Financial Inclusion Growth in India: A Study

with Reference to Pradhan Mantri Jan-Dhan

Yojana (PMJDY)

Mr. Muhammed Shafi.M.K

Dr. M. Ravindar Reddy
 Introduction
Financial Inclusion (FI) is the delivery of banking services at an
affordable cost to vast section of unbanked group.

In India various measures have been taken by banks, GOI

(Government of India) and RBI for financial inclusion plan like
Product Based Approach, Bank Led approach, Business
Correspondents (BCs), Simplified KYC Norms etc.

Pradhan Mantri Jan-Dhan Yojana (Peoples Wealth Scheme) is the

biggest financial inclusion initiative in the world announced by Indias
prime minister with the aim of launching Indias most intensive
financial inclusion as a national mission.
The ultimate aim of PMJDY is to reach out economic activity around
poor to bring them into formal banking channel. As the part of it,
20.63 crore bank accounts have been opened and Rs.
31399.67crore have been deposited (As on 3rd Feb, 2016).
 Problem Identification and
Research Question
This program would be affected on banking activities as well as
subscribers, particularly unbaked and unprivileged low income
people. This is a new program. So In this regard, no more study
has done with special reference to financial inclusive approaches
of PMJDY or initiatives taken to accomplish this mission.
Therefore, its applicability, beneficiary schemes, its current status,
Business Correspondent models are to be assessed and reviewed.
This paper tries to address some issues pertaining to what are
the different financial inclusive approaches and initiatives taken as
the part of PMJDY, what are the overall financial inclusive
measurements and major financial policies executed in India and
their current status and how is financial performance of banks
after executing this program on over all bank account
penetration, Business correspondent penetration, saving and
deposits increment with respect to of public, private and rural
banking sector.
 Objectives of the Study

To study the various schemes and approaches

towards financial inclusion in India

To analyse the financial performance of ICICI

and SBI during pre and post periods of PMJDY

To study the status of PMJDY initiatives with

respect to Public, Private and Rural banking
sectors in India
 Hypotheses
H01- There is no significant difference in SBI banking
performance during pre and post periods of PMJDY
mission.
HI- There is significant difference in SBI banking
performance during pre and post periods of PMJDY
mission.

H02- There is no significant difference in ICICI banking

performance during pre and post periods of PMJDY
mission.
H12-There is significant difference in ICICI banking
performance during pre and post periods of PMJDY
mission.
SPSS output
 Research Methodology

This is a quantitative assessment study based on exploratory

research method. The objectivity of the study has been
ascertained with the help of secondary data collected from
GOI publications, RBI reports, PMJDY press releases, SBI and
other annual reports. A detailed review on impact of PMJDY on
Business correspondents and Number of Bank accounts
penetration has been encompassed in this study.

To test hypotheses, paired sample t-test has been used and

analyzed pre and post quarter financial performance of ICICI
and SBI in terms of return on investment, Non performing
assets, Net profit for current term etc. To draw the
conclusions, overall inclusive measures of various institutions in
general and prospect and challenges of PMJDY in particular
have been illustrated.
 Financial Inclusion in India

To encourage savings and thrift among these people

government of India, RBI and other banks have been taking
intensive financial inclusive programs.
In this regard, GOI did two reforms (1969, 1980) in
banking sector to nationalize twenty banks, establishment
of Regional Rural Banks (RRBs) in the year of 1975 and
1976 and launching of Self-help group-bank linkage
program in 1992 by NABARD.
For achieving financial inclusion in India, GOI and RBI have
taken various measures such as Product Based Approach,
Bank Led approach (Self Help Group-Bank Led Program
(SLBP), product led approach, Government initiatives,
Technology based approach and Knowledge based
approach. etc
 Major Financial Inclusion Initiatives in
India and correspondent authorities
Important initiatives Initiated by Year of launching
1 Lead banking scheme (LBS)- for
promoting banking services and RBI 1969
financial literacy
2 No frills account (NFA) RBI 2005
3 Business Correspondence RBI 2006
4 Swabhiman (To bridge economic Finance Ministry
gap between rural and urban India) and Indian Banks 2011
Association
5 SHG Bank Linkage Programs NABARD 1992
6 Simplifications of Know your
RBI 2002
customer (KYC) norms
 Continue..
7 PMJDY Ministry of Finance, GOI 2014
8 Kisan Credit Card NABARD 1998
9 National Rural Livelihood Misson
Ministry of Rural
(NRLM) by restructuring the
development, Government 2010
Swarnajayanti Gram Swarozgar
of India
Yojna (SGSY)
10 Pension Fund Regulatory and
Ministry of Law and Justice
Development Authority (PFRDA) 2013
& PFRDA
Bill (for old age income security)
11 Basic Savings Bank Deposit
RBI 2012
Account (BSBDA)
12 Project Financial Literacy RBI 2007
 Government Initiatives
GOI and State Government have taken various programs
national and state levels like SGSY (Swarnajayanthi Swaroz
Gar Yojana)
MGNREGS (Mahathma Gandhi National Rural Employee
Guarantee Scheme)
Swavalamban
PMJDY
Swabhiman
APY (Atal Pension Yojana)
UIDAI (Unique Identification Authority of India) etc.
 Knowledge Based Approaches
Financial Literacy Centers (FLCs) by various Banks,
Financial Literacy Guide,
Initiatives of National Institute of Security Market
(NISM) to increase financial familiarity among school
students and RBI Young School Awards.
Regulatory approaches
Simplified Know Your Consumer (KYC)
Simplified Bank Saving Opening Bank Account
Simplified Bank Branch Authentication
ProductLed approaches
Basic Saving Bank Deposit Account(BSBDA)
NFA-No frills account
Kisan Credit Cards (KCC)
General Purpose Credit Cards (GCC).
Bank Led Approaches
Self Help Groups Bank Linkage Programs
(SBLP),
Business Facilitator (BF)
Business Correspondents
 Bank Group and Number of
Functioning Branches (As on September 30, 2014)
Semi
Bank Groups Rural Urban Metropolitan Total
Urban
SBI & its
7723 6448 4103 3482 21756
Associates
Nationalized
20264 15665 12066 10991 58986
Banks
Other Public
274 424 436 354 1488
Sector Banks
Old Private Sector
1409 2549 1589 1193 6740
Banks
New Private
2559 3527 2673 3140 11899
Sector Banks
Foreign Banks 6 13 57 242 318
Regional Rural
13989 3567 1012 204 18772
Banks
Grand Total 46224 32193 21936 19606 1,19,959
 Special Benefits under PMJDY
Scheme
Interest on deposit.
Accidental insurance cover of Rs.1.00 lac
No minimum balance required.
Life insurance cover of Rs.30,000/-
Direct Benefit Transfer in these accounts.
After satisfactory operation of the account for 6
months, an overdraft facility will be permitted
Access to Pension, insurance products.
Accidental Insurance Cover,
RuPay Debit Card must be used at least once in 45 days.
Overdraft facility upto Rs.5000/- is available in only one
account per household, preferably lady of the household.
 Banks Under PMJDY
Jan Dhan account can be opened at all the public sector banks and
majority of private sector banks.
All public sector banks (27) and Following Private Sector Banks
1. Axis Bank Ltd.
2. Dhanalaxmi Bank Ltd.
3. Federal Bank Ltd.
4. HDFC Bank Ltd.
5. ICICI Bank Ltd.
6. IndusInd Bank Ltd.
7. ING Vysya Bank Ltd.
8. Karnataka Bank Ltd.
9. Kotak Mahindra Bank Ltd.
10. YES Bank Ltd.
11. Jammu & Kashmir Bank Ltd
12. Ratnakar Bank Limited
13. South Indian Bank Ltd
 PMJDY
Accounts Opened as on 02.March.2016

NO OF
Bank Name RURAL URBAN TOTAL RUPAY
CARDS

Public Sector
9.27 7.34 16.61 14.11
Bank

Regional Rural
3.21 0.53 3.74 2.67
Bank

Private Banks 0.46 0.30 0.76 0.71

Total 12.94 8.17 21.11 17.49

(Figures in Crores)

Source: http://www.pmjdy.gov.in/account
 Trend of Zero Balance Accounts of All
Banks Under PMJDY (in%)
90

80
76.81
70 70.02
60
57.9
50 51.85
44.9
40 Series1

30 31.81 28.88
20

10

30, Sept, 31, Dec, 31, March, 24, June, 30, Sept, 30, Dec, 24, Feb,
2014 2014 2015 2015 2015 2015 2016

Consolidated Source of all Banks

 Business Correspondent
It was created in January 2006 in response to guidelines issued by the RBI. The
BC Model allows banks to provide door step delivery of services especially to
do cash in - cash out transactions.
At present it has been deployed across 499 districts in 28 states through more
than 28,000 customer service points. Since 24.06.2014, RBI also permitted
following Institutions/Persons to be the Business correspondent for Banks
Non Deposit taking NBFCs as BCs.
NGOs,
SHGs,
Micro Finance Institutions (MFIs),
Post Offices, Insurance agents,
Civil Society Organizations,
Farmers clubs
Community based organizations
Cooperatives societies
Village Knowledge Centers
Agri Business Centers
Krishi Vigyan Kendras
Khadi and Village Industries units
 Business Correspondent Under PMJDY
Status Report on Bank Mitra and Infrastructure as on 29.01.2016
Summary Report
No of Sub Total No.
No. of Active
Service of Bank
Name of Bank Bank Mitra. E-KYC
Area Mitra
Account Opening
Allotted Required
Public Sector
Bank 106778 88069 80447 80594
Regional Rural
Bank 48719 35258 28867 18060
Private Sector
2277
Bank 4375 3435 1905
Grand Total 159872 126762 111591 100559
 Financial Performance of Banks during
Pre and Post periods of PMJDY
ICICI Standalone financial Performance
Post periods of PMJDY (Rs. Cr) Pre periods of PMJDY (Rs. Cr)
Particulars
Sep '15 Jun '15 Mar '15 Jun '14 Mar '14 Dec '13
Income on
2,661.40 2,659.12 2,983.20 2,977.19 2,911.17 2,922.17
Investment

Gross NPA (Non 15,137.6

15,857.82 15,094.69 10,843.30 10,505.84 10,399.13
Performing- Asset) 1
Net NPA 6,759.29 6,333.31 6,255.53 3,428.52 3,297.96 3,118.44

Interest Expended 7,847.39 7,697.47 7,659.05 7,275.01 7,132.73 7,199.89

Net Profit/(Loss) For

3,030.11 2,976.16 2,922.00 2,655.30 2,652.01 2,532.21
the Period

Return on Assets % 1.89 1.91 1.92 1.83 1.86 1.76

 Hypothesis test-1(ICICI)
Paired Samples Test
Paired Differences
ICICI
Mean 95% Confidence Sig. (2-
Interval of the t Df tailed)
Difference
Lower Upper

Pre & Post

Pair 1 Income on -168.936 -669.964 332.091 -1.451 2 .284
Investment
Pair 2 Pre & Post 4780.616 4271.214 5290.018 40.379 2 .001
Gross NPA
Pair 3 Pre & Post 3167.736 2794.928 3540.544 36.559 2 .001
Net NPA
Pre & Post
Pair 4 Interest 532.093 374.903 689.283 14.565 2 .005
Expended
Pre & Post
Pair 5 Net 362.916 277.466 448.366 18.274 2 .003
Profit/(Los
s)
Pre & Post
Pair 6 Return on .090 -.061 .241 2.563 2 .124
Assets
Hypotheses
 SBI Standalone financial Performance
SBI Standalone financial Performance

Post-Qtrs of PMJDY (Rs. Cr) Pre-Qtrs of PMJDY (Rs. Cr)

Particulars
Sep '15 Jun '15 Mar '15 Jun '14 Mar '14 Dec '13

Income on
10,564.66 10,019.41 9,982.75 8,559.32 8,228.20 8,227.60
Investment
Gross NPA (Non
Performing- 56,834.28 56,420.77 56,725.34 60,434.24 61,605.35 67,799.33
Asset)

Net NPA 28,591.96 28,669.14 27,590.58 31,883.80 31,096.07 37,167.35

Interest Expended 26,405.01 25,910.86 25,389.40 23,234.88 22,954.81 22,229.94

Net Profit/(Loss)
3,879.07 3,692.43 3,742.02 3,349.08 3,040.74 2,234.34
For the Period
Return on Assets
2.14 2.24 2.12 0.74 0.69 0.52
%
Capital Adequacy
13.19 12.98 12.79 12.85 12.96 11.88
Ratio
 Hypothesis testing (SBI)
Paired Differences
SBI
Mean 95% Confidence Interval Sig. (2-
of the Difference T Df tailed)
Lower Upper
Pre & Post
Pair 1 Income on 1850.566 1514.599 2186.533 23.700 2 .002
Investment
Pair 2 Pre & Post Gross -6619.510 -16402.582 3163.562 -2.911 2 .101
NPA
Pair 3 Pre & Post Net -5098.513 -14792.414 4595.387 -2.263 2 .152
NPA
Pre & Post
Pair 4 Interest 3095.213 2795.534 3394.892 44.440 2 .001
Expended
Pair 5 Pre & Post Net 896.453 -427.154 2220.061 2.914 2 .100
Profit/(Loss)
Pair 6 Pre & Post 1.51667 1.258 1.775 25.239 2 .002
Return on Assets
Pre & Post
Pair 7 Capital .423 -.696 1.543 1.626 2 .245
Adequacy Ratio
 Prospects
Augmentation in Opening Bank accounts and Reduction of Zero
Balance Account.
Social beneficiary schemes under the PMJDY
DBT (Direct Benefit Transfer) facility
New Schemes like APY, PM Jeevan Jyoti Bhima Yojana
More Concentration in Rural areas

Challenges
Doubly opening of Bank account
Excessive zero balance Account
Lower Remuneration to BCs
Lack of Financial Literacy
large dormancy accounts
 Conclusion
To conclude, the overall study on PMJDY program explicates gradual
penetration of bank branches, opening bank accounts and
incrimination of business correspondents. As every mission,
this program also has prospects and challenges especially large
dormancy accounts, concerns regarding rural financial illiteracy,
inadequate executors etc.
Subsequently, this mission can plays significant role in elimination of
financial untouchably and proper thrift and savings of income. It
enables the DBT (Direct Benefit Transfer) facility, thereby
drastically reducing leakages and pilferages in social welfare
schemes. The overall results of hypotheses testing show that there
is high impact of this program on ICICI banking performance
compare to SBI in which the number of no frills accounts is larger
than ICICI.
In brief, along with wider operation of this mission the stable
performance of banks also to be ensured. However, the
detailed review of this program will be possible only after the second
phase implementation in which this mission will cover all adults,
students and households to bring formal financial channels.
End

THANK YOU
Net NPA :- RBI defines Net NPA as Gross NPA
minus Balance in Interest Suspense account plus
DICGC/ECGC claims received and held pending
adjustment + Part payment received and kept in
suspense account + Total provisions held. The zero
NPA closing of all banks is the ideal and health
scenario of Net NPA. Usually it is calculated on the
total lending done in a year.

Return on Assets (ROA), which is the profitability

ratio in relationship between net profit and total
assets. It shows the ability of management to procure
deposits at a reasonable cost and generating income
through profitable investments. The higher rate ROA
is the more profitable to banks.
 Return on Equity (ROE) shows the
mathematical relationship between net profit
and total equity, that is most important
indicator of a banks profitability and growth
potential. Interest Expended includes
Interest on Deposits, Interest on RBI or
other borrowings and other interest.
Income on Investment is the income
generated from interest payments, dividends,
capital gains collected upon the sale of a
security or other assets or any other profit
that is made through an investment.
 Capital Adequacy Ratio - CAR

The capital adequacy ratio (CAR) is a measure

of a bank's capital. It is expressed as a
percentage of a bank's risk weighted Credit
Exposures.
Capital adequacy ratio (CAR) is a specialized
ratio used by banks to determine the adequacy
of their capital keeping in view their risk
exposures. Banking regulators require a
minimum capital adequacy ratio so as to provide
the banks with a cushion to absorb losses
before they become insolvent. This improves
stability in financial markets and protects
deposit-holders.
 Difference Between Consolidated Financial
Statements and Stand Alone Financial Statements

Consolidated Financial Statements Because

consolidated financial statements present an
aggregated look at the financial position of a parent
and its subsidiaries, they enable you to gauge the
overall health of an entire group of companies as
opposed to one company's stand alone position.
A consolidated financial statement covers the activities
of the parent company and its subsidiaries in a single
report, as if they were all a single company operating
under one roof. Stand-alone financial statements, by
contrast, treat each entity as if it were entirely
separate the parent unrelated to the subsidiaries, and
the subsidiaries unrelated to one another.