Madhya Pradesh Gramin Bank Sagar Summer Training

7/29/2019 Madhya Pradesh Gramin Bank Sagar Summer Training

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Preface

The Project work is field which uses tools and techniques to transfer

subjectivity in the environment into objectives, also the findings of the

research, when applied show results, which can be measured and

evaluated so there is feedback this is what makes it a dynamic activity.

This survey is an analytical study of a different facts of the product. The

focus is given on the Brand profile. This project entitled Summer Training

ofMadhya Bharat Gramin Bank, is for the partial fulfillment of

B.B.A.(Hons) Degree 15TH Batch.

The idea behind this project is to give practical knowledge and to

make them to face real life situation. The project survey is commonly used

for the collection from the respondents through questionnaire. In this

method statistical techniques have been used systematically. This project

survey is not only with my own efforts but also that of others.

ASHISH RAIKWAR

BBA (HONS.) 15THBATCH


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ACKNOWLEDGEMENT

I would like to whole hearty thank and express my sincere gratitude to

Prof. Y.S. Thakur Head of the Department of Faculty of Management

Studies Dr. Hari Singh Gour Central University, Sagar for suggesting me this

problem and for giving an insight in dealing with the subject

.I am highly obliged to Mr. Himanshu Katare, Miss Mayuri Jain, Mrs. Jyoti

Pandey Miss Shakuntala Yadav Lecturer, , Mr. Ankur Randhelia, , , Dr.

Shree Bhagwat, Mr. Ankur Gautam, Miss Devagya Shrivastava, , Mr. Girbal

singh Lodhi, and All Faculty member, for guiding me in various aspects of

this project like conducting field work and designing questionnaire and

suggesting me the Project Work and helping me in finalising the Report. I

express my gratitude to all the customers who very kindly discussed various

aspects of this study and provided useful suggestions for discussing various

problems.

Lastly, I Must express my gratitude to all the elders of the family and

citizen of the city who blessed me in course of discussion. I also extend my

sincere thanks to my family and my friends for their encouragement and

support.

ASHISH RAIKWAR


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CERTIFICATE

This to certify that MR. ASHISH RAIKWAR Student of B.B.A.

(Hons) 15th Batch, Department of Business Management Dr. Hari Singh

Gour Central University, Sagar (M.P.) Has diligently worked on the

Project Report of the Summer Training of Madhya Bharat Gramin

Bank. He has done this Work under My Guidance and Supervision. This

project work is original and not submitted earlier for the award of any degree

or associate ship of any other University.

During this study he made meticulous efforts for its completion. I wish

him all the best in this sincere endeavors for a bright and successful future.

Signature of the Signature of the Signature of the

Supervisor Head of the Department Examiner

DECLARATION


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I hereby declare that the project work entitled Summer

Training Report onMadhya Bharat Gramin Bank submitted to the

Department of Business Management Dr. Hari Singh Gour Central

University, Sagar (M.P.), is a record of an original workMr. Himanshu

Katare Lecturer & Faculty Member at the Department of Business

Management Dr. Hari Singh Gour Central University , Sagar (M.P.). I also

ensure that this work done by me is purely original and is my own creativity.

Date : ASHISH RAIKWAR

Place : Enrollment no.: Y1018050004

Preface

The Project work is field which uses tools and techniques to transfer

subjectivity in the environment into objectives, also the findings of the


5/50

research, when applied show results, which can be measured and

evaluated so there is feedback this is what makes it a dynamic activity.

This survey is an analytical study of a different facts of the product. The

focus is given on the Brand profile. This project entitled Summer Training

ofMadhya Bharat Gramin Bank, is for the partial fulfillment of

B.B.A.(Hons) Degree 15TH Batch.

The idea behind this project is to give practical knowledge and to

make them to face real life situation. The project survey is commonly usedfor the collection from the respondents through questionnaire. In this

method statistical techniques have been used systematically. This project

survey is not only with my own efforts but also that of others.

DWARKA PRASAD PATEL

BBA (HONS.) 15THBATCH


6/50

ACKNOWLEDGEMENT

I would like to whole hearty thank and express my sincere gratitude to

Prof. Y.S. Thakur Head of the Department of Faculty of Management

Studies Dr. Hari Singh Gour Central University, Sagar for suggesting me this

problem and for giving an insight in dealing with the subject

.I am highly obliged to Mr. Ankur Gautam Mr. Himanshu Katare, Miss

Mayuri Jain, Mrs. Jyoti Pandey Miss Shakuntala Yadav Lecturer, , Mr.

Ankur Randhelia, , , Dr. Shree Bhagwat, , Miss Devagya Shrivastava, , Mr.

Girbal singh Lodhi, and All Faculty member, for guiding me in various

aspects of this project like conducting field work and designing questionnaire

and suggesting me the Project Work and helping me in finalising the Report.

I express my gratitude to all the customers who very kindly discussed

various aspects of this study and provided useful suggestions for discussing

various problems.

Lastly, I Must express my gratitude to all the elders of the family and

citizen of the city who blessed me in course of discussion. I also extend my

sincere thanks to my family and my friends for their encouragement and

support.

DWARKA PARASAD PATEL


7/50

CERTIFICATE

This to certify that MR. DWARKA PRASAD PATEL Student of

B.B.A. (Hons) 15th Batch, Department of Business Management Dr. Hari

Singh Gour Central University, Sagar (M.P.) Has diligently worked on

the Project Report of the Summer Training of Madhya Bharat Gramin

Bank. He has done this Work under My Guidance and Supervision. This

project work is original and not submitted earlier for the award of any degree

or associate ship of any other University.

During this study he made meticulous efforts for its completion. I wish

him all the best in this sincere endeavors for a bright and successful future.

Signature of the Signature of the Signature of the

Supervisor Head of the Department Examiner

DECLARATION


8/50

I hereby declare that the project work entitled Summer

Training Report onMadhya Bharat Gramin Bank submitted to the

Department of Business Management Dr. Hari Singh Gour Central

University, Sagar (M.P.), is a record of an original workMr. Ankur

Gautam Lecturer & Faculty Member at the Department of Business

Management Dr. Hari Singh Gour Central University , Sagar (M.P.). I also

ensure that this work done by me is purely original and is my own creativity.

Date : DWARKA PRASAD PATEL

Place : Enrollment no.: Y1018050007

CONTENTS

Preface

Acknowledgement

Declaration

Certificate of Summer Training

Certificate


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CONTENT

No. Particulars Page

No.

1. Current State of Rural Banking in India

2 Madhya Bharat Gramin Bankat Bilhara

3. Key Drivers of Financial Exclusion of RuralBanking in India

4. Reasons for Unprofitable Rural Banking in India

5. Usage Issues for Rural Customers

6. Market Opportunity of Rural Banking in India7. Improving Access of rural Banking In India

8 Research methodology

9 Objective of the Study

10 Limitation

11 Conclusion

12 Bibliography

13 Annexure

13 Questionnaire

CURRENT STATE OF RURAL BANKING IN INDIA

The Indian Economy

India is the 12th largest economy in the world in terms of gross

domestic product (GDP), and fourth in terms of purchasing power parity

(PPP)1. The growth of the economy is equally impressive with an


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average of over 8.0% during the last three years2. However, in terms

of GDP per capita, India ranks a lowly 160th among other nations.

Within the country, there is a stark divide in the incomes of urban and

rural areas with the average monthly per capita consumption

expenditure (MPCE) in urban India being almost double that of rural

India.

In addition, there are significant disparities in urban and rural

consumption expenditure between different states. Jharkhand and

Orissa, for example, have an MPCE of approximately Rs. 900 in urban

areas and Rs. 410 in rural areas4. In other states like Punjab and

Haryana, the urban rural disparity is significantly lower. A fifth of the

Indian population is below the poverty line (BPL) today with a MPCE

below Rs 340. In some states like Jharkhand and Orissa, the proportion

of BPL is greater than 40%. Diamond believes that the segments that

are not considered BPL should all be considered as potentially

bankable with genuine financial needs that could be met by formal

financial and banking systems.

Current State of Indian Banking

An important metric to determine the level of financial

outreach/inclusion is the ratio of the number of deposit accounts to

population. It gives a snapshot of the penetration of deposit accounts

and credit accounts in India in comparison with a few select countries

with similar socio-cultural and economic conditions. Even in comparison

with other developing economies, India has a significant opportunity for

increasing penetration of both deposit and credit accounts.

Not only is there a large disparity between India and other countries in

banking penetration but there is also a large variation in banking


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penetration within urban and rural India. While urban India seems to be

over-banked with more than 100% penetration (many urban Indians

have more than one bank account), rural India lags far behind with a

19% penetration. The variance in rural and urban deposit and credit

account penetration is not restricted only to few states but is common

across all states.

In addition, the average value of a deposit account and a credit

account is also quite low in rural areas as compared to urban areas.

Diamond believes that the reasons for lower penetration levels are

partly economic, as explained by the low GDP per capita in the rural

areas of the country, and partly a result of controllable factors that

are inherent in formal banking systems in India today. The low deposit

and credit account penetration and low average values in deposit and

credit accounts demonstrate that banking outreach in rural India is sub-

optimal. This low outreach can be explained by two key parameters:

access and usage.

Simply defined, access is the availability of financial services, andusage is the actual use of those services. Access is influenced by issues

such as the basic economic state of rural India, lack of physical

infrastructure facilities, regulatory constraints, and the economics of

rural banking. Usage is constrained by social issues such as illiteracy,

incomplete service offerings by banks, and high transaction costs in the

formal banking system. Access and usage are not synonymous, as

people may have access to financial services, but decide not to use

them, either for socio-cultural reasons or because opportunity costs are

too high.

List of Rural Banks in India


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Rural banking in India started since the establishment of banking

sector in India. Rural Banks in those days mainly focused upon the agro

sector. Regional rural banks in India penetrated every corner of the

country and extended a helping hand in the growth process of the

country.

SBI has 30 Regional Rural Banks in India known as RRBs. The rural

banks of SBI is spread in 13 states extending from Kashmir to

Karnataka and Himachal Pradesh to North East. The total number of

SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in

rural banking in India, there are 14,475 rural banks in the country of

which 2126 (91%) are located in remote rural areas.

Apart from SBI, there are many other banks which function for the

development of the rural areas in India. These banks are listed below:

Andhra Pradesh Bihar

Andhra Pradesh Grameena Vikas

Bank

Andhra Pragathi Grameena Bank

Deccan Grameena Bank

Chaitanya Godavari Grameena

Bank

Saptagiri Grameena Bank

Chhattisgarh

Chhattisgarh Gramin Bank

Surguja Kshetriya Gramin Bank

Durg-Rajnandgaon Gramin Bank

Haryana

Harayana Gramin Bank

Madhya Bihar Gramin Bank

Bihar Kshetriya Gramin Bank

Uttar Bihar Kshetriya Gramin Bank

Kosi Kshetriya Gramin Bank

Samastipur Kshetriya Gramin Bank

Gujarat

Dena Gujarat Gramin Bank

Baroda Gujarat Gramin Bank

Saurashtra Gramin Bank

Himachal Pradesh

Himachal Gramin Bank

Parvatiya Gramin Bank
http://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.html


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Gurgaon Gramin Bank

Jammu & Kashmir

Jammu Rural Bank

Ellaquai Dehati Bank

Kamraz Rural Bank

Assam

Assam Gramin Vikash Bank

Langpi Dehangi Rural Bank

Jharkhand

Jharkhand Gramin Bank

Vananchal Gramin Bank

Madhya Pradesh

Narmada Malwa Gramin Bank

Satpura Kshetriya Gramin Bank

Madhya Bharath Gramin Bank

Chambal-Gwalior Kshetriya

Gramin Bank Rewa-Sidhi Gramin Bank

Sharda Gramin Bank

Ratlam- Mandsaur Kshetriya

Gramin Bank

Vidisha Bhopal Kshetriya Gramin

Bank

Mahakaushal Kshetriya Gramin

Bank

Jhabua Dhar Kshetriya Gramin

Bank

Punjab

Punjab Gramin Bank

Faridkot-Bhatinda Kshetriya Gramin Bank

Malwa Gramin Bank

Kerala

Narmada Malwa Gramin Bank

North Malabar Gramin Bank

Tamil Nadu

Pandyan Grama Bank

Pallavan Grama Bank

Maharashtra

Marathwada Gramin Bank

Aurangabad -Jalna Gramin Bank

Wainganga Kshetriya Gramin Bank

Vidharbha Kshetriya Gramin Bank

Solapur Gramin Bank

Thane Gramin Bank

Ratnagiri-Sindhudurg Gramin Bank

Karnataka

Karnataka Vikas Grameena Bank

Pragathi Gramin Bank

Cauvery Kalpatharu Grameena

Rajasthan

Baroda Rajasthan Gramin Bank

Marwar Ganganagar Bikaner Gramin Bank

Rajasthan Gramin Bank


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Bank

Krishna Grameena Bank

Chikmagalur-Kodagu Grameena

Bank

Visveshvaraya Gramin Bank

JaipurThar Gramin Bank

Hodoti Kshetriya Gramin Bank

Mewar Anchalik Gramin Bank

Orissa

Kalinga Gramya Bank

Utkal Gramya Bank

Baitarani Gramya Bank

Neelachal Gramya Bank

Rushikulya Gramya Bank

West Bengal

Bangiya Gramin Vikash Bank

Paschim Banga Gramin Bank

Uttar Banga Kshetriya Gramin Bank

Meghalaya

Ka Bank Nogkyndong Ri Khasi-

Jaintia

Arunachal Pradesh

Arunachal Pradesh Rural Bank

Manipur

Manipur Rural Bank

Mizoram

Mizoram Rural Bank

Nagaland

Nagaland Rural Bank

Tripura

Tripura Gramin Bank

Uttar Pradesh

Purvanchal Gramin Bank

Kashi Gomti Samyut Gramin

Bank

Uttar Pradesh Gramin Bank

Shreyas Gramin Bank

Lucknow Kshetriya Gramin Bank

Ballia Kshetriya Gramin Bank

Triveni Kshetriya Gramin Bank

Uttaranchal

Uttaranchal Gramin Bank

Nainital Almora Kshetriya Gramin Bank
http://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.htmlhttp://finance.indiamart.com/investment_in_india/regional_rural_banks_india.html


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Madhya Bharat Gramin Bank

(A joint venture of Govt. of India, State Bank of India & State Govt. of

Madhya Pradesh)

About us :

Madhya Bharat Gramin Bank is established on 30.06.2006 by amalgamation of

3 Regional Rural Banks sponsored by State Bank of India namely Damoh Panna

Sagar Kshetriya Gramin Bank, Shivpuri Guna Kshetriya Gramin Bank &

Bundelkhand Kshetriya Gramin Bank under the notification issued by Govt. of

India (Ministry of Finance). These amalgamated RRBs were joint venture


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company established under Regional Rural Bank Act 1976 (23 of 1976). The

capital structure comprised of Govt. of India (50%), State Bank of India (35%) &

State Government of Madhya Pradesh (15%).

The Head office of the bank is at Sagar (M.P.). The Bank is serving rural masses

through its 221 branches covering 8 districts of state of Madhya Pradesh namely

Sagar, Damoh, Panna, Shivpuri, Guna, Ashoknagar, Tikamgarh & Chhatarpur.

Our Mission :

Our mission is "Prosperous Rural India". We are catering banking services to

rural people for their financial upliftment. We support marginal & small farmers,

artisans, self employed & small trader to carry on their activities by the way of

providing finances.

Products :

1. Deposit

(i) Current Account (ii) Savings Bank

(iii) Fix Deposit (iv) Recurring Deposit

(v) Tax Sever Scheme

2. Advances

(i) Kisan Credit Card (ii) Kisan Gold Card

(iii) Finance for Agriculture Allied Activity (iv) Finance for RuralArtisans

(v) Financing Self Help Group (vi) Road Transport

Operator

(vii) Small Business Finance (viii) Finance for SelfEmployed Person

(ix) Finance on ware house receipt (x) Personal loans forvehicle etc


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(xi) Finance for Rural Housing (xii) Housing loans

(xiii) Loans against NSCs, KVIP, Fix deposit receipt etc.

Services :

1. Gramin Pay order 2. Bank Guarantee

3. Cross Selling (SBI Life) 4. NEFT

Interest on Fix Deposit :

PERIOD

From 15 Days to 45 Days

From 46 Days to 90 Days

From 91 Days to 180 DaysFrom 181 Days to 240 Days

240 Days and Grater than 240 Days but less than 01 Year

01 Year and Grater than 01 Year but less than 02 Year




From 08 Years to 10 Years

Tax Saver Scheme (Lock in Period 5 years)

For Senior Citizen





From 08 Years to 10 Years

We adopt the Banking Codes and Standards & Code of Bank's commitment to Micro &

Small Enterprises formulated by The Banking Codes And Standard Board of India.

View\Download Hindi version of Codes in PDF format :

1. BankingCodeCustomers_HindiOct09.pdf

2. Code Of Bank's Commitment to Micro & Small Enterprises

Administrative Structure :

A-Board of Directors :
http://www.mbgbank.co.in/Doc/BankingCodeCustomers_HindiOct09.pdfhttp://www.mbgbank.co.in/Doc/CodeOf%20Bank_MSE_Hindi.pdfhttp://www.mbgbank.co.in/Doc/BankingCodeCustomers_HindiOct09.pdfhttp://www.mbgbank.co.in/Doc/CodeOf%20Bank_MSE_Hindi.pdf


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1. Chairman (Top Management Grade Scale VI from State Bank of India)

2. Two nominees from State Bank of India

3. One official from Reserve Bank of India

4. One official from GRAMIN BANK

5. Two officials from State Govt. (Madhya Pradesh)

6. Two non-officials Nominated by Govt. of India

Some Important Statistics :

(Amt. in Lacs)

Parameter Mar 2012 Jun2012

No. of Regional Offices 4 4

No. of District Covered 8 8

No. of Branches (as on 31 March 2012) 228 228

No. of Branches in Core Banking 228 228

No. of employees 1019 1011

Total Deposits (as 31.03.11) 20,03,96 21,03,40

Total Advances (as on 31.03.2011) 11,67,93 11,90,62No. of Kisan Credit Card Issued 22,14,11

No. of Self Help Group 16,757

Profit before Tax 9,49

Per Branch Business 13,91 14,45

Per employee Business 3,11 3,26

Per Branch Profit 2.33

Per employee Profit 0.93

List of Branches :

SrNo.

Br.Code

Name of the Branch DistrictPin

CodeTelephone

No.

1 1100 Head Office Sagar 470002 07582-237704

2 1101 Gadakota Sagar 470229 07585-258238

3 1102 Dhana Sagar 470228 07582-285218

4 1103 Surkhi Sagar 470221 07582-280224

5 1104 Khimalasa Sagar 470118 07581-284348

6 1105 Bada Bazar Sagar Sagar 470002 07582-249046


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7 1106 Bilhara Sagar 470051 07584-270408

8 1107 Barokalan Sagar 470441 07581-274213

9 1108 Bara Sagar 470335 07583-277755

10 1109 Chandpur Sagar 470227 07585-287241

11 1110 Shahpur Sagar 470669 07582-282288

12 1111 Agasaud Sagar 470114 07580-28524013 1112 Bhangarh Sagar 470113 07580-283234

14 1113 Barodiya Nongar Sagar 470117 07581-281210

15 1114 Kesali Sagar 470235 07586-224314

16 1115 Shahgarh Sagar 470339 07583-259194

17 1116 Chanaua Bujurg Sagar 470232 07585-247755

18 1117 Barayatha Sagar 470335 07583-277122

19 1118 Banda Sagar 470335 07583-252237

Contact Us :

Head Office :Poddar Colony, Tilli RoadSagar (M.P.) - 470 001Phone : (07582) 236299, 236277, 237071, 236599Fax : (07582) 236488, 237704E- mail : [email protected], [email protected] Person : N. R. Jain

Mobile : 09893820075

KEY DRIVERS OF FINANCIAL EXCLUSION OF

RURAL BANKING

According to Diamond estimates, approximately 245 million adults in

rural India do not have a bank account today. As depicted in Following

Table, this reflects 24% of the total population. While 60 million out of

245 million may not need banking services because they are below thepoverty line, Diamond believes that approximately 185 million

potentially bankable people do not use formal banking services

because of reasons like poor access or usage.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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100

47 53

16

37

1324

618

0

20

40

60

80

100

120

TotalP

opulation

NonAd

ultP

opulation

AdultP

opulatio

n

Urba

nAd

ultPop

ulatio

n

RuralA

dultPo

pulatio

n

Bank

edPop

ulation

Unba

nked

Pop

ulatio

n

Fina

ncially

Con

straint

s

Pontentia

llyBankabl

e

Series1

Source: Census India ;BSR 2008Reserve Bank of India; World Bank &

NCAER (2008).

Access Issues for Rural Customers

Access is explained in terms of infrastructure, physical distance, limited

delivery capabilities, regulatory constraints and the economics of rural

banking.

The banking infrastructure in rural India is not encouraging, with just

7% of villages housing a bank branch. Whats more, the poor physical

and social infrastructure also impacts the access to financial services,

with 23% of villages going without electricity, 67% without a Post

Office, and an average rural literacy rate of 59% and secondary school

penetration of 12%. This lack of physical and social infrastructure in

rural India is a key issue impacting access to formal financial services.

The average distance to a branch in India is approximately 3.8 Kms.

While this compares favorably to the average distance to a branch in a

developed market like the U.S. (which is 6 Kms6), there are significant

additional challenges in India in the form of unpaved roads and limited

access to modern transportation. Most rural customers are likely to

sacrifice an entire days wage to travel to a bank branch which is open


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between 10:00am and 5:00pm. While some banking transactions could

be done over phone, this is rarely an option in a country with such low

rural tele-density.

Limited delivery capability is a significant challenge. Much of rural

India is serviced through branches because ATM penetration is low and

other channels such as Phone and Internet Banking are non-existent.

Intermediaries like Non-Governmental Organizations (NGOs), Self-Help

Groups, and Micro Finance Institutions (MFIs) are being used by banks

to improve access to credit and savings. However, these channels, in

their current form, offer limited services.

There are some regulatory constraints imposed by the Reserve

Bank of India (RBI) which may inadvertently contribute further to the

lack of formal banking services in rural areas. For example, the RBI

does not allow banks to post anyperson other than a security guardat

ATMs. Hence, banks cannot deploymany ATMs in rural areas as many

rural customers require in-person support. A second regulatory

inhibitor is that new banks planning to establish a branch in a ruralarea have to receive approval fromthe Lead Bank and District Collector

of that district. Hence, banks choose not to open new branches in

certain areas evenwhen it is profitable to do so because there is no

certainty of getting approvals.

Many banks view the rural market as a regulatory requirement rather

than an economic opportunity. Banks have from time to time borne

the social cost of lending to the rural economy at rates below their

costs. They have also faced capital erosion because of the write-off of

loans, particularly agriculture loans. Banks are required via regulatory

requirements to open branches in rural areas to provide loans to

agriculture and other priority sectors.


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Current Rural Banking Channels

Description Service Provided Remarks

- Full fledged Branches and - Deposit Accounts -96% of total deposit and 95% of

Extension Counters of - Credit Accountstotal loans are with scheduled

Scheduled Commercial Banks - Remittancescommercial banks with

including Regional Rural Banks - Cardscooperative banks holding

Cooperative Banks - Third-Party Productsthe difference

- Has a high cost-to-serve

- NGOs, SHGs, MFIs and - MFIs directly lend to the poor - This

channel delivers limitedCooperatives that act as and also act as agents for

services in its current formIntermediaries to take financial he banksServices to the rural areas - SHGs borrow from banks and

are beneficiaries of loansthemselves

- Onsite - Cash Withdrawal- Negligible presence of this

ATM installed at a branch - Cash Depositchannel in rural areas

- Offsite - Money TransferATM installed at a remote - Cheque Book Request

Branch

Intermediaries

ATMOthers


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Source: Reserve Bank of India; Diamond analysis.

REASONS FOR UNPROFITABLE OF RURAL

BANKING IN INDIA

High Non-performing Loans (NPL):


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Banks have higher non-performing loans in rural areas because rural

households have irregular income and expenditure patterns. The issue

is compounded by the dependence of the rural economy on monsoons,

and loan waivers driven by political agendas. NPLs from the agriculture

sector are 7.7%, compared to 3.5% across non-agriculture sectors8. In

order for banks to view rural India as a growth opportunity, rather than

a regulatory requirement, a combination of these issues must be

addressed. Increasing financial access to rural areas is contingent upon

basic conditions such as proper infrastructure and an enabling

regulatory framework, as well as innovative thinking on the part of

commercial banks. Access issues, however, explain only one part of the

problem. Usage is an equally important issue for rural customers.

Low Ticket Size:

The average ticket size of both a deposit transaction and a credit

transaction in rural areas is small. This means that banks need more

customers per branch or channel to break even. Considering the small

catchments area of a branch in rural areas, generating a customer

base with critical mass is challenging.

High cost to serve:

Branches are the most used channel in rural areas. This is because

many rural people are not literate and are not comfortable using

technology-driven channels such as ATMs, phone banking or internet

banking. On the other hand, a branch is an expensive channel for

banks (Following Table). In addition, rural people, whenever they have

access to banks, have frequent low ticket and cash-based transactions,

which increase the overall transaction cost for their bank.


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Cost Per Transaction in Indian Banks

48

25

18

84

0

10

20

30

40

50

60

Branch Phone (Call

Centre)

ATM Phone (IVR) Internet

Series1

Source: Reserve Bank of India; CGAP, World Bank.

Higher risk of credit:

Rural households may have highly irregular and volatile income

streams. Irregular wage labor and the sale of agricultural products are

the two main sources of income for rural households. The poor rural

households (landless and marginal farmers) are particularly dependent

on irregular wage employment. Rural households also have irregularexpenditure patterns. The typical expenditure profile of rural

households is small, with daily or irregular expenses incurred through

the month. Furthermore, a majority of households incur at least one

unscheduled expenditure per year, with the most frequent reasons

being medical or social emergency7. In short, the rural customer is

generally considered to be a risky one.

Information Asymmetry:

Since many rural people do not have bank accounts, there is a lack of

information on customer behavior in rural India. Absence of a Credit

Information Bureau also complicates the problem as banks have to rely

on informal sources to learn the credit history of rural customers. A lack


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of reliable information can result in either missed opportunities in not

approving otherwise eligible loan candidates, or nonperforming loans.

USAGE ISSUES FOR RURAL CUSTOMERS

Even if access to formal banking is provided to rural customers, there is

no guarantee that these services will be used. According to a study

conducted by the World Bank, many households, even in developed

countries, choose not to have a bank account as they do not engage in


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many financial transactionsthey collect wages in cash, spend in cash

and do not wish to be burdened by a bank account9. To compound the

situation many customers in rural India, who have access to and would

otherwise choose to use formal financial services, do not do so because

the product and service mixes do not meet their needs.

The financial service needs of rural customers are not confined to just

savings and credit, as is usually assumed. Their financial needs are

linked to their life cycle needs, ranging from savings to credit to

insurance to remittances. In fact, even the savings and credit products

currently offered to rural customers do not entirely meet their needs.

Access to savings and investment facilities is critical for the poor. The

two critical needs for the rural poor are micro-savingsand frequent

withdrawals. These needs facilitate a customer in building capital

over the long term, as well as coping with income shocks in the near

term. However, banks do not offer adequate services to address these

needs. The lack of services, therefore, leaves the rural poor with little

option than to transact with the informal banking market. A studyconducted by Micro Save also concludes that the poor transact with the

informal sector because it will accept small amounts, provide doorstep

service, and ensure ease of enrolment.

Rural customers need loans not only for productive purposes but also

for consumption needs (Following Table). A part from agricultural

support, rural customers need micro credit for consumption, education

and emergencies. Though banks offer purpose free loans (personal

loans and credit cards) in urban areas quite liberally, in rural areas

sanction of such loans is significantly restricted. Therefore, the poor

raise these loans through the informal financial system (it is worth

noting that these loans taken from the informal system are almost


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always repaid or renewed12). In addition, larger households need

occasional high value micro-enterprise loans for small capital

investment. Though banks offer these loans, they require excessive

documentation and time-consuming processes which discourage

customer applications.

Purpose of Borrowing

Rural Household Borrowing

Other business

expenditure, 14%

Household

expenditure, 48%

Agricultureexpenditure, 38%

Other business

expenditure

Household

expenditure

Agriculture

expenditure

Bank Lending to Rural Households

Personel Loans, 12

Agr iculture Loan, 36

Other Business Loan

52%

Personel Loans

Agriculture Loan

Other Business Loan

A significant percentage of borrowing is toward consumption and other household expenditure, whereas

formal financial institutions in rural India provide loans primarily for productive purposes.

Source: AIDIS2008, National Sample Survey Organization (NSSO);

Diamond analysis.


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Insurance reduces the vulnerability of poor households by replacing

the uncertain prospect of large losses with the certainty of payout

against small, regular premium payments. It is integral to a

comprehensive risk management strategy for poor households. This

includes life, health, accident and asset (dwelling, crop, and livestock)

insurance. Banks and insurance firms do not offer these services in

many rural areas, leading the poor to rely on the informal financial

system.

There are many rural households which depend on weekly or monthly

remittances from their family members who have moved to urban

areas. At present, they depend on informal channels to remit the

money and consequently either risk the loss of money or pay high

transaction fees. Banks do not offer seamless remittance facilities

between urban and rural branches as many of the rural branches are

not computerized and connected to the main banks computer

systems. This often results in the beneficiary receiving the amount two

weeks after it has being transferred. This represents yet another key

service which is not provided.

The transaction cost for a rural customer to receive credit primarily

constitutes four attributes: the interest rate, loan amount received as a

percentage of amount applied, bribes paid, and the lead time to

process the loan. Though the formal banking system offers loans at

interest rates lower than informal banking systems, the time taken for

a loan to be sanctioned is high which increases uncertainty and

opportunity cost. In addition, the customer needs to pay almost 10% of

the loan amount in bribes and eventually receives an amount that is

less than what was applied for. Therefore, while the interest rates are

usurious in the informal financing system, rural customers still resort to

this channel because the waiting time to receive the loan is negligible


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and there are no indirect costs or commission. Banks also insist on

collateral security which many rural poor cannot afford.

As far as savings are concerned, though the formal banking system

provides financial security, the cost of opening and operating an

account is high. The overall cost of transacting with the formal financial

system increases for a rural person because of additional costs such as

expenses incurred to reach a branch and the opportunity cost of lost

wages. Since rural banks are generally not within an accessible area

and do not operate at convenient times, the rural customer must forgo

a days wage to reach a branch. Informal systems, on the other hand,

involve a lower transaction cost, but they are risky and in some cases

result in the loss of ones entire capital. In short, this leaves the rural

customer to choose between two unfavorable options.

In summary, the services being offered by the formal banking system

do not seem to meet the needs of the rural poor. A World Bank study

suggests that the poor apply a set of criteria to judge the services

being offered by any financial service provider, including:

ProductsAre financial services available and tailored to my needs?

CostWhat is the total cost of the service (including opportunity

cost)?

ConvenienceHow easy is it to access and use?

EligibilityAm I eligible for financial services and can they be

accessed repeatedly?

As explained earlier, the savings products offered in the current format

do not qualify as a flexible, convenient and cost-efficient service.

Similarly, loan products do not meet product and eligibility criteria. In

addition, insurance and remittance services are not even available. The


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cost of services, despite lower interest rates, is high because of other

indirect costs which make the banking services cost-inefficient.

MARKET OPPORTUNITY OF RURAL BANKING

At present, a rapidly growing urban India is the focus of the banking

sector; however, as the deposit penetration numbers suggest (Figure 3

& 4), the market is highly competitive and over banked. Despite this,

most banks are still not shifting their focus to the rural opportunity, as

they are apprehensive about the total market potential of the rural

market and the profitability of rural banking channels. Contrary to the

widely held notion, however, the rural market is attractive from both a

credit and deposit perspective. The credit demand in rural areas is

approximately Rs 1,330 billion (based on an estimate by World Bank).

There are other studies by the Planning Commission and ICICI Bank

which put the figure even higher at Rs 1,440 billion and Rs 1,500 billion

respectively. Similarly, on the deposit side, a large segment of the rural

population does not save with formal banking channels because banks

are not accessible and do not provide the appropriate products and

service, leaving a significant opportunity to grow the deposit base.

At present, the penetration of banking in rural areas is sub-optimal with

a large market remaining untapped in both the liability (~ Rs 215

billion) and asset (~ Rs 1,204 billion) sides of the business. These

estimates clearly suggest that there is sufficient demand in the rural

market to encourage banks to think seriously about rural areas as analternative growth opportunity.

As we identified earlier, access and usage are two broad concerns

which explain why the potentially bankable are unbanked. With regard

to access, the challenge for banks is to identify profitable channels that


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meet the needs of rural customers. With regard to usage, banks need

to understand the requirements of the rural customer and customize

products and services

Accordingly (Following Table).

Proposed Approach to Tap Potentially Bankable Population

Source: Diamond analysis

Convert

Potentially

Bankable

Address

Access Needs

Of Rural

Customers

Ensure

Channel

Profitability

Address

Usage Needs

Of Rural

Customers

Improve

Access

For Rural

Customers

Bank

Initiatives

To Improve

Usage

Encourage

Usage of

Services


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IMPROVING ACCESS FOR RURAL BANKING

Today, branches are the primary delivery channel in rural areas.

Though there are 32,000 commercial bank branches in India, they

cover less than 7% of total villages. Opening more branches is not

necessarily profitable as many pockets of rural areas do not have

business enough to justify an expensive branch channel. Therefore, to

improve access in rural areas, banks need to modify existing channels,

introduce new channels and identify innovative ways to integrate the

two.

Modify Existing Channels

Fortunately there are a variety of options available for banks looking tomodify their existing channels. To reduce the costs imposed by

branches, banks should consider the option ofsharing their branch

infrastructure. This would not be too dissimilar to the example of the

telecom industry sharing network infrastructure or the fast food

industry sharing food courts in urban areas. Though infrastructure

sharing may raise concerns over client confidentiality and data

leakage, in the long run banks will only benefit from such collaboration.

ATMs are an effective channel which can deliver many of the services

frequently used by a branch customer. However, ATMs, in their current

form, are not suitable for rural areas as the literacy level and

transaction ticket amount is too low. ATMs can, however, be designed


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to meet the needs of rural customers. For example, ICICI Bank is

working with IIT Chennai to develop an ATM that has a biometric

fingerprint login, accepts soiled notes, and lower value denominations.

In addition to modifying the design of the machines, banks should also

hold discussions with the RBI to allow an attendant to be posted at

ATMs. This will enhance the usability of ATMs.

Though phone banking and internet banking are cost-effective

channels, given very low tele-density and low internet penetration in

rural areas, the ability to use these channels to reach the rural

customer is low. However, phone and internet banking should be

considered once infrastructure and literacy levels improve in rural

India. A business correspondent could then run an e-kiosk to assist

customers to transact over these channels. For example, Centenary

Bank in Uganda uses internet and phone banking to provide bill

payments,money transfers and loan repayments.

Business correspondents can be provided with point-of-sale (POS)

functionality to allow customers to deposit and withdraw cash fromtheir accounts. Combining POSwith a smart card is one way to improve

access. Brazil has successfully usedbanking correspondents who use

POS and card readers to provide current accounts, loans, and

insurance, accept bill payments,and perform other transactions.

Introduce New Channels

The RBI allows banks to appoint business correspondents and

facilitators tobe used as intermediaries in providingbanking services.

NGOs, MFIs, Societies, Section 25 companies, registered NBFCs not

accepting public deposits, and Post Offices can be appointed as

Business Correspondents. Business Correspondents can provide


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several services which are not currently offered by SHGs and MFIs,

including: (i) identification of borrowers and fitment of activities; (ii)

collection and preliminary processing of loan applications including

verification of primary information/data; (iii) creating awareness about

savings and other products and education and advice on managing

money and debt counseling; (iv) processing and submission of

applications to banks; (v) promotion and nurturing Self Help

Groups/Joint Liability Groups; (vi) post-sanction monitoring; (vii)

monitoring and handholding of Self Help Groups/Joint Liability

Groups/Credit Groups/others; and (viii) follow-up for recovery; (ix)

disbursal of small value credit, (x) recovery of principal/collection of

interest (xi) collection of small value deposits (xii) sale of micro-

insurance/ mutual fund products/ pension products/ other third-party

products and (xiii) receipt and delivery of small value remittances/

other payment instruments.

The introduction of Business Correspondents may face some

challenges from labor unions. However, Diamond believes that there

may be some options to address the concerns of the current workforcewhile using Business Correspondents to capture more value from rural

customers.

Caixa Economica, a state-owned bank in Brazil, manages the countrys

lottery network and distributes government benefits. To increase the

access of its services, Caixa extensively utilizes the Banking

Correspondent channel, with 14,000 banking correspondents covering

all of Brazils 5,500 municipalities. In less than 2 years, Caixa opened

about 2.8 million new accounts and estimates that 40% of its banking

transactions are handled through the banking correspondent channel.


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Satellite offices are a cost-effective alternative to branches. These

offices can be established at fixed premises in villages and are

controlled and operated from a base branch located at a block

headquarters. All types of banking transactions may be conducted at

these offices. Banks have, however, not used this channel actively,

despite the argument that this channel is relatively less expensive, as

it can draw personnel from the main branch and can remain open for

just two days a week. This channel, therefore, is appropriate in blocks

and districts which are densely populated. In the urban areas, most

Indian banks opt for an extension counter where the business does not

justify a full-fl edged branch. Similarly, satellite branches can cater to

rural areas which do not justify a large branch.

Where banks do not find it economical to open full-fl edged branches of

satellite offices, mobile offices may be more appropriate. Mobile

offices extend banking facilities through a well-protected truck or van.

The mobile unit visits villages on specified days/ hours. The mobile

office would be affiliated with a branch of the bank, and serve areas

which have a large concentration of villages. This will not be dissimilarto the mobile ATMs implemented by some of the Indian banks in the

urban areas.

Determine the Combination of Channels

There is no one right channel or solution to improve access in rural

areas. Banks have to evaluate the trade-offs between those channels

that are most convenient to customers and those that are the most

profitable. Banks are not comfortable opening new rural branches

because many of those that already exist are unprofitable. Therefore,

determining the right combination of channels is critical to improving


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access in profitable ways. An innovative approach to improving access

will consider a combination of these channels. For example:

Branches and Satellite Branches In addition to providing regular

banking operations, providing backend support to manage and audit

the operations of business correspondents.

A low-cost, custom-made ATM Managed by a business

correspondent to bring down the operating cost and scale the channel.

An e-kioskManaged by a business correspondent with internet

banking, ATM and POS terminal in relatively large rural areas.

A business correspondentUsing manual ledgers or POS/Palmtop to

act as deposit collector and remitting agent in smaller rural areas.

While this list is not exhaustive, it highlights the need for creative

solutions that apply the right channel to the right market and

transaction. In South Africa, Capitec has combined convenient

branches along transportation routes (for example, train and bus

stations, and taxi stops). In addition, it has rolled-out debit cards and

automatic teller machines across 200 of these branches to stimulate

savings among low-income earners. Between February and August

2007, the number of customers jumped from around 30,000 to more

than 90,000.


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-


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Research Methodology:

The research methodology will include following steps:

Step 1: Data collection

(a) Primary data

Sample Size: 50

It is proposed to collect primary data from homes of common

people through proper sampling

Sample Unit: Homes of relatives, friends living in nearby area

Sampling Instrument:

Observation

Personal Interview

Telephonic Interview

Internet feedback

Sample area: Village Bilhara Distt. Sagar

(b) Secondary data

Newspaper

Magazines

Journals

Internet


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Limitations of the study:

The study may have some limitations which are listed below:

1. Primary data might not be too realistic and may suffer from

personal biases of the respondents

2. The study may suffer from financial constraints and hence the

above limited sample size.

3. Subjective nature of the study may affect its interpretation by

different individuals.


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OBJECTIVE OF THE STUDY

To know about GRAMIN BANK its service.

SWOT analysis of GRAMIN BANK.

A study on the Debt of the GRAMIN BANK.

Comparison of financial report of GRAMIN BANK of various year.


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Limitation of the study

The study is based on secondary data.

The study is confined only to specific sectors and few examples are

given only due to data and time constraints.

Researcher cannot get wide information during Research.

Researcher is only on indicator and cannot solve the problem.

This research report is part of my course-curriculum and I have

analysed the problem with the limited time and knowledge which was

at my disposal.

Complex statistical tools for data analysis have not been employed.


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CONCLUSION

There are 185 million bankable adults in rural India who are unbanked

because of access and usage issues. This presents a significant

opportunity for commercial banks.

However, to reach this market and subsequently build an inclusive

financial system, there must be a coordinated and concerted effort by

the three key stakeholders: the Government of India, the Reserve Bank

of India and the commercial banks.

In addition, a partnership between banks and business correspondents,

and collaboration amongst banks is critical.

Furthermore, banks should tailor their product and service mix to meet

ruralneeds, and adapt their delivery models to ensure commercial viability

of their rural banking operations.

ANNEXURE


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Table 1 : Bank Loan outstanding against SHGs Agency-wise Position

(Amount

Rs. crore)

Agency During

the

year

Total Bank Loan outstanding

against

SHGs as on 31 March 2008

Per

SHGbank

loan

Outstanding

(Rupees)

Out of Total :

Bank

loan outstanding

against SHGs

under

SGSY

No. of

SHGs

%

Shar

e

Amount %

Shar

e

No. of

SHGs

Amount

CommercialBanks(Public &PrivateSector)

2007-082008-09%growth

2378847

2831374

19.0

65.6

67.1

11475.47

16149.43

40.7

67.5

69.6

48,240

57,037

18.2

638283

645145

1.1

3225.92

3961.53

22.8

Regional

RuralBanks

2007-

082008-09%growth

875716

977834

11.7

24.2

23.1

4421.04

5224.42

18.2

26.0

23.0

50,485

53,428

5.8

223191

258890

16.0

1332.33

1508.10

13.2

CooperativeBanks

2007-082008-09%growth

371378

415130

11.8

10.2

9.8

1103.39

1306.00

18.4

6.5

5.8

29,711

31,460

5.9

55504

72852

31.3

258.62

392.09

51.6TOTAL 2007-08 3625941 100.0 16999.90 100.0 46,884 916978 4816.87

2008-09%growth

4224338

16.5

100.0 22679.85

33.4

100.0 53,689

14.5

976887

6.5

5861.72

21.7


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Table 2 : Agency-wise NPAs of Bank loans to SHGs

(Amount Rs.

crore)

Agency Total no. of

Banks

reported data

on NPAs

NPAs as on 31 March 2009

Outstanding

Loans

against

SHGs**

Amount of

NPAs

% of NPAs to

Outstanding

bank

loansCommercial

Banks

(Public Sector )

26 15086.65 363.27 2.4

Commercial

Banks

(Private Sector)

12 1376.93 23.83 1.7

Regional Rural

Banks

(RRBs)

72 4203.46 177.79 4.2

Cooperative

Banks

182 894.00 60.97 6.8

TOTAL 292 21561.04 625.86 2.9

Table 3 : Recovery Performance Agency-wise (All SHGs)


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Agency No. of

Banks

reported

recovery

data

No. of banks based on percentage distribution of

recovery performance of bank

loans to SHGs as on 31 March 2009

=/> 95% 80-94% 50-79% < 50%

Commercial

Banks

(Public Sector)

25 6 12 7 0

Commercial

Banks

(Private

Sector)

7 5 1 0 1

Regional Rural

Banks

65 12 31 15 7

Cooperative

Banks

170 56 58 37 19

TOTAL 267 79 102 59 27

Percentage of Banks 29.6 38.2 22.1 10.1

QUESTIONNAIRE

1. Your Age: ____________________


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2. Education Qualification.

Undergraduate

Graduate

Post graduate

3. Marital Status.

Married

Single

No. of Children: __________

5. Occupation.

Business

Profession

Service

Farming

(Please mention below the type of business/profession you are in incase of service

please mention your organization name and designation)

6.Your annual household income.

than 3 lack

8. What is your perception about different products and services offered by Bank?

Lucrative

Not lucrative

No idea


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9. Do you want to open an savings account with Damoh Panna Sagar Madhya Bharat

Kshetriya Gramin Bank ?

Yes

No

Will tell later

10. Do you have all the documents which are required to open an account?

Yes

No

Date:

Place: Signature

Thank You

BIBLIOGRAPHY


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1. World Bank 2008

2. Reserve Bank of India 2008

3. www.cia.gov

4. National Sample Survey Organization (NSSO), Household Consumer

Expenditure in India (2006)

5. Census 2006

6. Access to and Usage of Financial Services, World Bank 2008

7. RFAS, 2008, World Bank & NCAER

8. www.mbgb.gov.in

Documents

Madhya Pradesh Gramin Bank Sagar Summer Training