boost as these are now
classified as priority sector. Any bank that lends up to Rs 10 lakh to a household for solar
power and biomass-based generators can classify the loan as priority sector.
Earlier, there were sub-limits for direct lending and indirect lending to agriculture. These two
segments have been merged making it easier for banks to achieve the 18% agriculture target
as large loans to processed food industry are also now covered under agriculture. The
challenge for banks lies in disbursing 8% of their total credit to small farmers and 7.5% of
bank credit to micro enterprises.
FOREIGN BANKS
Foreign banks, which until recently enjoyed relaxed priority sector norms, will face new
challenges. Under the new norms, the sub-targets for small and marginal farmers and micro
enterprises would be made applicable post 2018 after a review in 2017 for foreign banks with
more than 20 branches. Foreign banks with less than 20 branches will move to the total
priority sector target of 40% of loans or 'Credit Equivalent Amount of Off-Balance Sheet
Exposure', whichever is higher, on a par with other banks by 2019-20. What this means is that
if any foreign bank issues a guarantee for Rs 1 crore, it will have to disburse loans worth Rs
40 lakh in the priority sector.

Page | 82

Banks can also lend up to Rs 5 crore per borrower for building social infrastructure such as
schools, healthcare facilities, drinking water facilities and sanitation facilities in tier II to tier VI
centres. Home loans up to Rs 28 lakh in metros and Rs 20 lakh in other centres will form part of
the directed lending as long as the cost of the property is not more than Rs 35 lakh and Rs 25
lakh, respectively
Large-ticket education loans are also expected to receive a boost. Under the new norms loans, up
to Rs 10 lakh, including vocational courses, irrespective of the sanctioned amount, will be
reckoned as part of priority sector lending

Page | 83

CHAPTER 5
Social Security
Schemes

Page | 84

Chapter 06
SOCIAL SECURITY SCHEMES
==================================================================
Introduction and Meaning of Social Security
History of Social Security
Needs that Necessitates Social Security
Social Security Schemes in India
PradhanMantri Jan-DhanYojana
Future of Jan-DhanYojana
==================================================================

INTRODUCTION:
SOCIAL SECURITY is a concept which states: Everyone, as a member of society, has the
right to social security and is entitled to realization, through national effort and international
co-operation and in accordance with the organization and resources of each State, of
the economic, social and cultural rights indispensable for his dignity and the free
development of his personality.
In simple terms, the signatories agree that society in which a person lives should help them to
develop and to make the most of all the advantages (culture, work, social welfare) which are
offered to them in the country. Social security may also refer to the action programs of
government intended to promote the welfare of the population through assistance measures
guaranteeing access to sufficient resources for food and shelter and to promote health and
well-being for the population at large and potentially vulnerable segments such as children,
the elderly, the sick and the unemployed. Services providing social security are often
called social services.
The term Social Security, in the United States, refers to a specific social insurance program
for the retired and the disabled. Elsewhere the term is used in a much broader sense, referring
to the economic security society offers when people are faced with certain risks. In its
1952 Social Security (Minimum Standards) Convention (nr. 102), the International Labour
Organization (ILO) defined the traditional contingencies covered by social security as
including:
Page | 85

Survival beyond a prescribed age, to be covered by old age pensions;

The loss of support suffered by a widow or child as the result of the death of the
breadwinner (survivors benefit)

Responsibility for the maintenance of children (family benefit)

The treatment of any morbid condition (including pregnancy), whatever its cause
(medical care)

A suspension of earnings due to pregnancy and confinement and their consequences

(maternity benefit)

A suspension of earnings due to an inability to obtain suitable employment for

protected persons who are capable of, and available for, work (unemployment benefits)

A permanent or persistent inability to engage in any gainful activity (disability

benefits)

A suspension of earnings due to an incapacity for work resulting from a morbid

condition (sickness leave benefit);

The costs and losses involved in medical care, sickness leave, invalidity and death of
the breadwinner due to an occupational accident or disease (employment injuries).

People who cannot reach a guaranteed social minimum for other reasons may be eligible
for social assistance (or welfare, in American English).
Modern authors often consider the ILO approach too narrow. In their view, social security is
not limited to the provision of cash transfers, but also aims at security of work, health, and
social participation; and new social risks (single parenthood, the reconciliation of work and
family life) should be included in the list as well.[2]
Social security may refer to:

Page | 86

Social insurance, where people receive benefits or services in recognition of

contributions to an insurance program. These services typically include provision for
retirement pensions, disability insurance, survivor benefits and unemployment insurance.

Services provided by government or designated agencies responsible for social security

provision. In different countries, that may include medical care, financial support during
unemployment, sickness, or retirement, health and safety at work, aspects of social work
and even industrial relations.

Basic security irrespective of participation in specific insurance programs where

eligibility may otherwise be an issue. For instance, assistance given to newly arrived
refugees

for

basic

necessities

such

as food, clothing, housing, education, money,

and medical care

A report published by the ILO in 2014 estimated that only 27% of the world's population has
access to comprehensive social security.

Page | 87

Page | 88

DEFINITION:
Social Security is defined by the International Labour Organization (ILO) as The protection
which society provides for its members through a series of public measures against the
economic and social distress that otherwise would be caused by the stoppage or substantial
reduction of earnings resulting from sickness, maternity, employment injury, invalidity and
death; the provision of medical care; and the provision of subsidies for families with
children (1984).The security which society furnishes through appropriate organizations
against certain risks to which its members are perennially exposed.

MEANING:
Social Security Schemes means Government programs aimed at providing basic needs to
citizens who are retired, unemployed or unemployable due to a disability. It is funded usually
by mandatory payroll contributions (typically 5 to 8% of a pay check) from both the
employees and the employers, and from the governments tax revenue.

HISTORY OF SOCIAL SECURITY

Germany was the first country to introduce Social security scheme (1883)

Each member of a particular trade (blacksmiths, painters, weavers etc.) was required
to contribute at regular intervals;

Money from this fund was used for food, lodging, hospital and feneral expenses of
aged and disabled members.

In USA, Social Security Act came into existence in 1935.

NEEDS THAT NECESSITATES SOCIAL SECURITY

1. Physical risks: Sickness, invalidity, old age, maternity, accidents, death.
2. Economic risks: Unemployment
3. Economic burden of large family

Page | 89

SOCIAL SECURITY IN INDIA

India has always had a Joint Family system that took care of the social security needs of all
the members provided it had access/ownership of material assets like land. In keeping with
its cultural traditions, family members and relatives have always discharged a sense of shared
responsibility towards one another. In the Indian context, Social Security is a comprehensive
approach designed to prevent deprivation, assure the individual of a basic minimum income
for himself and his dependents and to protect the individual from any uncertainties. The State
bears the primary responsibility for developing appropriate system for providing protection
and assistance to its workforce. Social Security is increasingly viewed as an integral part of
the development process. It helps to create a more positive attitude to the challenge of
globalization and the consequent structural and technological changes.
Indias social security system is composed of a number of schemes and programs spread
throughout a variety of laws and regulations. Keep in mind, however, that the governmentcontrolled social security system in India applies to only a small portion of the population.
Furthermore, the generally accepted concept of the social security system includes not just an
insurance payment of premiums into government funds (like in China), but also lump sum
employer obligations. Generally, Indias social security schemes cover the following types of
social insurances:

Pension
Health Insurance and Medical
Maternity
Gratuity
Disability

While a great deal of the Indian population is in the unorganized sector and does not have an
opportunity to participate in each of these schemes, Indian citizens in the organized sector
(which include those employed by foreign investors) and their employers are entitled to
coverage under the above schemes. The applicability of mandatory contributions to social
insurances is varied. Some of the social insurances require employer contributions from all
companies, some from companies with ten or more employees, and some from companies
with twenty or more employees.

Page | 90

SOCIAL SECURITY SCHEMES IN INDIA

The principal social security laws for workers are the following:

The Employees State Insurance Act, 1948 (ESI Act)

The Employees Provident Funds & Miscellaneous Provisions Act, 1952 (EPF & MP Act)
The Workmens Compensation Act, 1923 (WC Act)
The Maternity Benefit Act, 1961 (M.B. Act)
Coal Mines Provident Fund Bonus Scheme, 1948
Employees Family Pension Scheme, 1971

Social security for civil servants:

Central Government Health Scheme (CGHS)

Social Assistance Scheme: National Social Assistance Programme (NSAP). Three

components of this are:

National Old Age Pension Scheme

National Family Benefit Scheme
National Maternity Benefit Scheme

Pradhan Mantri JanDhanYojana Scheme: Government through the budget Speech

announced three ambitious Social Security Schemes pertaining to the Insurance and Pension
Sectors, namely
Pradhan Mantri Jeevan Jyoti BimaYojana (PMJJBY),- Insurance
Pradhan Mantri Suraksha Bima Yojana (PMSBY)- Insurance

Atal Pension Yojana (APY)-Pension

To move towards creating a universal social security system, targeted especially for the poor
and the under-privileged.
Honourable Prime Minister launched PMJJBY and PMSBY schemes nationally in Kolkata
on 9th May 2015.

Page | 91

Page | 92

PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY)

PMJDY
PradhanMantri Jan-DhanYojana (PMJDY) is National Mission for Financial Inclusion to
ensure access to financial services, namely, Banking/ Savings & Deposit Accounts,
Remittance, Credit, Insurance, Pension in an affordable manner.
Account can be opened in any bank branch or Business Correspondent (Bank Mitra) outlet.
PMJDY accounts are being opened with Zero balance. However, if the account-holder wishes
to get cheque book, he/she will have to fulfil minimum balance criteria.
About PMJDY

The name Jan Dhan was chosen through an Online Competition on the My government
Platform, received more than 6000 suggestions from Indian citizens.

7 individuals was suggested Jan Dhan.

Slogan Mera Khata-BhagyaVidhaatha.

Primarily the PMJDY Scheme is meant for those who do not have a savings bank
account.

Only 58% of Indian citizens are having a bank account.

Objective of PMJDY:
Objective of PradhanMantri Jan-DhanYojana (PMJDY) is ensuring access to various
financial services like availability of basic savings bank account, access to need based credit,
remittances facility, insurance and pension to the excluded sections i.e. weaker sections &
low income groups. This deep penetration at affordable cost is possible only with effective
use of technology.
Aim of PMJDY:

To bring poor financially excluded people into banking system.

It covers both urban & rural areas.

Page | 93

Raise of Indian Economy.

To decrees corruption in Government subsidy schemes.

Digital India.

Page | 94

Special Benefits under PMJDY Scheme

a. Interest on deposit.
b. Accidental insurance cover of Rs.1.00 lac
c. No minimum balance required.
d. Life insurance cover of Rs.30,000/e. Easy Transfer of money across India
f. Beneficiaries of Government Schemes will get Direct Benefit Transfer in these accounts.
g. After satisfactory operation of the account for 6 months, an overdraft facility will be
permitted
h. Access to Pension, insurance products.
i. Accidental Insurance Cover, RuPay Debit Card must be used at least once in 45 days.
j. Overdraft facility up to Rs.5000/- is available in only one account per household,
preferably lady of the household.
k. Each family will have a bank account opened in the countries best bank free of cost and
quite easily .This will help them find a place to save their earnings easily.
l. With a new bank account each family will be getting a RuPay debit card that they can use
to withdraw money from the account
Documents required opening an account under Pradhan Mantri Jan-DhanYojana
1. If Aadhar Card/Aadhar Number is available then no other documents is required. If
address has changed, then a self-certification of current address is sufficient.
2. If Aadhar Card is not available, then any one of the following Officially Valid Documents
(OVD) is required: Voter ID Card, Driving License, PAN Card, and Passport& NREGA
Card. If these documents also contain your address, it can serve both as Proof of Identity
and Address.
Page | 95

3. If a person does not have any of the officially valid documents mentioned above, but it
is categorized as low risk' by the banks, then he/she can open a bank account by
submitting any one of the following documents:
a. Identity Card with applicant's photograph issued by Central/State Government
Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled
Commercial Banks and Public Financial Institutions;
b. Letter issued by a gazette officer, with a duly attested photograph of the person.

PRADHAN MANTRI JEEVAN JYOTI BIMA YOJANA (PMJJBY)

2

Details of Scheme:
The scheme will be a one year cover renewable from year to year, Insurance Scheme
offering life insurance cover for death due to any reason. The scheme would be offered
administered through LIC and other Life Insurance companies willing to offer the
production similar terms with necessary approvals and tie ups with Banks for this purpose.
Participating banks will be free to engage any such life insurance company for
implementing the scheme for their subscribers.
Scopeofcoverage:
All savings bank account holders in the age 18 to 50 years in participating banks will be
entitled to join. In case of multiple saving bank accounts held by an individual one or
different banks the person would be eligible to join the scheme through one savings bank
account only. Aadhaar would be the primary KYC for the bank account.
Enrolment Period:
Initially on launch for the cover period 1st June 2015 to 31st May 2016, subscribers will be
required to enroll and give their auto-debit consent by 31st May2015. Late Enrollment for
prospective cover will be possible up to 31st August 2015, which may be extended by Govt.
of India for another three months, i.e. up to 30th of November, 2015. Those joining
subsequently may be able to do so with payment of full annual premium for prospective
cover, with submission of a self-certificate of good health in the prescribed proforma.

Page | 96

Enrolment Modality:
The cover shall be for the one year period stretching from 1st June to 31st May for which
option to join / pay by auto-debit from the designated savings bank account on the prescribed
forms will be required to be given by 31st May of every year, with the exception as above for
the initial year. Delayed enrollment with payment of full annual premium for prospective
cover may be possible with submission of a self- certificate of good health. Individuals who
exit the scheme at any point may re-join the scheme in future years by submitting declaration
of good health in the prescribed proforrma.
In future years, newentrantsintotheeligiblecategoryorcurrentlyeligibleindividuals who did not
join earlier or discontinued their subscription shall be able to join while the scheme is
continuing, subject to submission of self-certificate of good health
Benefits: Rs.2 lakhs is payable on members death due to any reason.
Premium: be made to ensure that there is no upward revision of premium in the first three
Rs.330/- per annum per member. The premium will be deducted from the account holders
savings bank account through auto debit facility in one installment, as per the option given,
on or before 31st May of each annual coverage period under the scheme. Delayed enrollment
for prospective cover after 31st May will be possible with full payment of annual premium
and submission of a self-certificate of good health. The premium would be reviewed based
on annual claims experience.
EligibilityConditions
a) The savings bank account holders of the participating banks aged between 18 years
(completed) and 50 years (age nearer birthday) who give their consent to join / enable autodebit, as per the above modality, will be enrolled into the scheme.
b) Individuals who join after the initial enrollment period extending up to 31st August2015 or
30th November 2015, as the case may be, will be required to give a self- certification of good
health and that he / she does not suffer from any of the critical illnesses as mentioned in the
applicable Consent cum Declaration form as on date of enrollment or earlier.

Page | 97

Master Policy Holder: Participating Banks will be the Master policy holders. A simple and
subscriber friendly administration & claim settlement process shall be finalized by
LIC/other insurance company in consultation with the participating bank.
Termination of assurance: The assurance on the life of the member shall terminate on any
of the following events and no benefit will become payable there under:
1) On attaining age 55 years (age near birth day) subject to annual renewal up to that date
(entry, however, will not be possible beyond the age of 50 years).
2) Closure of account with the Bank or insufficiency of balance to keep the insurance
in force.
3) In case a member is covered under PMJJBY with LIC of India / other company through
more than one account and premium is received by LIC / other company inadvertently,
insurance cover will be restricted to Rs. 2 Lakh and the premium shall be liable to be
forfeited.
4) If the insurance cover is ceased due to any technical reasons such as insufficient balance
on due date or due to any administrative issues, the same can be reinstated on receipt of full
annual premium and a satisfactory statement of good health.
5) Participating Banks shall remit the premium to insurance companies in case of regular
enrolment on or before 30th of June every year and in other cases in the same month when
received.
Administration:
The scheme, subject to the above, will be administered by the LIC P&GS Units / other
insurance company setups. The data flow process and data proforma will be informed
separately. It will be the responsibility of the participating bank to recover the appropriate
annual premium in one installment, as per the option, from the account holders on or before
the due date through auto-debit process. Members may also give one-time mandate for autodebit every year till the scheme is in force. Enrollment form / Auto-debit authorization /
Consent cum Declaration form in the prescribed proforma shall be obtained and retained by
the participating bank. In case of claim, LIC / insurance company may seek submission of the
same. LIC / Insurance Company reserve the right to call for these documents at any point of
time. The acknowledgement slip may be made into an acknowledgement slip-cum-certificate

Page | 98

of insurance. The experience of the scheme will be monitored on yearly basis for recalibration etc., as may be necessary.
Appropriation of Premium:
1) Insurance Premium to LIC / insurance company : Rs.289/- per annum per member
2)

Reimbursement of Expenses to BC/Micro/Corporate/Agent: Rs.30/- per annum per

member
3) Reimbursement of Administrative expenses to participating Bank: Rs.11/- per annum per
member
The proposed date of commencement of the scheme will be 1st June 2015.The next
Annual renewal date shall be each successive 1st of June in subsequent years.
The scheme is liable to be discontinued prior to commencement of a new future renewal date
if circumstances so require.

PRADHAN MANTRI SURAKSHA BIMA YOJANA (PMSBY)

Details of Scheme:
The scheme will be a one year cover, renewable from year to year; Accident Insurance
Scheme offering accidental death and disability cover for death or disability on account of an
accident. The scheme would be offered / administered through Public Sector General
Insurance Companies (PSGICs) and other General Insurance companies willing to offer the
product on similar terms with necessary approvals and tie up with Banks for this purpose.
Participating banks will be free to engage any such insurance company for implementing the
scheme for their subscribers.
Scope of coverage:
All savings bank account holders in the age 18 to 70 years in participating banks will be
entitled to join. In case of multiple saving bank accounts held by an individual in one or
different banks, the person would be eligible to join the scheme through one savings bank
account only. Aadhar would be the primary KYC for the bank account.
Enrollment Modality / Period:
The cover shall be for the one year period stretching from 1st June to 31st May for which
option to join / pay by auto-debit from the designated savings bank account on the prescribed
Page | 99

forms will be required to be given by 31st May of every year, extendable up to 31st August
2015 in the initial year. Initially on launch, the period for joining may be extended by Govt.
of India for another three months, i.e. up to 30th of November, 2015. Joining subsequently on
payment of full annual premium may be possible on specified terms. However, applicants
may give an indefinite / longer option for enrolment / auto-debit, subject to continuation of
the scheme with terms as may be revised on the basis of past experience. Individuals who exit
the scheme at any point may re-join the scheme in future years through the above modality.
New entrants into the eligible category from year to year or currently eligible individuals who
did not join earlier shall be able to join in future years while the scheme is continuing.
Master Policy Holder:
Participating Bank will be the Master policy holder on behalf of the participating subscribers.
A simple and subscriber friendly administration & claim settlement process shall be finalized
by the respective general insurance company in consultation with the participating Banks.
Eligibility Conditions:
The savings bank account holders of the participating banks aged between 18 years
(completed) and 70 years (age nearer birthday) who give their consent to join / enable autodebit, as per the above modality, will be enrolled into the scheme.
Benefits: As per the following
Tableof Benefits

Sum Insured

a.

Death

Rs. 2Lakh

b.

Total and irrecoverable loss of both eyes or loss of use of both

hands or feet or loss of sight of one eye and loss of use of hand or
foot

Rs. 2Lakh

c.

Total and irrecoverable loss of sight of one eye or loss of use of

one hand or foot

Rs. 1Lakh

Premium:
Rs.12/-per annum per member. The premium will be deducted from the account holders
savings bank account through auto debit facility in one installment on or before 1st June of
each annual coverage period under the scheme. However, in cases where auto debit takes
place after 1st June, the cover shall commence from the first day of the month following the

Page | 100

auto debit. The premium would be reviewed based on annual claims experience. However,
barring unforeseen adverse outcomes of extreme nature, efforts would be made to ensure that
there is no upward revision of premium in the first three years.
Administration:
The scheme, subject to the above, will be administered as per the standard procedure
stipulated by the Insurance Company. The data flow process and data proforma will be
provided separately It will be the responsibility of the participating bank to recover the
appropriate annual premium from the account holders within the prescribed period
throughauto-debitprocess. Enrollment form / Auto-debit authorization in the prescribed
proforma shall be obtained and retained by the participating bank. In case of claim, the
Insurance Company may seek submission of the same. Insurance Company reserves the right
to call for these documents at any point of time. The acknowledgement slip may be made into
an acknowledgement slip-cum-certificate of insurance. The experience of the scheme will be
monitored on yearly basis for re-calibration etc., as may be necessary.
Termination of cover:
The accident cover for the member shall terminate on any of the following events and no
benefit will be payable there under:
1) On attaining age 70 years (age nearest birth day).
2) Closure of account with the Bank or insufficiency of balance to keep the insurance
in force.
3) In case a member is covered through more than one account and premium is received by
the Insurance Company inadvertently, insurance cover will be restricted to one only and the
premium shall be liable to be forfeited.
4) If the insurance cover is ceased due to any technical reasons such as insufficient balance
on due date or due to any administrative issues, the same can be reinstated on receipt of full
annual premium, subject to conditions that may be laid down. During this period, the risk
cover will be suspended and reinstatement of risk cover will be at the sole discretion of
Insurance Company.
5) Participating banks will deduct the premium amount in the same month when the auto
debit option is given, preferably in May of every year, and remit the amount due to the
Insurance Company in that month itself.

Page | 101

Appropriation of Premium:
1) Insurance Premium to Insurance Company: Rs.10/- per annum per member
2) Reimbursement of Expenses to BC/Micro/Corporate/Agent: Rs.1/- per annum per member
3) Reimbursement of Administrative expenses to participating Bank: Rs.1/- per annum per
member
The proposed date of commencement of the scheme will be 1st June 2015.The next Annual
renewal date shall be each successive 1st of June in subsequent years. The scheme is liable to
be discontinued prior to commencement of a new future renewal date if circumstances so
require.

Page | 102

PRADHAN MANTRI ATAL PENSION YOJANA (PMAPY)

1. Atal Pension Yojana (APY) is open to all bank account holders. The Central Government
would also co-contribute 50% of the total contribution or Rs. 1000 per annum, whichever
is lower, to each eligible subscriber, for a period of 5 years, i.e., from Financial Year
2015-16 to 2019-20, who join the APY before 31st December, 2015, and who are not
members of any statutory social security scheme and who are not income tax payers.
Therefore, APY will be focused on all citizens in the unorganized sector.
2. Under APY, the monthly pension would be available to the subscriber, and after him to
his spouse and after their death, the pension corpus, as accumulated at age 60 of the
subscriber, would be returned to the nominee of the subscriber.
3. Under the APY, the subscribers would receive the fixed minimum pension of Rs.1000 per
month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per
month, at the age of 60 years, depending on their contributions, which itself would be
based on the age of joining the APY. Therefore, the benefit of minimum pension would be
guaranteed by the Government. However, if higher investment returns are received on the
contributions of subscribers of APY, higher pension would be paid to the subscribers.
4. A subscriber joining the scheme of Rs. 1,000 monthly pension at the age of 18 years
would be required to contribute Rs. 42 per month. However, if he joins at age 40, he has
to contribute Rs. 291 per month. Similarly, a subscriber joining the scheme of Rs.5, 000
monthly pensions at the age of 18 years would be required to contribute Rs. 210 per
month. However, if he joins at age 40, he has to contribute Rs. 1,454 per month.
Therefore, it is better to join early in the Scheme. The contribution levels, the age of entry
and the pension amounts are available in a table given in frequently asked questions
(FAQs) on APY, which is available on www.jansuraksha.gov.in.
5. The minimum age of joining APY is 18 years and maximum age is 40 years.
Therefore, minimum period of contribution by any subscriber under APY would be 20
years or more.

Page | 103

FUTURE OF JAN-DHAN YOJANA

Due to the absence of savings, the poor have been living under financial duress for long. The
unbanked population has been powerlessly dependent on informal channels of credit, like the
usurious moneylenders. In addition, a considerable sum of money that is meant for the poor
does not actually reach them. The government is, therefore, pushing for direct cash transfers
to beneficiaries, which needs a bank account.
Against this backdrop, the PradhanMantri Jan DhanYojana (PMJDY) launched in August
2014, has been conceived as a national mission of financial inclusion with the objective of
covering all households in the country with a bank account. Other than being able to open a
new bank account with zero balance, the Jan DhanYojana is offering certain incentives for the
customers, such as a life insurance cover of Rs 1 lakh and health insurance cover of Rs
30,000 as an incentive to open a bank account, along with providing RuPay debit cards. Good
customers would also be eligible for an overdraft facility of up to Rs 5,000 after six months
As of November 10, 7.24 crore accounts have been opened. The effort for financial inclusion
is not new in our country. Ever since bank nationalization in 1969, many schemes aimed at
financial inclusion have been launched. Most have flopped. In 2011, the government
launched Swabhimaan to bring banking services to large rural areas without banking services.
However, this scheme quickly degenerated into merely an account-opening exercise, because
no one really used it to save money. There is a real danger of the same thing happening with
the Jan DhanYojana.
The Reserve Bank of Indias vision for 2020 is to open nearly 600 million new customer
accounts and service them through a variety of channels by leveraging on IT. The idea of
universal bank accounts was originally proposed by a panel constituted by the RBI to
improve financial inclusion. The panel proposed that every adult Indian be granted a
Universal Electronic Bank Account (UEBA) by January 2016.
The Jan DhanYojana should be looked as just one of the multiple approaches to achieve
financial inclusion. Only a holistic framework inclusive of the Jan Dhan Yojana, financial
education, specialised products, and improved infrastructure can result in effective financial

Page | 104

inclusion. But that requires political will, bureaucratic support and persistent persuasion by
the regulator.

Page | 105

CHAPTER 6
General Comparison,
Analysis,
&
Interpretation of the
Survey.

Page | 106

Chapter 07
SBI Bank v/s ICICI Bank
=================================================================
General Comparison Of Banks
Analysis & Interpretation of the Survey.
=================================================================

GENERAL COMPARASION
Criteria
Year Founded

SBI Bank
ICICI Bank
1995(ancestry to British India, ICICI formed in 1955; ICICI
the Imperial Bank of India, Bank formed in 1994
and the Bank of Calcutta
founded in 1806)

Type of Bank
Head Quarters
Bank Branches

Public Sector
Mumbai, Maharashtra, India
14,119
branches;
21,500
branches including branches
of associate banks.
ATM/Debit cards
Yes
ATMs in India
Over 21,000 ATMs, over
45,000 including associate
banks
ATM/Debit card access to Yes
other banks
Average Banking hours
Monday Friday: 9:00am to
3:00pm
Saturday: 9:00am to 12:00pm.
Bank Customers

Individual
High Net Worth
Business
Corporate

Private sector
Vadodara, Gujarat, India
3,350branches

Yes
10,900ATMs

Yes
Monday to Friday : 9.00am to
6.00pm
Saturday : 9.00am to 2.00pm

Individual
High Net Worth
Business
Corporate

Page | 107

Criteria
Bank Products

Recent Innovative Products

Number of Employees
Reach
Phone Banking
Mobile Banking
DEMAT
Cash Delivery
Cash Pickup
Revenue
Profit
Total Assets
Web Site

SBI Bank
Credit cards
Consumer banking
Corporate banking
Finance and insurance
Investment banking
Mortgage loans
Private banking
Wealth Management
E-KYC,
Mobile Wallet,
Cash Deposit Machine,
SBIINTouch,
SBI Tiny

228,296
Worldwide
Yes
Yes
Yes
Yes
Yes
US$32 billion
US$2.7 billion
US$360 billion
www.sbi.co.in

ICICI Bank
Credit cards,
Consumer banking
Corporate banking
Finance and Insurance
Investment banking
Mortgage loans
Private banking
Wealth Management
Smart Vault
Tap N Pay
IWish
Pockets
Contactless Credit and
Debit Cards
67,857
Worldwide
Yes
Yes
Yes
Yes
Yes
US$ 9.8 billion
US$ 1.8 billion
US$ 103.4 billion
www.icici.com

Page | 108

ANALYSIS & INTERPRETATION OF STUDY

Questions
Customers for No Frill A/c

SBI
Below
poverty
customers.

No frill A/c beneficial to

customers?

ICICI
line Lower Middle Class
customers
People who cannot afford
to maintain a minimum
balance amount in the
A/c.
Yes, definitely this A/c is Yes, no compulsion to
beneficial to customers.
maintain a minimum
Its a 0 balance A/c.
balance in the account
People can easily open & Plus saving is also done.
operate this A/c.
Minimum
Low

Operating cost. Low or

High?
Any changes in No Frill A/c? Yes, there should be
changes in No Frill A/c
A minimum balance of Rs
100 should be maintained.
Opening an A/c is easy but
maintaining it with a
minimum
balance
is
necessary.
Views for PMJDY social It is good and very effective
security schemes
scheme.
The A/c should kept
activated
Government gives rights to
people but the responsibility
also comes with rights. So
people
should
be
responsible to maintain a
minimal balance.
Are people approaching for Yes, majority of people are
PMJDY schemes
approaching for such social
schemes.

No
It is designed for a
specialized category of
people
(especially
depending on customers).

JanDhanYojana is a very
good social scheme.
It is useful for every
Indian national from poor
to rich
It also covers their life
insurance and pension.

Yes, very much.

Page | 109

No of A/c? Do they provide Approx. 50-60%

Approx. 50%
If these accounts are active If these accounts have an
any income?
then surely it brings
average minimal balance
incomes.
then banks is beneficial
Problems faced due to such People just open these social No such problems.
social schemes
schemes A/c & they are less
active
Due to maximum number of
inactive A/c the server gets
jammed & bank has to pay
operating cost to activate
their A/c.
How PSL are managed?
Depends on people.
It is handled by Bank
Usually it is managed sector
wise.

We have launched RIBG

wise
group for Priority Sector
lending.
Are you able to invest 40% Yes.
No further
in PSL? How?
shared.

Yes.
Information No further Information
Shared

Page | 110

INTERPRETATION

Most of the branches of Multinational banks are concentrated in the metros. The branches

of SBI bank are comparatively more than ICICI bank.

Both the bank provides ATM cards to their customers to make banking more easily. ATM

service can be accessed through other banks as well.

Banking hours of the banks are quite different. And they provide 24*7 online services to

their customer.
ICICI is using more advanced technology in their banks for transaction process.
In case of technological progress both the banks are launching new and innovative

products for the ease and faster banking transaction for their customers.
These innovative and technological products help in attracting huge customers to open

accounts in their banks.

Comparing both the banks SBI is having more employees than ICICI.
SBI is one of the largest employers in the country having 228,296 employees
SBI banks suggest to maintain at least a minimum balance of Rs 100 in No Frill A/c.
ICICI has setup a RIBG group for handling the project of Priority Sector Lending.

Page | 111

CHAPTER 7
Objective,
Methodology,
Limitation of Study.

Page | 112

OBJECTIVE OF THE STUDY

To understand the concept and importance of Financial Inclusion in banks and customers.
To study an insight of the current practices & efforts with regards to Financial Inclusion in the

selected banks.
To get aware of various efforts and initiatives for Financial Inclusion by banks.
To make a Comparative Analysis of selected public and private sector banks in Mumbai to judge

the Financial Inclusion, efforts, measures and strategy.

To find the impact of change in the business model of banks on employees, customers and
branch managers.

To find the inter linkage of the Financial Inclusion activities with Human resource
department.

To find out how efficiently Financial Inclusion and Social Security products are managed in

these banks.
If not, to study the symptoms and drawbacks and therefore, to suggest measures for ensuring
effective strategies for Financial Inclusion in banks

RESEARCH METHODOLOGY
Data was collected in to forms of Primary Data and Secondary Data which is as
follow:
The data is collected through secondary sources (Google, Wikipedia, online papers,
different websites and articles).
Primary data was collected mainly using a questionnaire, bank visit, field visit etc.
Personal interview was taken from the manager, employee of the SBI Bank & ICICI
Bank.
The services of SBI Bank and ICICI Bank are compared in tabular format.

Page | 113

LIMITATION OF THE STUDY

Financial Inclusion itself is a vast topic it covers different products hence it was

difficult to cover the entire topic & products offered by Banks.

The primary data collected is less relevant for obtaining conclusions.
The entire project is mostly based on secondary data.
Lack of information from the bank employees.
The time provided for the study was not sufficient.
A sample Questionnaire was selected.
The data provided by the respondent may not be correct or accurate.
Some of the sample selected for the study did not respond properly to the
questionnaire. However proper care had been taken to make the analysis and

interpretations more meaningful.

Officials are not willing to fill Questionnaire and give answers.
Lack of co-operation by the banks and by the bank officials was a major limitation.
Some of the banks refused to provide any help in completing the survey by not
willing to share any information.

Page | 114

CHAPTER 8
Recommendation,
Conclusion,
Bibliography,

Page | 115

RECOMMENDATIONS & SUGGESTIONS

FOR SBI:
SBI should make customer friendly norms.
Employees/Agents should be trained and well educated to convince the people in rural
areas to access banking services against money lenders.
More innovative & technological products should be launched to encourage both
customers as well as employees/Agents in order to open bank accounts.
SBI should more focus on retaining existing customers through better service and

innovative products
SBI must take feedbacks from customers regarding advance products.
The staffs of SBI bank have to be courteous and polite.
SBI should take steps to solve customer problems immediately.
Develop error free software.

FOR ICICI:
Customer awareness Programme is required so that more people should attract towards
advance products.
ICICI banks should penetrate more in rural areas.
Make manager competitive and introduce spirit of market-orientation and culture of
working for customer satisfaction.
There is need to build the knowledge and skill base among the employees in the context
of technology.
Develop error free software.
Develop service oriented internal processes.
Include employees in the banks vision.

Page | 116

CONCLUSION
Financial inclusion is not a onetime effort; it is an on-going process. It is a huge project
which requires concerted and team efforts from all the stake holders the Government,
financial institutions, the regulators, the private sector and the community at large. From the
sporadic attempts of today dispersed across the nation, it should gather momentum and grow
in geometric proportions and develop into a focused and effective movement. If this is to be
achieved, it requires the passionate involvement, dedication and commitment of all stake
holders. It requires a major mind-set change in the minds of every individual involved
banker, bureaucrat, regulator et al, and, therefore, creating awareness at all levels. At the same
time, the role of technology in the whole scenario cannot be undermined either. It has to be
admitted that today, more than even before, technology plays a vital role in bringing about
integration in society of all social and economic classes. Accessibility, affordability,
appropriateness and benefits determine how deep financial inclusion penetrates the social
fabric of the village. Financial inclusion can empower even the poorest person and bring
about a dramatic change in his fate. The basic ingredient of overcoming poverty is packed
inside each poor person. All we need to do is to help this person to unleash this energy and
creativity. Only place in the world where poverty will exist will be in the museums and no
longer in human society. With combined efforts of all the stake holders, viz., policy makers,
regulators, banks, NGOs, MFIs and other similar entities, this can be made possible.
Financial inclusion in a large scale is possible only if the banks join hands with like-minded
partners in their initiative. The banks would have to evolve specific strategies to expand the
outreach of their services in order to promote financial inclusion. One of the ways in which
this can be achieved in a cost-effective manner is through forging linkages with microfinance
institutions and local communities. Banks should give wide publicity to the facility of no
frills account. Technology can be a very valuable tool in providing access to banking products
in remote areas. ATMs cash dispensing machines can be modified suitably to make them user
friendly for people who are illiterate, less educated or do not know English. Financial
inclusion can emerge as commercial profitable business. Only the banks should be prepared
to think outside the box!

Page | 117

BIBLIOGRAPHY
WEBSITES
www.banknetindia.com
www.yourarticlelibrary.com
www.drawbacksof.com
www.business.mapsofindia.com
www.economictimes.com
www.sbi.co.in
www.icicibank.com
www.allbankingsolution.com

NEWSPAPERS
ECONOMICTIMES
TIMES OF INDIA (TOI)

Page | 118

ANNEXURE
Questionnaire with Branch Manager of State Bank of India, Kurla West.
1. Who are your customers for No Frill A/c?
Below poverty line customers.
2.

Is No Frill A/C beneficial to customers?

Yes, definitely this A/c is beneficial to customers.
Its a 0 balance A/c.
People can easily open & operate this A/c.

3. How is your operating cost? High or Low?

Minimum
4.

Do you think there should be any changes in No Frill A/c? If Yes then what?
Yes, there should be changes in No Frill A/c
A minimum balance of RS 100 should be maintained.
Opening an A/c is easy but maintaining it with a minimum balance is necessary.

5.

What are your views for PradhanMantriJanDhanYojana? (Suraksha, Bima, Atal)

It is good and very effective scheme.
The A/c should kept activated
Government gives rights to people but the responsibility also comes with rights. So
people should be responsible to maintain a minimal balance.

6. Are people approaching for such type of social scheme?

Yes, majority of people are approaching for such social schemes.
7. How many A/c do you have? Do these accounts bring any income to you?
Approx. 50-60 % accounts
If these accounts are active then surely it brings incomes.

8. What are the problems faced due to such social schemes?

People just open these social schemes A/c & they are less active
Due to maximum number of inactive A/c the server gets jammed & bank has to pay
operating cost to activate their A/c.
9. When it comes to Priority Sector lending how you manage it?
Depends on people. Usually it is managed sector wise.

Page | 119

10. Are you able to invest 40% in Priority Sector Lending? How? Please elaborate.
Yes.
No further Information shared.

Page | 120

Questionnaire with Branch Manager of ICICI, Kurla west

1. Who are your customers for No Frill A/c?
Lower Middle Class customers
People who cannot afford to maintain a minimum balance amount in the A/c.
2. Is No Frill A/C beneficial to customers?
Yes, no compulsion to maintain a minimum balance in the account
Plus saving is also done.
3. How is your operating cost? High or Low?
Low
4. Do you think there should be any changes in No Frill A/c? If Yes then what?
No
It is designed for a specialized category of people (especially depending on customers).
5.

What are your views for PradhanMantriJanDhanYojana? (Suraksha, Bima, Atal).

JanDhanYojana is a very good social scheme.
It is useful for every Indian national from poor to rich
It also covers their life insurance and pension.

6. Are people approaching for such type of social scheme?

Yes, very much.
7. How many A/c do you have? Do these accounts bring any income to you?
Average 50 %.
If these A/c have an average minimal balance then banks is beneficial
8. What are the problems faced due to such social schemes?
No such problems.

9. When it comes to Priority Sector Lending how you manage it?

It is handled by Bank wise.
We have launched RIBG group for Priority Sector lending.
10. Are you able to invest 40% in Priority Sector Lending? How? Please elaborate.
Yes.
No further Information Shared

Page | 121

Page | 122