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:>9? FINANCIAL INCLUSION TO REACH OUT RURAL AREA PREFACE This dissertation is original, unpublished and independent work by the authors, Dr.S.Vasantha and Ms.R.Paveethiraa .I would like to acknowledge many people for helping me during my research work. I take this opportunity to express my gratitude and thank each one of them. This dissertation is based on the data collected from the villages of Kancheepuram district in Tamil Nadu. Literature review is taken from previously published article and which was acknowledged. The interview schedule survey has been conducted among the rural people to examine the financial literacy, analyze the banking habits, usage of banking services and to examine the awareness level towards usage of technology in accessing financial services. Based on the analysis and interpretations of data the challenges of financial inclusion to reach out rural people are identified to suggest measures to promote financial inclusion to reach out rural people. Finally, I also appreciate the respondents who were willing to share their experiences. It was a privilege to meet the respondents personally and get the questionnaire filled. The study was a great experience for me to meet the underprivileged people to bring them under the ambit of inclusive growth. The authors are very grateful to Management of Vels University for the successful completion of this research work. Finally we are thankful to the Lambert Academic Publisher for publishing our research work Dr.S.Vasantha Ms.R.Paveethiraa TABLE OF CONTENTS S.NO CONTENTS 1 INTRODUCTION 2 THEORTICAL BACKGROUND 3 REVIEW OF LITERATURE 4 RESEARCH METHODOLOGY 5 DATA ANALYSIS AND INTREPRETATION 6 MAJOR FINDINGS OF THIS STUDY 7 SUGGESTIONS 8 9 CONCLUSION BIBLIOGRAPHY PAGE NO 1 25 34 49 55 69 70 71 72 ABSTRACT Financial inclusion is one of the most important aspects in the present scenario for inclusive growth and development of our economy. Financial inclusion means connecting all individuals, who are in the remote rural areas, to a well-functioning financial system. Financial Inclusion is one of the essential conditions for reduction of poverty and socio- economic inequalities in the society (Rangarajan, C.R., 2008). It is one of the tools to reach out the bottom of the pyramid and bring them under inclusive growth. The CRISIL report stated that the three big challenges of financial inclusion to reach our rural were high cost, lack of robust technology, and lack of awareness, and while these challenges are significant. It further states that there is a need for greater stakeholder coordination, greater consumer understanding, trust and protection. Throat (2007), observed cumbersome documentation procedure, unavailability of diversified products and services, high transaction costs, and easy availability of informal credits are major barrier to achieve financial inclusion. The research was conducted among the rural areas of Kancheepuramdistrict,Tamil Nadu.The data was collected through interview schedule tostudy the financial literacy among the rural people, to analyze the banking habits and usage of banking services among the rural people and to examine the awareness level towards usage of technology in accessing financial services. The literature collected from various published articles and research report helped the researcher to examine the challenges of financial inclusion to reach out rural people and to suggest measures to promote financial inclusion in rural area -1- 1 INTRODUCTION The financial inclusion term was first time used by British lexicon when it was found that nearly 7.5 million persons did not have a bank account. But financial inclusion concept is not a new one in Indian economy. Bank Nationalization in 1969, establishment of RRBs and introduction of SHG- bank linkage programs were initiatives taken by RBI to provide financial accessibility to the unbanked groups. Dr. C. Rangarajan committee states that “Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”. Financial Inclusion is the affordable cost in a fair and transparent manner by mainstream institutional players. India has a rural population of about 780 million with limited or no access to financial services. According to the World Bank, India has 600,000 villages, of which only 74,000 have access to banks. Financial inclusion may be interpreted as the ability of every individual to access basic financial services which include savings, loans and insurance in a manner that is reasonably convenient and flexible in terms of access and design and reliable in the sense that savings are safe and that insurance claim will be paid with certainty (Mor and Ananth, 2007) The branch banking route apparently is not very practical due to the huge cost of opening the branches vis-a-vis volumes expected, high costs of operations, limited banking hours, illiteracy, non-availability of alternate channels in rural centres, etc. Further, financial inclusion through branch network may adversely affect customer service at branches due to increased traffic and larger numbers of people to be attended to within the limited hours of banking. Financial inclusion can be described as the -2- provision of affordable financial services, viz saving, credit, insurance services, access to payments and remittance facilities by the formal financial systems to those who are excluded. So, financial inclusion refers to access to vast range of financial product and services at affordable cost. It not only includes banking products but also other financial services such as loan, equity and insurance products. In India, the focus of the financial inclusion at present is more or less confined to ensuring a bare minimum access to a savings bank account without frills to all. However, having a current account/savings account on its own, cannot be regarded as an accurate indicator of financial inclusion. [Vallabh and Chathrath, 2006]. 1.2 .NSSO Survey Results The Committee debated the various dimensions of inclusion and concluded that while aspects such as savings, remittance facilities, insurance, etc. were important, nevertheless exclusion was particularly germane from the standpoint of access to credit by vulnerable groups. The Committee accordingly scanned the data put out by the NSSO in the situation assessment survey on "Indebtedness of Farmer Households" (2003). The Committee noted that the definition of indebtedness as adopted in the survey referred to farmer households having outstanding loans from institutional or non-institutional sources4 in cash or kind having a value of Rs.300 or more at the time of transaction. As per NSSO data, 45.9 million farmer households in the country (51.4%), out of a total of 89.3 million households does not access credit, either from institutional or non-institutional sources. Only 27% of total farm households are indebted to formal sources (of which one-third also -3- borrow from informal sources). In other words, 73% of farm households do not have access to formal credit sources. For purposes of this analysis, "financially excluded" households will be defined as those not having any debt to formal credit sources. The various aspects of such exclusion among specific regions and population groups are indicated below. 1.3. RATIONALE FOR FINANCIAL INCLUSION Finance has come a long way since the time when it wasn't recognized as a factor for growth and development. It is now attributed as the brain of an economic system and most economies strive to make their financial systems more efficient. It also keeps policymakers on their toes as any problem in this sector could freeze the entire economy and even lead to a contagion. The earlier research focused on how finance helps an economy. Now, research shows that financial inclusion is as important. The new avenue for research in finance is - making financial inclusion workable. Patrick Honohan (of Trinity College, Dublin) in his research developed an index to measure access to finance in 160 countries. If the index is put on a world map it can be clearly seen that those economies having higher indices are usually those, which we term as developed/advanced economies. It is not implied that financial inclusion alone has led to the development but is an important factor. The policymakers have set up their task force/committees to understand how financial inclusion can be achieved including advanced economies like United Kingdom. India also set up a committee under the chairmanship of Mr. C.Rangarajan to suggest measures to increase financial inclusion (hence called the Rangarajan Committee on Financial Inclusion). The World Bank had organized a -4- conference in March 2007 and has released a report titled "Finance for All" in November 2007. The first question that comes to mind is why can't financial inclusion happen on its own? Why do we need to make a policy to increase the same? Like any other product or service, why can't it find a market of its own? The reasons are: a) Financial Exclusion: It has been found that financial services are used only by a section of the population. There is demand for these services but it has not been provided. The excluded regions are rural, poor regions and also those living in harsh climatic conditions where it is difficult to provide these financial services. The excluded population then hasto rely on informal sector (moneylenders etc) for availing finance that is usually at exorbitant rates. These leads to a vicious cycle. First, high cost of finance implies that first poor person has to earn much more than someone who has access to lower cost finance. Second, the major portion of the earnings is paid to the moneylender and the person can never come out of the poverty. b) High cost: It has also been seen that poor living in urban areas don't utilize the financial services as they find financial services are costly and thus are unaffordable. Hence, even if financial services are available, the high costs deter the poor from accessing them. For example, to open a checking account in Cameroon, the minimum deposit requirement is over 700 dollars, an amount higher than the average GDP per capita of that country, while no minimum amounts are required in South Africa or Swaziland. Annual fees to maintain a checking account exceed 25 percent of GDP per capita in Sierra Leone, while there are no such fees in the Philippines. In Bangladesh, Pakistan, Philippines, to get a -5- small business loan processed requires more than a month, while the wait is only a day in Denmark. The fees for transferring 250 dollars internationally are 50 dollars in the Dominican Republic, but only 30 cents in Belgium. c) Non-price barriers: Access to formal financial services also requires documents of proof regarding a persons' identity, income etc. The poor people do not have these documents and thus are excluded from these services. They may also subscribe to the services initially but may not use them as actively as others because of high distance between the bank and residence, poor infrastructure etc. d) Behavioral aspects: Research in behavioral economics has shown that many people are not comfortable using formal financial services. The reasons are difficulty in understanding language, various documents and conditions that come with financial services etc. Figure 1. Household Access to Financial Services -6- 1.4. Financial exclusion in India Financial exclusion is the lack of access by certain consumers to appropriate low cost, fair and safe financial products and services from mainstream providers. It is observable at individual, family, or household level, but can also be heavily concentrated in suburbs or regions, and sometimes among ethnic minorities in a suburb or region. There are several reasons for financial exclusion: ™ Lack of awareness ™ Low income and asset ™ Social exclusion ™ Illiteracy ™ Distance from branches ™ Branch timings ™ Unsuitable product ™ Language, ™ Staff attitudes, etc 1.5. CHALLENGES OF FINANCIAL INCLUSION The challenges are of structural, social and regulatory in nature. The structural challenges are the branch expansion in rural unbanked areas. Human resource operation in remote area is not profitable for bank that is nearly adjusting 600 million new customers. Offering a simple load product without proper security is the risk for bank management. Processing capacity of the banks is also limited. To overcome this some central processing centers are required to open Regulatory Challenges are to see the followings : i) viability ii) security iii) capacity iv) cash handling v) setting of local service points vi) enrolment process – time consuming -7- and identity problems vii) issue of personalization cards viii) connectivity problems ix) reconciliation of transaction with business correspondent (BC) and CBS x) bank staff not confident at operating level xi) business correspondent (BC) cum technology vendor is an ideal combination xii) prospective BCs are sitting on the fence and watching others. Similarly the Social challenges are i) rural populace having inhibition to approach bank branches ii) illiteracy of lower economy status so inhibition iii) lack of active customer education campaign. Modern banking requires literacy skills that are often not present. Potential customers need to invest time and effort in understanding banking opportunities and costs. There may be also a collective action problem. Unless a critical mass of people is willing to invest in banking literacy, everyone else will find that their individual efforts in developing banking literacy will not pay off. Because banking activity is costly in terms of fees and transaction costs, opening a bank account only becomes attractive if the individual has a minimum income (Beck and Demirguc-Kunt, 2008). Due to lack of awareness, low financial education and procedural hassles, many still prefer to borrow money from informal sources like money lenders and also rapid expansion, the number of bank branches in the country is still inadequate (SomasroyChakraborty&Nupur Anand,2014). According to a nation-wide survey on financial behaviour, India has the highest account dormancy rate even more than countries like Kenya, Tanzani, Uganda, Nigeria, Pakistan and Bangladesh . Only 48 per cent of Indian adults have bank accounts and nearly half of them lie dormant. -8- 1.6. FACTORS AFFECTING ACCESS TO FINANCIAL SERVICES ™ 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. ™ 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. ™ Limited literacy: Limited literacy, particularly financial literacy, i.e., basic mathematics, business finance skills as well as lack of understanding often constraints 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 country's Social security payments -9- ™ 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. ™ 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 grouplending programmes may exclude the poorer members of the community. ™ Type of occupation: Many banks have not developed the capacity to evaluate loan applications of small borrowers and unorganized enterprises and hence tend to deny such loan requests. 1.7. VILLAGES COVERED NSSO 59th Round Survey Result shows that51.4% of farmer households are financially excluded from both formal/ informal sources. Of the total farmer households, only 27% access formal sources of credit; one third of this group also borrowed from non-formal sources. Overall, 73% of farmer households have no access to formal sources of credit. Across regions, financial exclusion is more acute in Central, Eastern and North-Eastern regions. All three regions together accounted for 64% of all financially excluded farmer households in the country. - 10 - Overall indebtedness to formal sources of finance of these three regions accounted for only 19.66%. Figure 2. Villages Covered The number of banking outlets in villages with population more than 2000 as well as less than 2000 increased consistently since March 2010. World Bank report stated that for rural India about 40% of households has deposit accounts, 20% have outstanding loans and only 15% have any insurance. As per census 2011, only 58.7% of households are availing banking services in the country. However, as compared with previous census 2001, availing of banking services increased significantly largely on account of increase in banking services in rural areas 1.8. FINANCIAL INCLUSION PLAN - ACHIEVEMENTS SO FAR India has launched more Yojana schemes but this is the scheme launched by our prime minister on Independence Day meeting in 15 Aug 2014. India’s ambitious financial inclusion plans aimed as 15m bank accounts were opened the first day of - 11 - the Jan DhanYojana scheme, our Prime Minister ShriNarendraModi has new initiative for every Indian household to have at least one bank account by 2018. Table 1.PradhanMantri Jan - DhanYojana (Accounts Opened As on 27.05.2015) (All figures in crores) S.No Banks No Of Accounts No Of Balance Debit In Cards Accounts % of Zero Balance Accounts Rural Urban Total 1 Public Sector Banks 6.75 5.64 12.39 11.59 13480 53.7 2 Private Banks 0.39 0.27 0.65 0.59 992.17 49.65 2.4 0.42 2.82 2.06 3048.17 54.09 9.53 6.33 15.86 14.24 17520.3 53.6 3 Regional Rural Banks Total Source: www.pmjdy.gov.in 1.9. A VIEW ON JAN DHAN YOJANA The Jan DhanYojana (JDY) would be implemented in two phases. In the first phase, the aim is to provide universal access to banking facilities through a business correspondent or bank branch, zero-balance bank accounts with overdraft facility of Rs.5,000 after six months and RuPay debit card (domestic card payment network which competes with MasterCard and Visa) with inbuilt insurance cover of Rs.100,000. Those who open accounts by January 26, 2015will be given life insurance cover of Rs.30,000. In the second phase starting from 15th August 2015, - 12 - the focus of JDY would be to provide additional financial services such as micro insurance and pension schemes meant for unorganized workers. The government claims that the JDY is a major departure from the earlier initiative launched in 2005 which was primarily aimed at promoting financial inclusion in the rural areas with focus on the coverage of villages, whereas the JDY aims to provide banking services in both rural and urban areas with focus on the coverage of individual households. One of the new features of JDY is the creation of local monitoring committees and a web-portal to monitor its implementation at the national level. The JDY is being run in a mission mode with the Finance Minister as head of the mission. Even though there is no universally accepted definition of financial inclusion (FI), it has become a buzzword in development circles lately. From Queen Maxima of the Netherlands to World Bank to G20, everyone espouses the concept of financial inclusion. In simple terms, financial inclusion means delivery of banking services (such as savings accounts, loans, remittance and payment services) at an affordable cost and in a convenient manner to the poor and marginalized sections of society. For India, financial inclusion has become a key policy concern as there are over 600 million citizens who lack basic banking and financial services. In India, financial exclusion has strong linkages with poverty and is predominantly concentrated among the vast sections of disadvantaged and low income groups. One of the important factors behind rising farmer suicides in the countryside is the lack of access to cheap credit from banks and institutional sources.In India and - 13 - elsewhere, financial exclusion is not merely restricted to rural population. A large number of urban dwellers, migrants and informal sector workers also lack access to banking and other financial services.The JDY is not the first major initiative to promote financial inclusion in India. It should be rather viewed as financial inclusion 3.0 – as two policy initiatives on Financial inclusion were launched previously. Financial Inclusion 1.10 After independence, the first initiative on financial inclusion was launched in July 1969 when 14 of the largest privately-owned banks were nationalized. The bank nationalization marked a paradigm shift as the policy aim was to take the banking services to poor people. Before nationalization, privately-owned banks were located in metropolitan and urban areas. Much of bank lending was concentrated in a few organized sectors of economy and limited to big business houses and large industries. Whereas farmers, small entrepreneurs, laborers, artisans and selfemployed were totally dependent on informal sources (mainly traditional moneylenders and relatives) to meet their credit requirements. The share of agriculture in total bank lending was a meager 2.2 percent during 1951-67. There were several policy objectives behind the bank nationalization strategy including the transformation of “class banking” into “mass banking,” expanding geographical and functional spread of institutionalized credit, mobilizing savings from rural and remote areas and reaching out to neglected sectors such as agriculture and small scale industries. Another policy objective was to ensure that - 14 - no viable productive business should suffer for lack of credit support, irrespective of its size. 1.11.Rapid Expansion of Branch Network in Unbanked Locations At the time of nationalization, scheduled commercial banks had 8,187 branches throughout the country. But in 1990, the branch network increased to 59,752. What is even more important is that out of 59,752 bank branches, 34,791 (58.2 percent) were located in the rural areas. In contrast, the share of rural branches was 17.6 percent in 1969. Such a massive expansion of bank branches in the rural areas was the result of 1:4 licensing policy under which banks were given incentive to open one branch in metropolitan and one branch in urban areas, provided they open four branches in the rural areas. In the early 1970s, the concept of priority sector lending (also known as directed lending) was evolved to ensure that adequate credit flows to the vital sectors of the economy and according to social and developmental priorities. In addition, the establishment of regional rural banks (RRBs) in the mid-1970s also widened the reach of banking services. The RRBs were jointly owned by the central government, the state government and the sponsor bank. Between 1975 and 1987, 196 RRBs were established in the rural India. The mandate of RRBs was to serve small and marginal farmers, agricultural laborers, artisans and small entrepreneurs in the rural and remote areas. Further, banks were directed to - 15 - maintain a credit-deposit ratio of 60 percent in the rural and semi-urban branches in order to ensure that rural deposits are not used to increase urban credit. In rural areas, there was significant rise in bank deposits and credit. According to official data, the share of rural deposits in total deposits increased more than five times, from 3 percent in 1969 to 16 percent in 1990. The share of agriculture credit in the total bank credit increased from 2.2 percent in 1968 to 13 percent in 1980 and further to 15.8 percent in 1989. The share of small-scale industry in the total bank credit which was negligible before nationalization reached 15.3 percent in 1989, a significant achievement by international standards. There is no denying that the banking system under the nationalization regime was not perfect as it could not reach out to each and every household but at least a serious effort was made to spread banking services: geographically, socially and functionally. There are very few parallels in the history of banking in the world where such large-scale geographical expansion and functional diversification of the banking system (with social and developmental orientations) took place within a span of two decades. Admittedly, there were cumbersome lending procedures, inadequate supervision, corruption and political interference which affected functional efficiency and profitability of the banking system. Nevertheless, the bank nationalization drive was inspired by a larger objective to promote social and development banking in India. - 16 - 1.12. The Neglect of Financial Inclusion under Banking Sector Reforms One of the adverse consequences of banking sector reforms launched in the 1990s was the steady decline in the number of bank branches in the rural India. During 1994-2006, bank branches in rural areas were closed down to meet the profitability criteria and to achieve higher efficiency levels. In absolute terms, the total number of rural bank branches declined from 35,329 in 1994 to 30,119 in 2006. In other words, as many as 5,210 bank branches in the rural India were closed down during 1994-2006. On an average, two bank branches were closed down on each working day during this period.On the other hand, a rapid expansion of branches in the metros and urban areas has been witnessed in the post-liberalization period. According to the Reserve Bank of India (RBI) statistics, 5,960 new branches were opened in the six metros during 1994-2006. In 1994, the share of rural branches was 57.16 percent but it declined to 37.18 percent in 2013, indicating the worsening of the rural-urban ratio of bank branches in the post-liberalization period.In the 1990s, the banking sector witnessed a secular decline in agricultural credit. This is in sharp contrast to the 1970s and 80s when a significant shift in bank lending in favor of agricultural sector took place. The proportion of bank credit to agriculture and small sector industries declined from 30 percent in 1994 to 18 percent in 2013, despite several initiatives launched by the government to revive bank credit to these sectors which generate largest employment opportunities in the rural areas. The share of deposits raised from rural areas declined from 15 percent in 1994 to 9 percent in 2012. All these - 17 - statistics reveal a sheer neglect of the banking needs of people living in rural and semi-rural areas during the post-liberalization period. 1.13. Financial Inclusion Concerned over these adverse developments, another initiative towards FI was launched in 2005 with greater emphasis on branchless business correspondent model to provide last mile connectivity to unbanked villages. In 2005, the RBI pushed banks to provide a “no-frills” zero-balance account with minimum charges for other services. Other major policy initiatives under this drive included relaxation in know-your-customer (KYC) norms, easier credit facility, introduction of General Purpose Credit Card (GCC) and support to microfinance institutions and Self Help Groups. The focus on FI was further intensified in 2009 when the RBI directed banks to draw up a road map to cover nearly 74,200 villages with more than 2,000 population with one banking outlet by 2012. To achieve this target, several new regulatory measures were introduced. For instance, the domestic banks (both public and private) were given freedom to open branches in Tier-2 to Tier-6 centers without prior approval from the RBI. In order to encourage banks to open branches in the predominantly unbanked North-East region, domestic banks were allowed to open the branches in rural, semi-urban and urban centers without the prior approval from the RBI. Later on, banks were mandated to open at least 25 percent of their new brick-and-mortar branches in the unbanked rural areas. - 18 - Under the financial inclusion plans adopted by banks, 7,459 new branches were opened in rural areas in three years during 2010-13. However, this period saw the domination of banking correspondents (BCs) to provide banking services to unbanked population. Most of the villages covered under this drive were through BCs. As discussed in more detail below, the BC model failed to adequately accomplish its intended purpose despite a rapid increase in its outreach. 1.14. Misplaced Emphasis on BC Model A business correspondent is a representative of bank who provides doorstep banking services through the use of smart card handling devices which are connected to the main servers of the bank. The handheld device can identify the bank customer through finger prints and facilitates basic transactions such as depositing and withdrawing cash. The RBI has allowed banks to use the services of NGOs, microfinance institutions, non-banking finance companies and post offices as BCs. Since 2006, the policymakers have supported the expansion of banking services through BC model on the pretext that it provides services at the doorstep of customers living in unbanked locations and reduces the costs involved in putting up and operating a brick-and-mortar branch. There is no denying that the BC model has expanded its reach across the country in the last eight years. The RBI’s annual report for 2013-14 notes that “nearly 248,000 BC agents had been deployed by banks as on March 31, 2014 which are - 19 - providing services through more than 333,000 BC outlets.” Close to 117 million zero-balance accounts have been opened up by the BCs as on March 31, 2014. In addition, there were 60,730 BC outlets in urban locations as on March 31, 2014. These are pretty impressive numbers. But empirical evidence from Sundergarh in Orissa to Surendranagar in Gujarat suggests that access to bank accounts has not translated into use. More than 80 percent of zero-balance bank accounts are dormant. In cases where customers receive wages under the National Rural Employment Guarantee Act (NREGA), they simply withdraw the entire amount immediately after the NREGA disbursement. Not even 5 percent of zero-balance account holders make deposits into their bank accounts. If people are not actively using their bank accounts, it defeats the very purpose of financial inclusion. Banks, on their part, are not interested in promoting awareness activities on the usage and benefits of formal banking services as they lose money on zero-balance accounts due to few transactions and low balances. Most banks view zero-balance accounts as a corporate social responsibility thrust upon them by the government. For banks, serving poor clients is a social obligation rather than a viable business opportunity. With the result, the potential benefits of access to formal banking services are not fully realized. - 20 - 1.15. The Inherent Weaknesses of BC Models Some caution is obviously warranted because the JDY relies heavily on the BC model for expanding banking network in both rural and urban areas. One of primary reasons behind the unsatisfactory performance of BC model is the poor remuneration (Rs.2000-3000 per month) paid to business correspondents. For such a meager amount, it is unfair to expect a BC to visit villages or slums at regular intervals, open new bank accounts for poor people, process financial transactions, educate customers about banking services and answer all queries of the customers. With the result, there is a high attrition rate among BC agents across the country. Surveys have found that more than half of BC agents are untraceable. Under the JDY, the BCs will get a minimum compensation of Rs.5000 per month. This is a welcome move but there are several other important factors which act as a barrier in the delivery of banking services through BC model. Some of these factors include inordinate delay in issuing of smart cards to customers (three to six months); limited utility of smart cards as services such as remittance are not loaded; inadequate cash handling limit given to BCs; devices not working properly due to technical problems or poor network connectivity; lack of trust in BCs; lack of customer-centric banking products and services; poor governance and inadequate supervision of BCs; and absence of a comprehensive strategy for financial education. If these impediments are not addressed, the JDY may turn out to be another government program under which ambitious targets of opening millions of bank - 21 - accounts are achieved on paper but very little meaningful financial inclusion is actually accomplished on the ground. It is imperative that the policy focus should shift from the quantity of inclusion to the quality of inclusion. The success of the JDY should not be measured only on the basis of number of new accounts opened. The measure of success should also include clearly defined targets for usage and transactions. 1.16.The JDY Should Emphasize on Physical Branches Given the unsatisfactory outcomes of the BC model, the JDY should give greater emphasis on brick-and-mortar branches which enjoy a high degree of trust and acceptability among the rural people. Besides, there are several transactions (e.g., loans) require physical branches and direct interaction with the bank officials. In a rural setting, a mini-branch (consisting of two staff persons) can easily serve 4-5 villages and provide a full range of banking services. This would ensure that the villagers will no longer have to take substantial travel and expense to visit a mini-branch. A mini branch linked with a nearest large branch could function as a hub-and-spoke system. In Andhra Pradesh, for instance, HDFC bank has recently established several mini-branches and found it to be a commercially viable model to offer full banking services to rural people. The last-mile connectivity is very crucial for the success of JDY. Given the large outreach of post offices across the country, postal networks could be explored to provide banking products and services at a low cost. - 22 - Like “Post Office on Wheels” which provides a variety of postal services through a mobile van in the country, the mobile van banking is another credible delivery model which could be used to serve large customers located in the far-flung rural areas at regular intervals. 1.1.1 NEED FOR THE STUDY Financial inclusion is a policy measure to address the issue of poverty which would ensure avenues for people. It is estimated that globally over two billion people are excluded from access to financial services, of which one third is in India. Access to various financial services enables the poor people to participate in the growth of the economy. Many banks are forced to adopt financial inclusion rather than their own interest. Only few banks are actively involved in financial inclusion to promote economic development. The banks have encountered various problems while adopting financial inclusion Viz. Improper repayment, the need for additional workforce, more time consumption, heavy work load, high cost etc. Hence, many banks are not fostering fully fledged financial inclusion plan to accelerate the growth of the country. This study attempts to address the issues involved in the adoption of the financial inclusion plan and to widespread the financial inclusion. 1.1.2 OBJECTIVES OF THE STUDY - 23 - ƒ To study the financial literacy among the rural people. ƒ To analyze the banking habits and usage of banking services among the rural people. ƒ To examine the awareness level towards usage of technology in accessing financial services. ƒ To examine the challenges of financial inclusion to reach out rural people. ƒ To suggest measures to promote financial inclusion in rural area 1.1.3. SCOPE OF THE STUDY This study attempts to cover all the 5 villages of kanchipuram district in Tamil Nadu.. This district is potential for the agriculture. Agriculture is the main occupation of the people with 47% of the population engaged in it. Paddy is the major crop cultivated in this district. Groundnuts, Sugarcane, Cereals & Millets and Pulses are the other major crops cultivated. 76.50 Metric Tonnes lands are cultivated in Fuel wood and 8.039 Tonnes in Cashew. Palar River along with Tanks and wells are the main sources of irrigation in this district. The study covers the sample size of 200 respondents. The survey has been conducted in the villages which are not having banking facilities. 1.1.4 HYPOTHESIS FRAMED FOR THIS STUDY ¾ H1: The age of the respondents does not depend on the bank transaction with the bank officials - 24 - ¾ H2: There is no association between demographic variables of the respondents with respect to reasons for not availing loans. ¾ H3: There is no significance difference between reasons for not availing loan from bank and source of finance. ¾ H4: There is no significant difference between towards lack of knowledge about banking services and usage of various schemes of banks. 2. THEORTICAL BACKGROUND 2.1 OVERVIEW OF FINANCIAL INCLUSION "Financial Inclusion" focuses attention on the need to bring previously excluded people under the umbrella of financial institutions. There is no universally accepted definition of financial inclusion. Financial Inclusion is generally defined in terms of exclusion from the financial system. The working or operational definitions of financial exclusion generally focus on ownership or access to particular financial products and services .Furthermore, the definitions have witnessed as shift in emphasis from the earlier ones, which defined financial inclusion and exclusion largely in terms of physical access, to a wider definition covering access to and use and understanding of products and services. The financial services include the entire gamut - savings, loans, insurance, credit, payments etc. The financial system has to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing these services, the aim is to - 25 - help them come out of poverty. So far, the focus has only been on delivering credit (it is called as microfinance but is microcredit) and has been quite successful. The access to finance could be divided into four segments: 1. The proportion of the population that uses a bank or bank like institution. 2. Population which uses services from non-bank "other formal" financial institutions, but does not use bank services. 3. The population which only uses services from information financial service providers. 4. Percentage of population transacting regularly through formal financial instruments and, 5. The population which uses no financial services. Since measuring inclusion is perceived to be difficult, financial inclusion has generally been defined in terms of exclusion from the financial system. It focuses on ownership or access to particular financial products and services. Specific indicators such as number of bank accounts, number of bank branches that are generally used as measures of financial inclusion can provide only partial information on the level of financial inclusion in an economy. In India, the financially excluded sections comprise largely marginal farmers, landless labourers, oral lessees, self employed and unorganized sectors enterprises, urban slum dwellers, migrants, ethnic minorities and socially excluded groups, senior citizens and women. Some of the important causes of relatively low extension of institutional credit in the rural areas are risk perception, cost of its assessment and management, lack of rural infrastructure, and vast geographical spread of the rural areas with more than half a million villages, some sparsely populated. - 26 - 2.2 EFFECTIVE DELIVERY MODELS Several models have been tried, namely like opening of banking outlets, Business correspondent model, bank led model, basic savings basic deposits accounts, Kisan credit cards & general credit cards, self-help group-Bank Linkage for pursuing financial inclusion. Opening of Banking Outlets Banking outlets are banking centre or financial centre is a retail location where a bank, credit union, or other financial institution offers a wide array of face-to-face and automated services to its customers. So opening of banking outlets in unbanked areas help people of under banked to get financial aids. Basic Savings Bank Deposit Account It will include deposit and withdrawal of cash; receipt / credit of money through electronic payment channels or by means of deposit / collection of cheques at bank branches as well as ATMs and services will be free. Business Correspondent Model It is a strategy that has been advocated by the Reserve Bank of India (RBI) ensuring greater financial inclusion and increasing the outreach of the banking sector, especially in the rural areas. The model intends to use the services of NonGovernmental Organizations/ Self Help Groups (NGOs/ SHGs), Micro Finance Institutions (MFIs) and other Civil Society Organizations (CSOs) as intermediaries in providing financial and banking services for people in rural and areas outside of the Banks’ coverage. - 27 - Bank Led Model RBI has advocated a bank-led model for financial inclusion with thrust on leveraging technology. Many PSU and Private Banks have started using ICT for covering all sorts of people for their financial services partnering with Telecom companies. Mobile banking, online shopping, etc., and several other technology driven financial services gaining momentum with the help of bank led models. Kisan Credit Cards It was started by the Government of India, Reserve Bank of India (RBI), and National Bank for Agriculture and Rural Development (NABARD) in 1998-99 to help farmers access timely and adequate credit. Banks have been advised to issue KCCs to small farmers for meeting their credit requirements. Up to March 2013, the total number of KCCs issued to farmers remained at 33.79 million with a total outstanding credit of Rs.2622.98 billion General Credit Cards To enable farmers to withdraw cash from ATMs anywhere in the country, banks need to convert KCCs/GCCs to electronic credit card. Further, banks may explore the possibility of issuing multipurpose cards which could function as debit cards, KCC and GCC as per the requirements in rural areas. Development in Self Help Groups- Bank Linkage The SHG - Bank Linkage Programme is a major plank of the strategy for delivering financial services to the poor in a sustainable manner. It helps in bringing more people under sustainable development in a cost effective manner - 28 - within a short period of time. As on March 2011, there are around 7.46 million saving linked SHGs with aggregate savings of Rs.70.16 billion and 1.19 million credit linked SHGs with credit of Rs. 145.57 billion (Source: NABARD, Status of Microfinance in India). Growth in Micro Finance Institutions Though RBI has adopted the bank-led model for achieving financial inclusion, certain NBFCs which were supplementing financial inclusion efforts at the ground level, specializing in micro credit have been recognized as a separate category of NBFCs as NBFC-MFIs. At present, around 30 MFIs have been approved by RBI. Their asset size has progressively increased to reach Rs. 19,000 crore as at end Sept 2013. 2.3 FINANCIAL INCLUSION INITIATIVES International Initiatives The current approach to financial inclusion can be United Nations initiatives, which described the main goals of inclusive finance as access to a range of financial services including savings, credit, insurance, remittance and other banking / payment services to all bankable households and enterprises at a reasonable cost. The Report of the Centre for Global Development (CGD) Task Force on Access to Financial Services (October, 2009) has given the broad policy principles for expanding financial access, including some mechanisms. The G20 Toronto Summit (June, 2010) had outlined the “Principles for Innovative Financial Inclusion”, which serves as a guide for policy and regulatory approaches aimed at - 29 - sound adoption of innovative, adequate, low-cost financial delivery models, helping provide conditions for fair competition and a framework of incentives for the various bank, insurance, and non-bank actors involved in the delivery of a full range of affordable and quality financial services. The global financial crisis has brought the need for financial inclusion into greater focus worldwide as it is believed that widespread incidence of financial exclusion was one of the factors that precipitated the financial crisis. While spread of financial inclusion is recognized through formal financial institutions such as banks, credit unions, post offices or microfinance institutions, the approach of keeping some/ all of these entities as a part of the core or as support players, varies from country to country. National Initiatives Several countries across the globe now look at financial inclusion as the means for a more comprehensive growth, wherein, each citizen of the country is able to use his/her earnings as a financial resource that they can put to work to improve their future financial status and simultaneously contribute to the nation’s progress. Initiatives for financial inclusion have come from the financial regulators, the governments and the banking industry. While the banking sector has taken several steps to promote financial inclusion, legislative measures have also been initiated in some countries. 2.3.1 INITIATIVES STARTED BY COMMERCIAL BANKS ™ INDIAN BANK: The bank has established an exclusive microstate branch in Chennai for financial inclusion of lower income people who are also - 30 - migrants form villages settled in different parts of the city by bringing large number of under privileged persons into the banking fold through the concept of SHGs. In the case of SHGs, a line of credit is provided to them giving flexibility, with simplified accounting procedures. The bank proposes to open one more such specialized branch in Chennai and in 10 other metros and urban across the country. ™ UNION BANK OF INDIA-Village Knowledge Centers: Keeping in view the urgent requirement to educate the rural inhabitants and farmers in particular, for updating them with the latest technological developments, a pioneering effort has been initiated by Union bank of India by establishing Village Knowledge Centers (VKCs) at strategic rural locations. So far, the bank has established 198 KVCs all over the country. ™ Pilot Project in Andhra Pradesh: Andhra Pradesh Government has embarked on a pilot project with six banks. Viz SBI, SBH, Andhra Bank, Union Bank, UTI Bank and AP GrameenaVikas bank, to make payments of social security pensions and AP Rural Employment. ™ SELF-HELP GROUP - BANK LINKAGE PROGRAMME: An SHG is a group of about 15 to 20 people from a homogenous class who join together to address common issues. They involve voluntary thrift activities on a regular basis, and use of the pooled resource to make interest bearing loans to the members of the group. In the course of this process, they imbibe the - 31 - essentials of financial intermediation and also the basics of account keeping. The members also learn to handle resources of size, much beyond their individual capacities. They begin to appreciate the fact that the resources are limited and have a cost. Once the group is stabilized, and shows mature financial behavior, which generally takes up to six months, it is considered for linking to banks. Banks are encouraged to provide loans to SHGs in certain multiples of the accumulated savings of the SHGs. Loans are given without any collateral and at interest rates as decided by banks. Banks find it comfortable to lend money to the groups as the members have already achieved some financial discipline through their thrift and internal lending activities. The groups decide the terms and conditions of loan to their own members. The peer pressure in the group ensures timely repayment and becomes social collateral for the bank loans Generally, the SHGs need selfhelp promoting institutions (SHPIs) to promote and nurture them. These SHPIs include various NGOs, banks, farmers' clubs, government agencies, self-employed individuals and federations of SHGs. However, some SHGs have also been formed without any assistance from such SHPIs. There are three different models that have emerged under the linkage programme: • Model I: This involves lending by banks directly to SHGs without intervention/facilitation by any NGO. • Model II: This envisages lending by banks directly to SHGs with facilitation by NGOs and other agencies. - 32 - • Model III: This involves lending, with an NGO acting as a facilitator and financing agency. 2.3.2 RBI POLICY INITIATIVES FOR FINANCIAL INCLUSION Many policy initiatives have been taken for financial inclusion such as: ¾ Making Available basic banking “no frills” account either with „nilெ or very low minimum balance. ¾ Issuing of general credit cards to eligible beneficiaries without insistence on security, purpose or end use of credit ¾ Introduction of KCC (Kisan Credit Card ) ¾ Allowing banks to utilize the services of NGOs, SHGs, MFIs and other civil society organization as intermediaries in providing financial services ¾ Credit linking of SHGs, support to MFIs ¾ Introduction of financial sector ( regulation and development ) bill 2007 to develop and regulate the MFIs ¾ Constitution of financial inclusion fund and financial inclusion technology fund to strengthen the institutional and technological infrastructure for greater financial inclusion. ¾ Finance literacy would help in using savings, credits and insurance services. ¾ Stipulation of Priority sector lending. Priority sector comprises agriculture, SSIs, Small road and water transport operator, Small business, retail trader, self employed persons, housing loan, micro credit, artisan, village and tiny industries etc. - 33 - REVIEW OF LITERATURE In this chapter the researcher discusses about studies which have been undertaken the part in India and overseas regarding problems, issues and challenges of financial inclusion. Some of the key findings of the available literature are presented below. 3.1 FINANCIAL SERVICES AND DELIVERY MODEL Beck, Demirguc-Kunt and Peria (2006) stated Access to financial services allows lower income groups to save money outside the house safely, prevents concentration of economic power with a few individuals and mitigates the risk that poor people face as a result of economic shocks’. Rangarajan Committee (2008)explained that the financial services include the entiregamut of savings, loans, insurance, credit, payments, etc. The financial system is expectedto provide its function of transferring resources from surplus to deficit units, but both deficit and surplus units are those with low incomes, poor background, etc. By providing these services, theaim is to help them come out of poverty. Rural branches of commercial banks must go beyond providing credit and provide extension services, including advice on farm-related activities. And the Committee on Comprehensive Financial Services for Small Business and Low Income Households has suggested providing a universal bank account to all Indians above the age of 18 years. This target is to be achieved by January 1, 2016, - 34 - less than two years from now. The Aadhaar will be the prime driver towards rapid expansion in the number of bank accounts. Ravichandran and Alkhathlan (2009), explained a very few people have access to banking services. Lack of awareness, low incomes and assets, social exclusion, and illiteracy are the barriers from the demand side. Distance from the bank branch, branch timings, cumbersome banking procedure, requirement of documents for opening bank accounts, unsuitable banking products/schemes, language barriers, high transaction costs, and attitudes of bank officials are the barriers from the supply side. The authors discussed bank-SHG, bank-MFI, MFINBFC (with non-banking financial companies), and bank-post office linkage models and proposed new models such as rural students banking model and RBIeducation institute linkage models. Prabha (2012) stated the importance of technology in delivery of financial services to unbanked areas, a technology driven low cost platform has been designed, which since its implementation is the preferred route for reaching out to the excluded sections of the society. Dr. AtulBansal (2012) analyzed banks need to take bold decisions and reach out to rural India with strategies and business models which are beyond the realm of conventional thinking D. Subbarao (2012) explained RBI's rationale for endorsing the bank-led mobile banking model. He said that while globally the delivery of payment services - 35 - through mobile has followed two models viz. bank-led model and non-bank led model, the first model offers a couple of key advantages over the second one. Jake Kendall (2012) explained bank led model in that he believe that payments are an optimal gateway product for financially underserved households. Unlike credit, insurance, and savings, payments do not require trust by either party. RBI Committee (2013)decided to invite suggestions from various stakeholders with a view to enabling them to share their thoughts on the subject from organizations that are engaged in developing new models of financial services delivery, in rural as well as urban contexts and have subject matter expertise. R. Magesh Kumar &C. Samuel Joseph (2013), focused an overview of various business models and highlights the need and importance of these emerging profitable models which are in need to be adopted by all banks and financial institutions towards Financial Inclusion in India. K.HemaDivya (2013) focused on the objective of financial inclusion to deliver banking services at an affordable cost to vast sections of the low-income groups of society. It is argued that 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 public policy C.Paramasivam, V.GaneshKumar(2013) Stated that inclusive growth is possible only through proper mechanism which channelizes all the resources from top to bottom. Households with low income often lack aces to bank account and have to spend time and money for multiple visits to avail the banking services, be it opening a savings bank account or availing a loan, these families find it more - 36 - difficult to save and to plan financially for the future. It is an attempt to discuss the overview of financial inclusion in India. Rinky Bhatia, Arun. B. Menon (2013) stated an estimated 2.5 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institution. It is argued that as banking services are in the nature of public good; the availability of banking and payment services to the entire population without discrimination is the prime objective of financial inclusion public policy. GadamsettySaiArun(2013) Stated high economic growth in the past decade has lead to huge economic inequality in India; various efforts have been made to achieve the objectives of the financial inclusion. One such effort is adoption of ICT in Indian banking sector. Today, banks have centralized operations; banks and branches are increasingly moving to core banking solutions (CBS), network-based computing, and new delivery channels such as networked. ShwetambaraSairam (2014) stated that the cost of serving the rural segment is so high that banks do not consider it as an economically viable business proposition. Consequently, the regulator and the government through stipulated guidelines have been driving banks to provide financial services in these areas .It reviews the various cost effective rural credit delivery models across the world which could be emulated by banks in India to transform their rural financing into a lucrative proposition for both the rural customers as well as for themselves. - 37 - B.M.Ramamurthy stated that in order to accomplish this banks are targeting poorest segment with the support of NGOெs and informal sector comprising small Self Help Groups (SHGs). The study has attempted to examine the performance and impact of selected banks and SHGs on financial inclusion. Ramesh Subramanian (2014) examines whether it would be feasible for banks to achieve the objective of financial inclusion. The low penetration level of bank branches in rural India, the high cost of operations/transactions of rural bank, product design and suitability etc are the challenges for the task. Among the alternative models Non-Banking Finance Company-Micro Finance Institutions seem to suit the most suitable. Financial inclusion will lead to economic development and NBFC-MFIs can play an important role in developmental agenda of the central government and RBI. MireyaAlmazán and Elisa Sitbon (2014) overviewed a global smartphone adoption is set to ramp up massively in the coming years, particularly in developing markets. As more unbanked consumers gain access to smartphones and mobile internet services, new opportunities for mobile financial services models will arise. This GSMA Mobile Money for the Unbanked (MMU) White Paper discusses the factors at play and their significance to the evolution of mobile money. 3.2 FINANCIAL INCLUSION INITIATIVES - 38 - Lata Krishnan (2013) stated the corrective measures taken against financial exclusion and the financial inclusion initiatives taken by the Government of India and the RBI. And she stated financial inclusion covers the financial literacy level of the population, their banking habits and the coverage of the entire financial system. Government of India and the RBI are keen on introducing and supporting financial inclusion programmes in India. She explained about the indian financial system which is effectively controlled by the government of India and RBI has been reacting positively in order to solve the problems of financial exclusion and her study has been conducted by various committees and they have suggested several steps to be taken by the RBI and our indian government. Dr.M.M.Gandhi (2013) explainedthe main reason why the large section of the rural populationstill remains under below poverty is financial exclusion, which is proving to be a major obstacle in the path of India’s economic growth. The Reserve Bank of India (RBI)’s dictate (2005) obligated the Banks to adopt the national policy of financial inclusion and take initiatives and suitable measures therefore. The objective data derived from the RBI’s reports and other empirical studies unequivocally pinpoint that the main reasons of financial exclusion are lack of opportunities and access to finance, financial illiteracy, besides poor performance, apathy and negative approaches of the Banks. Therefore, financial inclusion, today, has become the national objective and major concern for the economic policy decision maker. - 39 - SonuGarg (2014)focuses on approaches adopted by various Indian banks towards achieving the ultimate goal of financial inclusion forinclusive growth in India and analyses of past years progress and achievements. He concluded that for achieve targets of financial inclusion programme, it is need to empowering MSMEs through provide timely and adequate finance because MSMEெs are the best medium for achieving inclusive growth which generate local demand and consumption, provide employment to millions of freshers. Dayananda. K. C (2014)tries to understand policy initiatives by the government for financial inclusion, reasons for financial exclusion, steps taken by the government for financial inclusion and implications of financial inclusion. He said that all activities mainly depend on financial. Financial sector is like blood in human body .All economic and social problems due to financial sector exclusion. We can solve all these problems and strengthen the weaker section only through financial inclusion. Harshit Eric Williams (2014) focusedin his study founded number of commercial bank, scheduled commercial bank, RRBs and non scheduled commercial banks number are reduced during the period between 2008 and 2013. And he analyses the various initiatives taken by RBI and various banks for encouraging financial inclusion services so as to achieve rural, social and economic growth. Anuradha C. HastakAndArunGaikwad (2015) stated for standing out on a global platform India has to look upon the inclusive growth and financial inclusion is the - 40 - key for inclusive growth. There is a long way to go for the financial inclusion to reach to the core poor. As the Honorable prime minister of India has taken initiative and started ‘Pradhanmantri Jan DhanYojana’, the efforts taken by RBI have been strengthened. The fact is number of bank accounts opened by urban and rural poor are increasing but whether these accounts will really provide financial services to urban and rural poor is matter of concern. 3.3 OPPORUNITIES AND TECHNOLOGY Geach (2007) studied financial exclusion and mobile phone technology. He found that the use of electronic communication throughout the world has not included everyone. He argues that the vast majority of the world‘s population is still unable to gain access to digital technology, especially the Internet. These people are located in rural or poor inner city areas that are less likely to have Internet access. Advances in mobile phone technology could provide the solution to this problem. Thorat (2007) stated that the ATMs, internet banking, smart card-based products, mobile access, and so on, and are using IT for customer relationship management, customer transaction pattern analysis, credit profiling, and risk management. Sangwan (2007) studied financial inclusion and self-help groups (SHGs), and found that over the last 15 years, India has witnessed unprecedented growth in financial services unfolded by liberalization and the globalization of financial services due to the adoption of information technology (IT) and the unlocking of the regulatory framework. However, alongside this positive development, there is - 41 - evidence that the formal financial sector still excludes a large section of the population. MandiraShanra&JasimPaise (2008) suggests that the issue of financial inclusion is a development policy priority in many countries. Further physical & electronic connectivity and information availability, indicated by road network, telephone & internet usage also play a positive role in enhancing financial inclusion. Medhi et al. (2009) focused the mobile banking adaptation and usage by lowliterate and low income users. Due to the increasing penetration of mobile phones even in poor communities, Mobile-phone-enabled banking (m-banking) services are increasingly targeting the ʊunbanked to bring formal financial services to the poor. However, more research is required to understand the issues that prevent low-income, low-literate populations from meaningfully adopting and using existing m-banking services in order to scale up financial inclusion through technology. Chakraborty (2009) focused on technology, financial inclusion, and the role of banks showed that technology can operate on any platform. However, the technology solution to the business needs should be user-friendly without much third-party or IT vendor intervention or support requirement for operating the same. Banks need to redesign their business strategies to incorporate specific plans to promote financial inclusion of low-income groups, treating it as both a business opportunity as well social responsibility. - 42 - Vijay Kelkar (2009) explained an innovative proposal for promoting financial inclusion as well as improving the delivery of a number of government subsidies. Currently, a number of subsidies are given via multiple channels, such as food subsidy, fertilizer subsidy, kerosene subsidy, power subsidy. Given the reach of information technology, it is now possible to deliver subsidies more efficiently and effectively to the target groups. Reddy (2010) suggested a new approach for banks to reach wider populations in rural areas establish mobile-banks/representatives/agents who operate on a commercial basis rather than relying on self-help groups. These agents/representatives work on commission basis and hence, are self-motivated and cost-effective in assisting banks in service provision/deposit mobilization. Shunko Rojas (2012) stated mobile banking, institutional innovations and improvements in performance have revolutionized the field making private actors, international institutions and governments focus on this industry in constant development. 3.4 CHALLENGES ON FINANCIAL INCLUSION Leeladhar (2005) stated despite making significant improvements in all areas relating to financial viability, profitability and competitiveness, there are concerns - 43 - that banks have not been able to include vast segment of the population, especially the underprivileged sections of the society. RBI (2009) stated that access to well-functioning financial system by creating equal opportunities enables economically and socially excluded people to integrate better into the economy and actively contribute to development and protects themselves against economic shocks. Das (2010) studied the scaling up of technology to build inclusive financial systems in India. The systems that provide connectivity need to be relatively inexpensive if they are to be commercially deployed, given the lower incomes in rural areas compared to those in urban areas. Recently, ICT implementations have emerged as a powerful tool to reduce operating costs, making it viable for financial institutions to expand into rural and low-income areas. Despite the success of microfinance services in many countries, access to financial services in remote rural areas remains a challenge in India. KrishnaveniMuthiah (2010) found limited access to affordable financial services such as savings, loans, remittance and insurance services to the vast majority of the population in the rural area and unorganized sector is believed to be a constraint to the growth in these sectors. The behavioral pattern shows that many people were not comfortable with formal financial services. The reasons were difficulty in understanding language, various documents and conditions that come with financial services etc. - 44 - Joseph Massey (2010)said that role of financial institutions in a developing country is vital in promoting financial inclusion. The efforts of the government to promote financial inclusion and deepening can be further enhanced by the proactiveness on the part of capital market players including financial institutions. Financial institutions have a very crucial and a wider role to play in fostering financial inclusion. National and international forum have recognized this and efforts are seen on domestic and global levels to encourage the financial institutions to take up larger responsibilities in including the financially excluded lot. VighneswaraSwamy P M (2011) has critically analyzed the issues and challenges involved in financial inclusion for inclusive growth and have also successfully attempted to highlight the factors that can aid in achieving financial inclusion for inclusive growth in India, particularly in the context of the feared global slowdown and negative impact of high inflation on the Indian economy. And also suggested some policy choices for successful implementation of the policy of financial inclusion for sustainable growth of Indian economy. Dr.AnuragB.Singh, PriyankaTandon(2012) Stated that more than 150 million poor people have access to collateral-free loans.However there are still large sections of the world population that are excluded from the financial services market. In India half of the poor are financially excluded from the country's main stream of the banking sector. Still in India 22 percent of the people are living below the poverty - 45 - line. Their monthly income is less than $1 per day and they are living in most unliveable conditions. Dr. VivekSingla (2013) stated thatin India various challenges are faced in the way of the financial inclusion such as lack of financial education, seasonal income of the poor, physical distance of the bank’s branches, complicated procedure to avail financial services etc. Hence, Government, RBI and Industry have to take various measures to provide the benefits of financial inclusion to the weaker section of the society. There is a huge need to adopt various strategies for the financial inclusion such as adaptation of advanced technology, opening up the bank branched in rural areas, introduction of new saving schemes for low income people etc. Sachindra G R (2013) explained Financial Inclusion has far reaching consequences, which can help many people come out of hopeless poverty conditions. The financial markets must act responsibly and ensure that the spirit of financial inclusion is not breached in the future. He witnesses the challenges of financial inclusion in India agent and vendor risk, consumption oriented expenditure patterns, dormant accounts, inadequate awareness levels, lack of infrastructure. low literacy rates. measuring actual extent of financial exclusion. poor saving habits, recovery related issues, small ticket transactions & high transaction costs, sustainability factor, varied local conditions. Elisabeth Rhyne (2013) statedfrom the Global Findex, more than 2.5 billion people lack access to even a basic bank account a huge gap in inclusion and an enormous - 46 - opportunity. Demographic changes, economic growth and advances in technology are making global financial inclusion more possible than ever before. With a massive new market of people demanding new services as incomes rise among the bottom 40 percent, the stage is set for dramatic leaps in access in the next few years. Emerging technologies are bringing down costs and opening new business models while providing greater access to a range of services. M.ShahulHameedu(2014) stated that 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 all out efforts are being made as financial inclusion can truly lift the financial condition and standards of life of the poor and the disadvantaged. Parveenkumar (2014) examined that financial inclusive is an innovative concept which make alternative technique to promote banking habit of the rural people because India is considered as largest rural people consist in the world financial inclusion is aimed at providing banking and financial services to all people in fair transparent and equitable manner at affordable cost. He broadly explain the challenges involved in financial access to low income families are as socioeconomic factors, geographic factors, high operational costs, limited availability of appropriate technology, inadequate banking products, financial inclusion and banks' business plans, greater emphasis is required on financial inclusion for the aged. - 47 - PavanKapoor&Dr. AlkaSingh(2014) concluded that undoubtedly financial inclusion is playing a catalytic role for the economic and social development of society but still there is a long road ahead to achieve the desired outcomes. SomasroyChakraborty&NupurAnand (2014) Due to lack of awareness, low financial education and procedural hassles, many still prefer to borrow money from informal sources like money lenders and also rapid expansion, the number of bank branches in the country is still inadequate. C.R.L. Narasimhan (2014) said latest inclusion plan will have as its focus households rather than geographical areas. After satisfactory conduct of accounts it is proposed to offer reasonable need-based credit facilities for which overdraft facilities will be sanctioned. A smart card (RuPay card) will be issued to enable customers to operate their accounts even without BCs. Simultaneously suitable awareness will be created among the financially excluded. In the second phase, there is a proposal to make available a pension scheme for identified individuals in the unorganised sector and offer microfinance products through governmentowned insurance companies. Dr. EuginPrakashPathrose& Allen Baby (2015) stated that all commercial banks have been working under the directive of the Reserve Bank of India to ensure that every household has access to banking services. Though significant progress has been made, there are many challenges on the way. This study is a critical step in - 48 - this regard, which aims to identify the key issues faced by the target population in accessing and using financial services. 4. RESEARCH METHODOLOGY This chapter explains the methodology employed by the researcher for this research work. This chapter describes research design adopted for the study in detail, nature and sources of data collected for the study and the details about data collection to used for the research further this chapter provides detail information about the various test employed to determine the reliability of the instrument. Finally this chapter provides detail about statistical packages and tools used for analyzing the data. 4.1 RESEARCH DESIGN The main objective of the study is to determine the financial literacy and examine usage of banking services among the rural areas of kancheepuram district, Tamil Nadu. Therefore descriptive research design is adopted to study the financial inclusion to reach out rural area. It is a plan of organizing framework for doing the collection of data. 4.2 DATA COLLECTION PROCEDURE: Data refers to information or facts. It includes numerical figures, non-numerical figures, descriptive facts, and qualitative facts. Collecting the information and data is an important part in completing this thesis. Primary data can be used for this study. - 49 - PRIMARY DATA: The research is mainly based on the primary data. The data has been collected from the four villages of Kanchipuram district namely thiruvadisoolam, kannivakkam, potheri, pulikudivanam. The instrument used for the collection of data is interview schedule Theinterview schedule is prepared in English and translated to Tamil for the convenience of the respondents. SECONDARY DATA: The secondary data has been collected from the website, relevant articles and research journals. Secondary data is data that is published by an entity different from the one that originally collected and published the data, so in this study secondary data is collected from company, accounting books, journals. 4.3 RESEARCH INSTRUMENT A research instrument is a survey, interview schedule test, scale, rating, or tool designed to measure the variable(s), characteristic(s), or information of interest, often a behavioral or psychological characteristic. Research instruments can be helpful tools to your research study. Before the survey questionnaire was administered to the respondents, a pre-test of the questionnaire was conducted. The pre-test was conducted on a 50 samples and the samples were randomly selected in rural areas of kanchipuram district to fill out the questionnaire. 4.4 RELIABILITY TEST FOR DATA COLLECTION INSTRUMENT Reliability of the research instrument refers to its ability to give consistent results on repeated trials. In other words, a reliable instrument gives the same - 50 - value when measured repeatedly with the same object (Gaur & Gaur, 2009). The question of reliability arises only for the questions used to measure attitude which cannot be accurately measured. In this research, statements are used to measure Perception Towards Bank, Reasons for Not Availing Loan, and Lack of Knowledge about Banking Facilities, Source of Income from Others and Usage Of Various Schemes Of Banks. . All the statements are in five points Likert scales. The statistical package SPSS is used to calculate Cronbach alpha value for measuring the reliability of the instrument. If the alpha value is more than 0.6, it is assumed that the instrument is reliable. Initially, alpha value is calculated for the data collected through pilot study. This survey has been conducted not only for testing the reliability of data collection instrument but also for making required changes in the interview schedule in order to extract necessary information from respondents. The interview schedule has been altered based on the feedback given by the respondents during the initial pilot study.. The measured reliability values in different stages are presented in the following table. TABLE 4.4 RELIABILITY TEST VARIABLES NO OF CRONBACH'S ITEMS ALPHA Perception Towards Bank 9 .676 Reasons For Not Availing Loan 4 .693 Lack Of Knowledge About 5 .875 - 51 - Banking Facilities Source Of Income From Others 2 .787 Usage Of Various Schemes Of 5 .696 Banks Source: primary data 4.5 STATISTICAL TOOLS USED FOR THIS STUDY Statistical tools used for this study are: ¾ Percentage analysis ¾ Descriptive analysis ¾ Chi square analysis ¾ Paired t test ¾ One way Anova PERCENTAGE ANALYSIS: Percentage analysis is helpful to find a percentage and frequency of the variables used for the study. The researcher used percentage analysis for the demographic variables, usage of technology to access financial services and no frill account. DESCRIPTIVE ANALYSIS Descriptive analysis means analysis of data that helps describe, show or summarize data in a meaningful way such that, for example, patterns might emerge from the data. Descriptive statistics do not, however, allow us to make conclusions beyond the data we have analysed or reach conclusions regarding any hypotheses we might have made. They are simply a way to describe our data. Descriptive - 52 - statistics are very important because if we simply presented our raw data it would be hard to visulize what the data was showing, especially if there was a lot of it. Descriptive statistics therefore enables us to present the data in a more meaningful way, which allows simpler interpretation of the data. There are two general types of statistic that are used to describe data: ¾ Measures of central tendency ¾ Measures of spread CHI SQUARE TEST A chi-squared test, also referred to as Ȥ² test (or chi-square test), is any statistical hypothesis test in which the sampling distribution of the test statistic is a chisquare distribution when the null hypothesis is true. Chi-square is a statistical test commonly used to compare observed data with data we would expect to obtain according to a specific hypothesis. For this study the researcher has used pearson chi square test. PEARSON'S CHI-SQUARE TEST Pearson's chi-square test also known as the chi-square goodness-of-fit test or chisquare test for independence. It is used to test whether there is any difference between the observed (experimental) value and the expected (theoretical) value. PAIRED t TEST A paired t-test is used to compare two population means where you have two samples inwhich observations in one sample can be paired with observations in the - 53 - other sample. ONE WAY ANOVA The one-way analysis of variance (ANOVA) is used to determine whether there are any significant differences between the means of two or more independent (unrelated) groups. 4.6 SAMPLING TECHNIQUES For this research, the researcher has used purposive sampling. Purposive sampling also known as judgmental, selective or subjective sampling is a type of nonprobability sampling technique. Non probability sampling focuses on sampling techniques where the units that are investigated as based on the judgment of the research. 4.7 SAMPLE SIZE If the sample size (‘n’) is too small, it may not serve to achieve the objectives and if it is too large, we may incur huge cost and waste resources. The sample must be of an optimum size i.e., it should neither be excessively large nor too small. Technically, the sample size should be large enough to give a confidence interval of desired width and as such the size of the sample must be chosen by some logical process before sample is taken from the universe. Size of the sample should be determined by a researcher. For this study researcher has taken 200 samples of unbanked rural areas from kancheepuram district. - 54 - 5. DATA ANALYSIS AND INTERPRETATION 5.1 PERCENTAGE ANALYSIS 5.1.1 DEMOGRAPHIC VARIABLES OF THE RESPONDENTS Respondents were asked about their demographic profile, which included age, education, occupation, gender, monthly expenditure, maritalstatus. The Responses are presented in the form of table whichisas follows TABLE: 5.1.1 DEMOGRAPHIC VARIABLES OF THE RESPONDENTS DEMOGRAPHIC CATEGORY VARIABLES AGE 15-25 26-36 37-47 48-58 59-69 70-80 YES EDUCATION OCCUPATION MARTIAL STATUS GENDER MONTHLY EXPENDITURE FREQUENCY PERCENT 42 62 43 37 15 1 143 21.0 31.0 21.5 18.5 7.5 .5 71.5 NO 57 28.5 AGRICULTURE DAILY WAGES SELF EMPLOYMENT DEPENDENT YES NO MALE FEMALE MINIMUM RS.1000 RS. 1000-2000 RS. 2000-3000 MINIMUM RS. 3000 13 62 6.5 31.0 1 .5 124 178 22 25 175 21 19 40 120 62.0 89.0 11.0 12.5 87.5 10.5 9.5 20.0 60.0 - 55 - Source: Primary Data CHART 5..1.1 AGE OF THE RESPONDENTS 00.5% AGE GROUP 7.5% 15-25 21% 26-36 18.5% 37-47 48-58 21.5% 31% 59-69 70-80 Source: Primary Dataa CHART 5.1.22 GENDER OF THE RESPONDENTS S 'EZ WZEd ϴϳ͘ϱй ϭϬϬ ϱϬ ϭϮ͘ϱй Ϭ DĂůĞ &ĞŵĂůĞ 'EZ Source: Primary Data - 56 - CHART 5.1.3E EDUCATION OF THE RESPONDENT TS PERCENT EDUCATION 71.5% 100 28.5% 0 Literate iiliterate LITERACY Source: Primary Data CHART 5.1.44 MARITAL OF THE RESPONDENTS S DZ/d>^ddh^ ϴϵй WZEd ϭϬϬ ϱϬ ϭϭй Ϭ DĂƌƌŝĞĚ hŶŵĂƌƌŝĞĚ Source: Primary Data - 57 - CHART 5.1.5OC CCUPATION OF THE RESPONDEN NTS WZEd KhWd/KE ϴϬ ϲϬ ϰϬ ϮϬ Ϭ ϲϮй ϯϭй ϲ͘ϱ ϱй ƵůƚƵƌĞ ŐƌŝĐƵ Ϭ͘ϱй ĂŝůLJǁĂŐĞƐ ^ĞůĨ ĞŵƉůŽLJŵĞŶƚ ĞƉĞŶĚĞŶƚ KhWd/KE>s> Source: Primary Data CHART 5.1.6 MONTH HLY EXPENDITURE OF THE RESPO ONDENTS DKEd,>zyWE/dhZ WZEd ϲϬй ϲϬ ϱϬ ϰϬ ϯϬ ϮϬ ϭϬ Ϭ ϮϬй ϭϬ͘ϱй DŝŶŝŵ ŵƵŵ ZƐ͘ϭϬϬϬ ϵ͘ϱй ZƐ͘ϭϬϬϬͲϮϬϬϬ ZƐ͘ϮϬϬϬͲϯϬϬϬ DŝŶŝŵƵŵ ZƐ͘ϯϬϬϬ Source: Primary Data INTERPRETATION From the above table it is clear that, 21% of the respondents are from the age group of 15-25, 31% of the respondents are from the age group of 26 6-36, 21.5% of the respondents are betweenn the age group of 37-47, 18.5% of the reespondents are - 58 - between the age group of 48-58, 7.5% of the respondents are from age group of 59-69 and .5% of the respondents are between the age group of 70-80. It has shown that 71.5% of the respondents are educated and 28.5% of the respondents are not educated. It is noted that 6.5% of the respondents are doing agriculture, 31% of the respondents are daily wage, .5% of the respondents are self employed, 62% of the respondents are dependent. It is shown that 89% of the respondents are married and 11% of the respondents are unmarried It is given that 12.5% of the respondents are male, 87.5% of the respondents are female. It is given that 10.5% of the respondents’ expenditure is Rs.1000, 9.5% of them is in between Rs.1000-2000, 20% of the respondents is in between Rs.2000-3000, 60% of the respondents has minimum Rs.3000. TABLE: 5.1.2 USAGE OF TECHNOLOGY TO ACCESS FINANCIAL SERVICES USAGE OF TECHNOLOGY ATM CARD CREDIT CARD MOBILE USAGE FREQUENCY PERCENT YES NO YES NO YES NO 84 116 3 197 144 56 - 59 - 42.0 58.0 1.5 98.5 72.0 28.0 CHART 5.1.7 USAGE OF ATM CARD TO ACCESS FINA ANCIAL SERVICES WZEd h h^'K&dDZ^ ϲϬϬ ϰϬϬ ϮϬϬ Ϭ ϱϴй ϰϮй zĞƐ EŽ h^' Source: P Primary Data CHART 5.1.8 USAGE OF CREDIT CARD TO ACCESS FIN NANCIAL SERVICES WZEd h^^'K&Z/dZ ϭϱϬ ϵϴ͘ϱй ϭϬϬ ϱϬ Ϭ ϭ͘ϱй zĞƐ EŽ h^' Source: P Primary Data - 60 - CHART 5.1.9 USAGE E OF TELEPHONE TO ACCESS FINA ANCIAL SERVICES WZEd h^'K&d>W,KE ϭϬϬ ϳϮй Ϯϴй ϱϬ Ϭ zĞƐ EŽ h^' Source: Primary Data a having From the above table it can bbe revealed that 42% of the respondents are ATM cards and 58% of the rrespondents are not having ATM cards. It is given that 1.5 % of the rrespondents are having the credit card and 98.5% of the respondents are not haviing the credit card.From the survey it can be observed that 72% of the respondents are using mobile and 28% of the respond dents are not using mobile. LE 5.1.3 NO FRILL ACCOUNT TABL PARTICUL LARS FREQUENCY PERCENT YES 34 17.0 NO 166 83.0 TOTAL 200 100.0 - 61 - CHART 5.1.10 NO FRILL ACCOUNT EK&Z/>>KhEd WZEd ϭϬϬ ϴϯй ϴϬ ϲϬ ϰϬ ϭϳй ϮϬ Ϭ LJĞƐ ŶŽ Source: Primary Data From the above table, 17% of the respondents are having no frill account and 83% of the respondents are not having no frill account. 5.2 DESCRIPTIVE ANALYSIS TABLE: 5.2.1 AVERAGE MEAN AND STANDARD DEVIATION FOR AGE AND MONTHLY EXPENDITURE Table 5.2.1 Descriptive Statistics N Minimum Age of the respondents Monthly expenditure Maximum Mean Std. Deviation 200 1 6 2.62 1.242 200 1 4 3.29 1.016 From the above table the average mean for the age of the respondents is 2.62 and standard deviation is 1.242 and the average mean for the monthly expenditure is 3.29 and standard deviation is 1.016. - 62 - 5.3 INFERENTIAL ANALYSIS 5.3.1 CHI SQUARE TEST H0: The age of the respondents does not depend on the bank transaction with the bank officials H1: The age of the respondents depend on the bank transaction with the bank officials Table 5.3.1 Age of the respondents * bank transaction with the bank officials Cross tabulation Demographic Bank transaction with the bank officials Variable strongly Disagree disagree no agree opinion Total strongly 23 6 8 3 2 42 26-36 39 8 9 5 1 62 Age of the 37-47 21 11 6 4 1 43 respondents 48-58 18 4 9 4 2 37 59-69 4 3 5 1 2 15 70-80 P value value agree 15-25 Total Chi square 0 0 1 0 0 1 105 32 38 17 8 200 19.923 .463 Since p value is 0.463 which is greater than 0.05 hence H0 is accepted at 5% level of significance therefore the age of the respondents does not depend on the bank transaction with the bank officials. - 63 - 5.3.2 CHI SQUARE TEST H0: There is no association between demographic variables of the respondents with respect to reasons for not availing loans. H1: There is association between demographic variables of the respondents with respect to reasons for not availing loans. Table 5.3.2Chi square association for demographic variables* reasons for not availing loans Cross tabulation Demographic Reasons for not availing loans Variable Lack of High More knowledge interest formalities Age 23.169 (.281) 8.107 (.991) 22.207 (.329) Education 20.325 (.000)** Occupation 10.041 11.384(.023)* (.040)* 22.682 27.894 (.006)** 27.701 (.006)** (.031)* 1.212 (.876) 1.919 (.751) 5.955 (.203) No Documentation 24.923 (.204) 7.045 (.134) 26.357 (.010)** Gender 2.499 (.645) Marital 6.057 (.195) 3.455 (.485) 6.775 (.148) 6.557 (.161) status Monthly 19.570 (.076) 5.698 (.931) 12.601 (.399) (.569) expenditure ** denotes 1% level of significance, * denotes 5% level of significance Since p value is .281 and it is greater than 0.05 level of significance. Therefore H0 is acceptedso there is no association between age and lack of knowledge. Since p value is 0.991 and it is greater than the 0.05 significance level H0 is accepted so there is no association between age and high interest. The p value is 0.329 and it is greater than the 0.05 significance level. Hence H0 is accepted so there is no - 64 - association between age and more formalities. Since p value is 0.204 it is greater than 0.05 significance level. Therefore H0 is accepted so there is no association between age and no documentation. The p value is 0.000 hence H0 is rejected at 1% level of significanceso there is association between education and lack of knowledge. Since p value is .040 therefore H0 is rejected at 5% level of significance so there is association between education and high interest. The p value is 0.23 and it is less than the 0.05 significance level therefore H0 is rejected so there is association between education and more formalities. Since p value is 0.134 and it is greater than 0.05 significance hence H0 is accepted it is concluded thatthere is no association between education and no documentation. The p value is 0.006 hence H0 is rejected at 1% level of significance so there is association between occupation and lack of knowledge. The p value is 0.31 and it is less than 0.05 level of significance therefore H0 is rejected, there is association between occupation and high interest. Since p value is 0.006 hence H0 is rejected at 1% level of significance, there is association between occupation and more formalities. Since p value is 0.010 therefore H0 is rejected at 1% level of significance, there is association between occupation and no documentation. The p value is 0.876 which is greater than 0.05 level of significance. Hence H0 is accepted so there is no association between gender and lack of knowledge. The p value is 0.75 which is greater than 0.05 level of significance.Therefore H0 is accepted so there is no association between gender and high interest. The p value is 0.203 and it is greater than 0.05 level of significance Hence H0 is accepted so there is no association between gender and more formalities. The p value is 0.645 it is greater than 0.05 level of significance therefore H0 is accepted so there is no association between - 65 - gender and no documentation. Since p value is 0.195 and it is greater than 0.05 level of significance therefore H0 is accepted so there is no association between marital status and lack of knowledge. Since p value is 0.485 and it is greater than 0.05 level of significance. Therefore H0 is accepted so there is no association between marital status and high interest. Since p value is 0.148it is greater than 0.05 level of significance hence H0 is accepted so there is no association between marital status and more formalities. The p value is 0.161 and it is greater than 0.05 level of significance therefore H0 is accepted so there is no association between marital status and no documentation. Since p value is 0.076 and it is greater than 0.05 level of significance therefore H0 is accepted so there is no association between monthly expenditure and lack of knowledge. Since p value is 0.931 it is greater than 0.05 level of significance .Therefore H0 is accepted so there is no association between monthly expenditure and high interest. The p value is 0.399 and it is greater than 0.05 level of significance. Hence H0 is accepted so there is no association between monthly expenditure and more formalities. Since p value is 0.569 it is greaterthan 0.05 level of significance Therefore H0 is accepted so there is no association between monthly expenditure and no documentation. 5.3.3 PAIRED T TEST H0: There is no significance difference between reasons for not availing loan from bank and source of finance from others. H1: There is significance difference in attitude between reasons for not availing loan from bank and source of finance from others. - 66 - Table 5.3.3 Paired Samples Test Paired Differences 95% Confidence Interval of the Difference Upper Reasons for not Pair 1 availing loan - .808 alternate ways T Df Sig. (2tailed) .217 199 .829 Since p value 0.829 and it is greater than the 0.05 level of significance. Therefore H0 is accepted so there is no significance difference in attitude between reasons for not availing loan and methods of sourcing finance. 5.3.4 PAIRED t TEST H0: There is no significant difference between towards lack of knowledge about banking services and usage of various schemes of bank. H1: There is significant difference between lack of knowledge about banking services and usage of various schemes of bank. Table 5.3.4 Paired Samples Test Paired Differences 95% Confidence Interval of the Difference Upper Lack of knowledge about Pair 1 banking services – 2.987 usage of various schemes of bank ** denotes 1% level of significance T Sig. (2tailed) 3.707 - 67 - Df 199 .000** Since p value 0.000 it is less than the 0.01 level of significance. Therefore H0 is rejected at 1% level of significance so there is significant difference between lack of knowledge about banking services and various schemes of bank. 5.3.5 ONE WAY ANOVA H0: There is no significant difference in opinion towards source of finance from others between different occupation groups. H1: There is significant difference in opinion towards source of finance from others between different occupation groups. TABLE 5.3.5 ONE WAY ANOVA Sum of Squares Df Mean Square F Between Groups 198.770 3 66.257 4.514 .004** Within Groups 2876.585 196 14.676 Total 3075.355 199 Sig. ** denotes 1% level of significance Since P value is0.004 it is less than the 0.01 level of significance. Therefore H0 is rejected at 1% significant level so there is significant difference in opinion towards source of finance from others between different occupation groups. - 68 - 6. FINDINGS ƒ It is found that among 200 respondents, 31% of the respondents are from the age group of 26-36 and 0.5% of the respondents are comes under the age group of 7080. ƒ It is observed that 71.5% of the respondents in the rural areas are educated and 28.5% of the respondents are uneducated. ƒ It is found that. 62% of the respondents are dependent and 0.5% of the respondents are self-employed. It is observed that 6.5% of the respondents are doing agriculture and 31% of the respondents working as a daily wage. ƒ It is noticed from the survey that 89% of the respondents are married. According to this study it is observed that 87.5% of the respondents are female and 10.5% of the respondents are male. ƒ 60 % Majority of the respondents said that they need minimum Rs.3000 as monthly expenses ƒ The study shows that 58% of the respondents are not having ATM cards and 42% of the respondents are having ATM cards and also using it.. ƒ It is found that 98.5% of the respondents are not having credit cards and only 1.5% of the respondents are having credit cards. ƒ It is noticed that 72% of the respondents are having mobile and 28.5% of the respondents are not having mobile. The study shows that majority of the respondents are having mobile and using it. ƒ It is observed that 83% of the respondents are not having no frill account and only 17% of the respondents are having no frill account. - 69 - ƒ Through this study the under the age group of 26-36 of the respondents has strongly disagree. It is evidenced that there is no association between the age of the respondents does not depend on the bank transaction with the bank officials ƒ The study found that lack of knowledge, high interest, more formalities are the reasons for not availing loan ƒ There is association between demographic variables of the respondents with respect to reasons for not availing loans. ƒ The analysis shows that there is no significance difference between reasons for not availing loan from bank and source of finance from others. ƒ It is found that there is significant difference between lack of knowledge about banking services and usage of various schemes of bank. ƒ It is evidenced there is significant difference in opinion towards source of finance from othersbetween different occupation groups. 7. SUGGESTIONS The major reasons for failure of Financial Inclusion in the past in spite of initiatives were: a) absence of technology, b) lack of reach and coverage, c) inefficient delivery mechanism, d) absence of business model, and e) lack of compassion for poor among rich. But, today, there is an increase in focus on inclusive growth. Banking technology has progressed fast enough and more importantly the realization that the poor is bankable has arrived. Various immediate measures which government of India should implement or which are under implementations but should be executed in a more effective manner are - 70 - ƒ Strengthen agency banking (micro finance institutions, business facilitators and business correspondents). Our very old post offices will be an ideal channel to pursue the future long term goals of agency banking especially in rural India. ƒ Achieve synergies between the technology providers and banking channels to expand reach. Application developers will be required to synergize core banking with micro financial applications. ƒ Increase coverage under mobile banking and satellite banking and develop new platforms. ƒ Have interest rate ceilings specified for NGO/MFI for they tend to charge higher rates of interest in a sugar coated form. These legalities can be introduced once an NGO/MFI enters into partnership with a bank. ƒ Corporate social responsibility: The CSR cells of MNC's and other firms can contribute by means of a common platform or even individually. Contribution can be cash grants to registered NGO/MFI's, which will be responsible for disbursement, or the CSR cell can act as potential customers for goods produced by the cottage industries. This model has been highly successful in the United Kingdom and even in eastern rural regions. 8. CONCLUSION Developing and under-developed economies all over the globe are looking for new modes and means to contain poverty and include their citizens in the financial system. It is becoming increasingly apparent that addressing financial exclusion will require a holistic approach on the part of the banks in - 71 - creating awareness about financial products, education, and advice on money management, debt counseling, savings and affordable credit. The banks would have to evolve specific strategies to expand the outreach of their services in order to promote financial inclusion. It is widely known that financial inclusion is a means to an end and not an end in itself. Financial inclusion alone cannot lift millions of poor Indians out of poverty but the regular usage of banking products and services can provide them with an opportunity to overcome poverty and improve their lives. 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