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FINAL REPORT FINAL REPORT FINAL REPORT FINAL REPORT FINANCIAL INCLUSION IN MAHARASHTRA: MAPPING AND ASSESSMENT OF CURRENT INSTITUTIONAL ARRANGEMENTS AND HOUSEHOLDS’ ACCESS TO FINANCIAL SERVICES Tara S. Nair Submitted to: Maharashtra State Rural Livelihood Mission (UMED) December 2014

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Page 1: FINANCIAL INCLUSION IN MAHARASHTRA: … study Final report.pdf · final report final report final report ... current institutional arrangements and households’ access to financial

FINAL REPORT FINAL REPORT FINAL REPORT FINAL REPORT

FINANCIAL INCLUSION IN MAHARASHTRA:

MAPPING AND ASSESSMENT OF

CURRENT INSTITUTIONAL ARRANGEMENTS AND

HOUSEHOLDS’ ACCESS TO FINANCIAL SERVICES

Tara S. Nair

Submitted to:

Maharashtra State Rural Livelihood Mission (UMED)

December 2014

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Acknowledgements Working on this study was an enlightening experience for me. It has unfolded in front of me the wide diversity of development challenges present within a single state and the enormity of the task that is cut out for the MSRLM. It has also revealed to me the collective strength of well directed and committed team work. I place on record my deep appreciation for the support provided by the UMED leadership – Shri Shravan Hardikar, Chief Executive Officer and Smt. Leena Bansod, Chief Operatig Officer – which helped me design and execute the study with utmost objectivity. My thanks are due to Parthasarathy T., State Mission Manager (Livelihoods) for the efficient navigation of the project. I am most indebted to the District and Block Mission Managers and their teams and the DRDA teams (at Ahmednagar and Amravati) for their unconditional support to and involvement in the study. The bright and motivated young team that carried out the field research, often in not-so-friendly conditions, deserves much appreciation. Tara Nair Ahmedabad

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Content

Acknowledgements i Content ii List of Table, Figure, Map iii

Chapter 1: Institutional Architecture of Financial Inclusion In Maharashtra:

Review of Current Status

1

1.1 Financial Inclusion in Maharashtra 1.1.1 Overall Structure of Banking

3 4

1.1.2 Cooperative Credit System 5 1.1.3 Indicators of Outreach 6

1.2 Priority Sector Advances 12 1.3 Agricultural Credit 13 1.4 Institutional Architecture of Microfinance 16

1.4.1 SHG Bank Linkage Programme 16 1.4.2 The MFI Model 22

1.5 Financial Inclusion: Achievements and Missing Links 22 References 24 Appendix 1.1 (A) Banking Network in Maharashtra 25 Appendix 1.1 (B) Volume of Business and Credit Deposit Ratio 26 Appendix 1.2 Performance of Cooperative Credit System in Maharashtra 27 Appendix 1.3 District-wise Scores and Ranks for Crisil Inclusix 27 Appendix 1.4 Digital Financial Inclusion Indicators by State 28

Chapter 2: Mapping Study of Financial Inclusion in Maharashtra: Scope,

Methodology and Context

29

2.1 Purpose and Objectives of the Study 29 2.2 Scope and Methodology 30 2.3 Approach 33 2.4 Demographic and Socio-economic Profile of Sample Households 34 2.5 Conclusion 39 Appendix A2.1 Demographic Profile of Sample Villages 40 Appendix A2.2 Employment Profile of Sample Villages 42 Appendix A2.3 Distribution of Aadhar Card by Sample Villages 44

Chapter 3: Engagement of Households with Financial Institutions and

Services

46

3.1 Institutional Arrangements in Financial Services: Village level Scenario 46 3.2 Engaging with Financial Institutions: Household level Analysis 46 3.2.1 Household Borrowing 47 3.2.2 SHG Membership 52 3.2.3 Household savings 52 3.3 Engaging with Banks 53 3.3.1 Bank Accounts: Major Features 57 3.3.2 Interaction with Bankers: Important Pointers 61

3.3.3 Access to Alternative Banking Channels 61 3.4 Conclusion: Making Sense of Accounts by Bank Appendix A3.1 Distribution of Accounts by Bank 64

Chapter 4: Conclusion: Making Sense of the Mapping Study 66

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List of Tables, Figures, Maps and Pictures

Tables Table 1.1 Position of Households availing Banking Services 2 Table 1.2 Banking Infrastructure of Maharashtra (March 2014) 5 Table 1.3 Status of Primary Agricultural Societies 6 Table 1.4 Average Population per Bank Office by District (March 2014) 7 Table 1.5 APPO by Population Group 8 Table 1.6 Credit Deposit Ratio by Population Group 8 Table 1.7 Percentage Share in Banking Business Branches Located among

Different Population Groups 10

Table 1.8 Financial Intermediation Intensity 10 Table 1.9 MFIs in Maharashtra 11 Table 1.10 Priority Sector Advances: A Break-up 12 Table 1.11 Crop Loan Disbursal by Banks 14 Table 1.12 Share in Disbursal of Crop Loans by Banks 14 Table 1.13 Crop Loan Disbursal across Districts – 2008 to 2014 15 Table 1.14 Progress of SBLP in Maharashtra 17 Table 1.15 Loan Outstanding by Commercial Banks 17 Table 1.16 Extent of Coverage of SHGs: Changing Picture 18 Table 1.17 Some SHG focused Initiatives by NABARD 19 Table 1.18 Status of NBFC-MFIs in Maharashtra 22 Table 1.19 MFIs in Maharashtra 22 Table 2.1 Sampling Frame and Number of Selected Sampling Units 31 Table 2.2 Select Development Indicators of the Study Districts (Census 2011) 33 Table 2.3 Distribution of Surveyed Households by Social Group 34 Table 2.4 Distribution of Sample Households by Poverty Category 35 Table 2.5 Status of House Ownership 36 Table 2.6 Distribution of Households by Average Landholding 36 Table 2.7 Ownership of Agricultural Land by Social Category 37 Table 2.8 Percentage of Individuals without Formal Education in the Surveyed

Households 37

Table 2.9 Possession of Aadhar Card by Respondents 38 Table 2.10 Occupational Profile of Respondent Households 39 Table 3.1 Source of Current Outstanding Debt 48 Table 3.2 Distribution of Debt by Source and Average Amount 49 Table 3.3 Distribution of Loans by Purpose 50 Table 3.4 Purpose of Loans and Major Sources 51 Table 3.5 Distribution of SHG Membership by Social Category 52 Table 3.6 Place of Savings Reported by Respondents 53 Table 3.7 Status of Bank Account Holding by Household Members 54 Table 3.8 Distribution of Bank Accounts by District and Type of Bank 55 Table 3.9 Distribution of Bank Accounts by District, Type of Bank and 56 Gender Table 3.10 Distribution of Bank Accounts by Social Groups and Gender 56 Table 3.11 Distribution of Bank Accounts by Social Group and Bank Group 57

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Table 3.12 Type of Bank Account 58 Table 3.13 Reason for Opening Bank Account 58 Table 3.14 Mode of Account Opening 59 Table 3.15 JDY Accounts 59 Table 3.16 Access to Services: Frequency of Transaction 60 Table 3.17 Reasons for Not Dealing with Banks 60 Table 3.18 Other Financial Products: Access and Use 64

Figures Figure 1.1 Movement in Credit Deposit Ratio 9 Figure 1.2 Small Borrowal Accounts: Trend 13 Figure 2.1 Sampling Scheme 30 Figure 3.1 Per Capita Bank Accounts by District 54

Maps Map 1.1 Per Capita District Income: 2011-12 4 Map 1.2 The NRLP Districts in Maharashtra 21 Map 2.1 Human Development Index 2011 32

Pictures

Picture 3.1 BCs at Work at Bank of India in Bhidi Village, Wardha 63

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Chapter 1

INSTITUTIONAL ARCHITECTURE OF FINANCIAL INCLUSION IN

MAHARSHTRA: REVIEW OF CURRENT STATUS

Financial inclusion, an expression that gained prominence in India since the mid-2000s, refers to the process of making the benefits of banking available to those sections excluded from them due to a variety of reasons. The Reserve Bank of India has defined financial inclusion as the “Process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner by regulated, mainstream institutional players”1.This definition emphasises that only the mainstream, regulated financial players are capable of bringing about meaningful financial inclusion as they have the ability to make the necessary investment in the build up phase, to cross-subsidize the services in the initial stages till they become self-sustaining and

to offer the entire suite of products to facilitate meaningful financial inclusion. Though India had undertaken many initiatives in the past (including bank nationalization, introduction of

lead bank scheme and service area approach, incorporation of regional rural banks, and mainstreaming of self help group-bank linkage programme) to extend the reach of banks to the unbanked population segments, financial inclusion became focused and structured

project since 2005.

Several estimates have shown that the access to banking by adult population in the country is far from satisfactory. The Census of India provides a rather vague idea about households’

engagement with banks by collecting information as to whether they avail banking services or not. A comparison of 2001 and 2011 Census data shows that the percentage households that reported that they make use of banking facilities increased from 35 per cent to 59 per

cent (Table 1.1). The increase in this percentage was more in the case of rural households – from 30 per cent to 54 per cent – as compared to urban households (from 49 per cent to 68

per cent).

1 K.C. Chakrabarty, ‘Financial Inclusion in India: Journey So Far And Way Forward’,

http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/CN18060913FS.pdf (accessed 13 June 2014).

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Table 1.1: Position of Households availing Banking Services

Census 2001 Census 2011

Total no. of households

Households availing banking service

Total no. of households

Households availing banking service

Number % Number %

Rural 138,271,559 41,639,949 30.1 167,826,730 91,369,805 54.4

Urban 53,692,376 26,590,693 49.5 78,865,937 53,444,983 67.8

Total 191,963,935 68,230,642 35.5 246,692,667 144,814,788 58.7

Source: Government of India (2013).

There have been efforts to develop more comprehensive and composite measures financial inclusion. For instance, an exercise done in 2010 estimated that financial inclusion in India was at medium level with the Index of Financial Inclusion (IFI) value at 0.386 on a scale of 0 to 1). The Global Findex (2012) survey of the World Bank reported that only 35 per cent

of adults in the country have a formal account and 8 per cent, a formal loan. Only 2 per cent of adults were found to use bank accounts to receive remittance while only 4 per cent used an account to receive payment from the government. In 2013 CRISIL came out with

another index to measure financial inclusion - CRISIL Inclusix - that estimated for India a score just above average - 40.1 (CRISIL, 2013). The study found that one in every two

Indians has a savings account. But access to bank loan is enjoyed by only one in every seven individuals. The study by CRISIL has reaffirmed the significant inter- and intra- state variations in

access to financial services. While the six largest cities of the country have11 per cent of all the bank branches, the bottom 50 districts have just 2 per cent of them. The southern region, historically the leading territory in banking finance business, tops the financial inclusion landscape, followed by the western region.

In the following section we will analyse the status of financial inclusion in the state of Maharashtra with the help of the available secondary data. The analysis broadly will cover aspects like the reach of banking and financial institutions including commercial banks and cooperatives, the deployment of agricultural credit and other priority credit, the role of alternative institutional arrangements like self help groups and microfinance institutions. Wherever possible disaggregated district level data will be used in the analysis.

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1.1 Financial Inclusion in Maharashtra

Maharashtra is the second largest state in India both in terms of population and geographical area (3.08 lakh sq. km.). The state has a population of 11.24 crore (Census 2011) which is 9.3 per cent of the total population of the country. The state is highly urbanised with 45.2 per cent people residing in urban areas. There are 35 districts in the state, clustered for administrative convenience under six revenue divisions viz., Konkan, Pune, Nashik, Aurangabad, Amravati and Nagpur. Maharashtra has a long tradition of having statutory bodies for planning at the district level. Services sector constitutes the largest share of gross state domestic product (GSDP) – 59.5 per cent. The share of industry in GSDP is 28 percent, while agriculture and allied sectors constitute 12.4 per cent of the state’s income. The GSDP at constant (2004-05) prices during 2011-12 stood at Rs. 787,426 crore showing an increase of 7.1 per cent over 2010-11as per the estimates reported in the Economic Survey of Maharashtra 2012-13 (GoM, 2013). The state’s contribution to the nation’s gross domestic product (GDP) is about 14 per cent. In terms of human development, Maharashtra ranks 5th in the country (India Human

Development Report, 2011). The Human Development Index (HDI) for the state is estimated as 0.572 (as against 0.467 for the country as a whole). This index, however, does not reflect the serious intra-state differences in the development experience of Maharashtra.

The district income estimates, for instance, shows that 15 out of the 35 districts (most of them in the Vidarbha region) have per capita incomes below the state average. For instance,

Nandurbar’s average income is less than a third of Mumbai’s income (Map 1.1).

Coming to the specific issue if financial inclusion, it must be noted that according to the Census of India 2011 report there were 1.64 crore households in Maharashtra wherein at least one member had accessed banking services over a period of 365 days preceding the day

of the Census household survey. These households constitute 69 per cent all households in the state. The percentage of urban households that availed bank services, as per this data, is

substantially higher (76 per cent) than that of rural households (63 per cent). It may be noted that the data released recently from the Debt and Investment Survey (70th Round) of the National Sample Survey Organisation (NSSO) pertaining to the period January-December 2013 shows the percentage of rural and urban households in Maharashtra with bank account as 76.3 per cent and 87.7 per cent respectively.

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Map 1.1

Per Capita District Income: 2011-12

Source: Government of Maharashtra (2013), Economic Survey of Maharashtra 2012-13,

Mumbai.

1.1.1 Overall Structure of Banking

As on 31 March 2014, Maharashtra’s banking infrastructure consists of 13762 banking institutions - 9235 scheduled commercial bank branches, 680 regional rural bank branches and 3838 cooperative bank offices (Table 1.2). The total number of offices of commercial banks in the state increased by2959 between 2007 and 2014 (RBI 2013; SLBC, 2014). Metro branches formed a significant chunk of all bank offices – about 40 per cent in March 2012 (RBI, 2013). The latest data furnished by SLBC, however, shows that this share has come down to 32 per cent over 2012-14. Until 2012, the pace of increment in number of branches was lower in the case rural branches compared to the others, particularly, semi-urban and urban branches. In fact, the percentage share of rural branches registered an absolute decline during 2007-12. A trend towards expansion of rural branches is visible in 2014. Their share has improved over the last couple of years along with a drop in the share of metro branches. Semi-urban and urban locations seem to continue as the sites of banking growth in Maharashtra (Appendix 1.1).

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By end March 2014, the banking system in the state has made advances Rs. 14,854 billion against deposit base of Rs. 15,650 billion (Table 1.2). The public sector commercial banks account for 74 per cent share in deposits and 83 per cent share in advances. Their share in total banking business is 78 per cent. Interestingly, the share of private sector commercial banks in deposits is greater - 22 per cent – than their share in advances – 14 per cent. Cooperative banks account for a share of about 3 per cent each in deposits and advances.

Table 1.2: Banking Infrastructure of Maharashtra (March 2014)

SCBs- Public

SCBs- Private

RRBs

LAB

Coop Banks

All banks

Rural branches (No.) 2208 213 444 4 2948 5817

Semi urban branches (No.) 1651 340 182 2 434 2609

Urban branches (No.) 1410 280 52 3 356 2101

Metro branches (No.) 2429 704 2 0 100 3235

Total branches (No.) 7698 1537 680 9 3838 13762

Deposits (Rs. Crore) 1,159,682 345,553 7141 42 52,538 1,564,956

Advances (Rs. Crore) 1,235,775 203,960 5021 51 40,622 1,485,429

Deposits (% share in all banks) 74.10 22.08 0.46 0.00 3.36 100

Advances (% share in all banks) 83.19 13.73 0.34 0.00 2.73 100

Total business (Rs. Crore) 2,395,457 549,513 12162 93 93,160 3,050,385

Business per branch (Rs. Crore) 311 358 18 10 24 222

Ratio of advances to deposits (%) 107 59 70 121 77 95

Source: SLBC (2014).

1.1.2 Cooperative Credit System The cooperative banking system in Maharashtra consists of a State Central Cooperative

Bank, 31 District Central Cooperative Banks (DCCB) and 29 District Cooperative Agriculture Rural Multipurpose Development Banks (Government of Maharashtra, 2013).

The state has the largest number of centres of state and district central cooperative banks in the country - 3860 in 2012 (31 per cent share nationally). Rural centres constitute 84 per cent of these. Maharashtra reports the largest number of Primary Agricultural Credit Societies or PACS –

21,238 - in India (Table 1.3). Their membership as in 2013 is about 1.7 crore and the loan outstanding is about Rs. 10,009 crore (Government of Maharashtra, 2014; NAFSCOB, 2011-12). Small and marginal farmers form about 80 per cent of membership. While such data looks inspiring, it may be noted that only half of the PACS in the state make any profits. About 52 per cent of the PACS are reportedly in loss (Government of Maharashtra, 2013). However, as per the data provided by the National Federation of Cooperative Banks

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Limited (NAFSCOB), 72 per cent of the PACS in the state are viable and another 28 per cent, potentially viable.

Table 1.3: Status of Primary Agricultural Societies

Govt. of Maharashtra

(2012) NAFSCOB (2011-12)

All PACS 21443 21402

Societies in loss 11246

Viable 15484

Potentially viable 5918

Membership (‘000) 15000 14230

of which,

Small farmers 2927

Marginal Farmers 9409

Rural artisans 274

SC/ST 1620

Source: Government of Maharashtra, 2013; NAFSCOB (2011-12)

Non-agricultural cooperative credit societies, known as ‘patsansthas’ or ‘patpedhis’, too have significant presence in the state 2 . These are registered under the Maharashtra Cooperative Societies Act 1960 and formed with the objective of promoting the economic interests or general welfare of members, or of the public, in accordance with co-operative principles. As on 31 March 2013 there are 22,899 non agricultural credit societies in

Maharashtra with a membership base of 2.43 crore (Government of Maharashtra, 2014). They hold deposits worth Rs.77,803 crore while the loan outstanding amounts to Rs. 49,542

crore. Thus these societies are far more in number compared to PACs and report about 5 times more business compared to the latter. If these amounts are added to the mainstream cooperative credit system, the shares of cooperatives in deposits and loans move up to 12

per cent and 9 per cent respectively.

1.1.3 Indicators of Outreach

Population per Branch Office As for the outreach of bank branches, it is found that as in June 2014 the average population per branch office (APPO) for the rural commercial banks in the state is almost double that

2 They could also be societies established with the object of facilitating the operations of such societies registered under the Act. A cooperative credit society may be registered with limited or unlimited liability. It should consist of at least ten persons (except in the case of lift irrigation societies) - each of such person being a member of a different family - who reside in the area of operation of the society. Such a society can receive deposits and loans from members and other persons as per the prescriptions of its by-laws. It can make advances to members and to depositors against deposits.

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of urban branches (including metros). While the rural commercial bank branches serve, on an average, 21,426 accounts per branch, the corresponding number for urban branches (including semi urban and metro branches) is only 5774 (Table 1.4). In the case of metros (Mumbai, Pune, Nagpur, Nashik and Thane) commercial bank branches deal with accounts 10664 on an average. However, the APPO of Mumbai is just 3126. Districts of Beed, Hingoli are Nandurbar the most disadvantaged as the rural bank offices in these districts have to deal with 35000 to 40000 accounts per branch. Dhule, Gadchiroli and Nanded also have larger APPO figures indicating the scope to expand bank outreach further.

Table 1.4: Average Population per Bank Office by District (March 2014)

District Total Rural Urban Metro

Ahmednagar 13323 22273 3934

Akola 13144 21042 5412

Amravati 13250 21278 4987

Aurangabad 14515 23383 5645

Bhandara 8698 14007 2598

Bid 25098 44059 8572

Buldana 16579 29106 6237

Chandrapur 11915 16424 5786

Dhule 19532 31486 6275

Gadchiroli 17589 31830 3689

Gondia 15744 24368 3586

Hingoli 21406 39944 5416

Jalgaon 16145 29164 5863

Jalna 19206 35147 4338

Kolhapur 10918 17758 3727

Latur 16925 31538 4960

Mumbai 3126

Mumbai Suburban 9954

Nagpur 8949 11990 6720 13237

Nanded 18884 32203 5973

Nandurbar 24240 38134 8102

Nashik 14576 24892 8066 13472

Osmanabad 15938 27530 5019

Parbhani 18179 33323 6331

Pune 8533 14713 6138 10310

Raigarh 8181 10146 4430

Ratnagiri 8157 11168 3256

Sangli 11566 21457 3442

Satara 12015 21160 3316

Sindhudurg 6743 8948 2489

Solapur 14787 24121 5340

Thane 11754 20202 6962 7247

Wardha 10162 14385 4601

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Washim 17350 31798 5421

Yavatmal 17008 29783 5201

Maharashtra 11323 21456 5775 10664

Source: Census of India (2011); SLBC (2014). If you include the cooperative banks in the analysis, the APPO for rural population improves to 10582, though there is not much change in the urban and metro regions (Table 1.5).

Table 1.5: APPO by Population Group

Only SCB

SCB plus cooperatives and others

Total 11323 8165

Rural 21455 10582

Urban 5775 6396

Metros 9586 9289

Source: Census of India (2011); SLBC (2014).

Credit Deposit Ratio The RBI data shows that the overall credit deposit ratio of Maharashtra dropped steadily from 97 per cent to 83 percent during 2007-11. Again it increased significantly in 2012

(Table 1.6 and Figure 1.1). The data given by the SLBC for 31 March 2014 shows that the CDR is 95.53 percent (Rs.1,512,417 crore deposits and Rs.1,440,808 crore advances).

Table 1.6: Credit Deposit Ratio by Population Group

Year

CD Ratio

Rural Semi urban Urban Metro All

2007 91.9 66.7 53.1 100.2 96.8

2008 80.2 61.1 50.6 97.5 93.9

2009 73.4 55.0 43.7 95.8 91.2

2010 73.0 54.9 48.8 86.1 82.9

2011 71.9 57.2 51.0 85.9 83.0

2012 77.7 55.1 52.5 96.1 91.8

Source: SLBC (various years).

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Figure 1.1: Movement in Credit Deposit Ratio

75

80

85

90

95

100

2007 2008 2009 2010 2011 2012

Year

CD

ra

tio

- O

ve

ra

ll

CDR-Overall

Structure of Banking Business

We have presented in Table 1.7 a comparative picture of three states – Maharashtra and two of its peers, Gujarat and Tamil Nadu - in terms of percentage share of branches among different population groups. A look at the share of different population groups in Table 7 makes it clear that the changes in state level CDR are driven by the metro branches in all the three states. However, in Maharashtra about 90 per cent of the banking business is

concentrated in metro branches. The share of metro-centric banking business all over India is 56 per cent, while it is around 50 per cent in both Gujarat and Tamil Nadu. In other words, the share of different population groups in credit and deposits reveals the gross disparity between rural and urban-metro areas in Maharashtra.

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Table 1.7: Percentage Share in Banking Business Branches Located among Different

Population Groups

Percentage share

Maharashtra Gujarat Tamil Nadu India

Deposits

Rural 2.2 11.2 8.5 9.4

Semi urban 3.8 16.7 19.3 13.9

Urban 5.4 22.0 22.6 20.9

Metro 88.6 50.1 49.5 55.8

Total 100 100 100 100

Credit

Rural 1.9 7.4 8.3 7.9

Semi urban 2.3 10.4 15.9 9.6

Urban 3.1 12.3 22.9 16.3

Metro 92.7 69.9 53.0 66.2

Total 100 100 100 100

Total business

Rural 2.1 9.6 8.4 8.8

Metro 90.6 58.3 51.4 60.4

Intensity of Financial Intermediation Extending the comparative analysis, we have worked out the amount of deposit and credit per persons of working age (age 15-59) for the three states as an indicator of the intensity of

financial intermediation (Table 1.8). Maharashtra’s position with respect to rural financial intermediation intensity is the lowest among the three. But Maharashtra far outpaces the

other two states when it comes to urban financial intermediation.

Table 1.8: Financial Intermediation Intensity

Inter-district Differences in Banking Access

The skewness in banking access in favour of the larger and more urbanized districts is evident in the Census 2011 data presented in Table 1.9. As is evident, the top 5 districts have a much larger share – 76 per cent overall - of bank-accessed households compared to the bottom 5 districts – just about 10 per cent overall. Even among the top ones rural households with bank access is systematically lower than the urban households. These

State

Rural Urban including metro

Deposit per person

Credit per person Deposit per person

Credit per person

Maharashtra 9246 7184 424271 397251

Gujarat 16231 7548 128099 102805

Tamil Nadu 14120 16023 122632 150632

India 11844 7863 189434 161008

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districts account for 37 per cent of all households in the state and 40 per cent of households with banking access. At the lower end, the bottom 5 districts account for only less than 2 per cent of households with banking access though their collective share in all households is around 11 per cent. Interestingly, even in these districts the urban population has better access to banking compared to their rural counterparts.

Table 1.9: Banking Access in the Top 5 and Bottom 5 Districts – Census 2011

Districts

Share in Census households (2011) Share in households with banking access (2011)

Total Rural Urban Total Rural Urban

Top 5

Thane 10.20 4.04 17.61 11.00 (74.32)

3.60 (55.98)

18.39 (79.39)

Mumbai (sub) 8.51 0.00 18.75 10.63 (86.06) 0.00

21.23 (86.06)

Pune 8.71 5.72 12.32 10.23 (80.84)

6.85 (75.45)

13.59 (83.86)

Nashik 4.95 5.09 4.79 4.48

(62.26) 4.76

(58.90) 4.20

(66.55)

Nagpur 4.18 2.49 6.21 4.30

(70.80) 2.63

(66.28) 5.96

(72.99)

All 5 districts 36.55 17.34 59.68 40.64 (76.57)

17.83 (64.74)

63.36 (80.71)

Bottom 5

Nandurbar 1.34 2.08 0.45 0.14 (7.25)

0.24 (7.20)

0.04 (7.52)

Buldana 2.32 3.42 1.00 0.27 (7.88)

0.41 (7.62)

0.12 (8.94)

Jalgaon 3.74 4.75 2.53 0.56

(10.36) 0.58 (7.70)

0.54 (16.38)

Dhule 1.72 2.30 1.02 0.31

(12.62) 0.33 (9.08)

0.30 (22.25)

Akola 1.64 1.90 1.33 0.32

(13.28) 0.30

(10.07) 0.33

(18.83)

All 5 districts 10.76 14.45 6.32 1.60

(10.24) 1.87 (8.14)

1.33 (16.03)

Maharashtra 100

(23,830,580) 100

(13,016,652) 100

(10,813,928) 100

(16,414,892) 100

(8,193,623) 100

(8,221,269)

Source: Government of India, Census of India 2011, HH-Series Tables: Number of Households Availing

Banking Services and Number of Households Having each of the Specified Assets, Office of the Registrar

General and Census Commissioner, New Delhi. Available at http://www.censusindia.gov.in/2011census/hlo/District_Tables/Distt_table/32/HH4012-3200DCRC.pdf

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1.2 Priority Sector Advances As on 31 March 2014 outstanding advances to priority sector in the state stood at Rs. 321872 crore, an increase of 20 per cent over 2011-12. Over the four year period 2010-14 there was increase of 48 per cent. Further, the advances to priority sector formed 27.5 per cent of those to non-priority sectors (Rs. 1171201 crore). The share of public sector commercial banks in priority lending is the highest – 60.8 per cent, followed by private sector banks – 35.6 per cent. RRBs and cooperative banks have minuscule shares – 1.4 per cent and 2.2 per cent respectively. Table 1.10 shows the detailed break up of priority sector advances for the period 2010 -12. It is clear that outstanding advances to agriculture and allied sectors have come to be stagnated around Rs. 54000 crore. SHG advances, however, doubled over the three years.

Table 1.10: Priority Sector Advances: A Break-up

2010 2011 2012

Growth (%) 2010-12

No. of Accounts

Amount (Rs. Crore)

No. of Accounts

Amount (Rs. Crore)

No. of Accounts

Amount (Rs.

Crore)

Agriculture and allied activities 2857 50447 2587 54577 3149 54783 8.60

Small enterprises 778 71556 963 109427 1037 100619 40.62

Housing 715 56428 738 70162 837 80016 41.80

Self help groups 145 765 176 993 186 1556 103.40

Other priority sectors 129 2974 144 3551 156 3879 30.43

Total 1 15273 1 19396 3 27401 79.41

4625 197443 4609 258106 5368 268254 35.86

The SLBC has observed that the banks do not receive enough loan applications from minority communities. There is a lack of awareness of among them of bank schemes.

It may also be noted that the share of small borrowal accounts (SBA), accounts with credit limit less than Rs.200,000 has steadily declined in the state (Figure 1.2). This shows the diminishing attention to the financial needs of borrowers of small means, which has serious implications for financial inclusion.

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Figure 1.2: Small Borrowal Accounts: Trend

0

5

10

15

20

25

30

35

40

45

Year

% s

ha

re

Rural Semi urban Urban Metro

Rural 38.31 39.87 37.35 34.08 32.47 28.83

Semi urban 28.61 29.38 25.86 23.79 20.93 22.13

Urban 15.63 14.49 12.02 9.67 7.82 7.16

M etro 4.28 4.77 4.23 2.34 1.67 1.98

2007 2008 2009 2010 2011 2012

1.3 Agricultural Credit Timely credit is a critical need of the state’s farmers suffering perennially from inadequacy

of irrigation. As per the Socio-Economic Survey 2012-13, close to 71 per cent of cultivable land

in the state is rain-fed. The disbursal of agricultural credit rose by 114 per cent between 2010-11 and 2013-14 from Rs. 18505 crore to Rs. 39684 crore. Nearly 80 per cent of these loans were extended as crop loans3 or short term production credit meant to help farmers raise crops. The available data shows that disbursal of crop loans has grown from Rs. 6445

crore in 2008-09 to Rs. 31,426 in 2013-14 or by about 5 times (Table 1.11). The increase has been more pronounced in the case of scheduled commercial banks (including RRBs) compared to cooperative banks.What is to be noted is the gradual decline in the contribution of cooperative banks towards crop loans; their share dropped from 63 per cent to 43 per cent in a span of 5 years (2009-10 to 1013-14).

3The Government of India introduced the Interest Subvention Scheme in 2006-07 to make short-

term crop loans up to Rs. 3 lakh for a period of one year available to farmers at the interest rate

of 7 per cent per annum. Additional interest subvention was announced by the central

government in 2009-10 to those farmers who make timely repayment. The additional subvention

was 1% in 2009-10, 2% in 2010-11 and 3% thereafter.

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By 31 March 2013 the total number of Kisan Credit Cards (KCC) issued by the banking system stood at 10.72 lakh with loans worth Rs. 12143 crore sanctioned against them. Commercial banks accounted for 84 of the sanctioned loans and 69 per cent of cards. Cooperative banks come next with a share of 12 per cent in loans and 23 per cent in cards. RRBs accounted for the rest. The average loan in KCC was Rs. 60000 for cooperative banks and RRBs and Rs. 1.39 for commercial banks (SLBC, 2014).

Table 1.11: Crop Loan Disbursal by Banks

Total Agri Loan Disbursed (Rs. crore)

Total Crop loan Disbursed (Rs. crore)

Loan (Rs. crore) disbursal by

SCB Coop Bank RRB

2008-09 9625 6445 2477 (38.4) 3683 (57.1) 286 (4.4)

2009-10 15214 11590 3751 (32.4) 7316 (63.1) 524 (4.5)

2010-11 18505 13375 5567 (41.6) 7205 (53.9) 603 (4.5)

2011-12 24227 19493 8146 (41.8) 10401 (53.4) 947 (4.9)

2012-13 30666 25197 11325 (44.9) 12507 (49.6) 1365 (5.4)

2013-14 39684 31426 16461 (52.4) 13354 (42.5) 1611 (5.1)

Source: SLBC (2012, 2013,2014). Note: Figures in brackets are percentage share in total crop loan (column 3).

In Table 1.12 we have presented the share of the major banks in crop loan disbursal. In 2013-14 the top 5 public sector commercial banks together accounted for 38 per cent of all

the crop loans disbursed in the state (up from 32 per cent in the previous year). Among the private sector banks ICICI Bank had the largest share – 1.75 per cent. Bank of Baroda, Dena Bank and Union bank of India, the public sector SCBs, too have been playing an

important role in disbursing crop loans in the state. Among private sector SCBs, Axis Bank and HDFC Bank have raised their stake in the recent years.

Table 1.12: Share in Disbursal of Crop Loans by Banks Bank 2008-09 2009-10 2010-11 2011-12 2013-14

State Bank of India

9.25 7.01 6.75 11.38 12.8 13.87

Bank of Maharashtra

5.34 5.37 7.81 7.04 7.6 8.86

Bank of India 6.75 5.45 4.44 5.84 5.3 6.04

State Bank of Hyderabad

0.00 2.54 2.92 3.46 3.8 4.62

Central Bank of India

2.22 0.00 2.65 2.44 2.9 4.20

ICICI Bank 1.95 0.47 1.2 1.75

Gramin Banks 4.44 4.52 4.76 4.86 5.4 5.13

DCCBs 57.14 63.12 62.52 53.36 49.6 42.49

All banks 100 100 100 100 100 100

Source: SLBC (2012, 2013,2014).

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We have presented the district level analysis of crop loans disbursed between 2008 and 2014 in Table 1.13. The analysis compares crop loans disbursed during two triennia, 2008-11 and 2011-14 by looking at the growth rates. It further estimates the crop loan per cultivators (based on district level Primary Census Abstract 2011). In terms of average crop loan per cultivator the top 5 five districts are Akola, Amravati, Jalgaon, Wardha and Nagpur while Thane, Raigad and Gadchiroli are at the bottom. Thane has registered the lowest growth rate in crop loan disbursal followed by Kolhapur, Gondia, Aurangabad, Sangli and Beed in that order. The growth rates between the two triennia considered here was the highest for Bhandara, Solapur, Dhule, Raigad, Ratnagiri and Nanded. Raigad has one of the lowest crop loan per cultivator, but it has improved substantially (more than tripled) over the six year period since 2008-09. Ratnagiri is other district with similar growth experience. Interestingly we found negative correlation (-0.189) between the population of cultivators and percentage of growth of average crop loan per cultivator across states.

Table 1.13: Crop Loan Disbursal across Districts – 2008 to 2014

District

Crop loan (Rs. Crore) Population of

Cultivators (2011) census

Crop loan per cultivator (Rs.)

2008-11 2011-14 2008-11 2011-14 %

growth

1 Akola 612 1580 120,136 50,905 131,518 158

2 Amravati 864 2380 181,436 47,617 131,176 175

3 Jalgaon 1543 4607 358,786 42,994 128,405 199

4 Wardha 357 1347 124,563 28,666 108,138 277

5 Nagpur 833 1912 188,844 44,133 101,248 129

6 Washim 621 1367 154,583 40,152 88,431 120

7 Yavatmal 1101 2743 310,818 35,410 88,251 149

8 Bhandara 167 850 101,040 16,495 84,125 410

9 Solapur 1044 5072 607,657 17,187 83,468 386

10 Nashik 3112 7250 900,810 34,542 80,483 133

11 Kolhapur 3320 4559 594,056 55,890 76,744 37

12 Latur 816 2355 311,209 26,210 75,673 189

13 Nanded 764 3120 416,826 18,325 74,851 308

14 Satara 1822 3759 521,786 34,928 72,041 106

15 Parbhani 896 1986 281,771 31,814 70,483 122

16 Sangli 1573 2876 432,058 36,402 66,565 83

17 Chandrapur 628 1256 192,568 32,596 65,224 100

18 Pune 2556 5368 832,261 30,710 64,499 110

19 Buldhana 701 2239 363,983 19,251 61,514 220

20 Sindhudurg 165 493 82,966 19,865 59,422 199

21 Osmanabad 708 1620 284,235 24,898 56,995 129

22 Ahmednagar 1873 5264 968,974 19,330 54,326 181

23 Dhule 249 1152 220,641 11,302 52,212 362

24 Jalna 771 2028 398646 19,333 50,872 163

25 Nandurbar 380 966 192,433 19,743 50,199 154

26 Hingoli 370 1062 227,,284 16,300 46,726 187

27 Beed 1320 2517 581,109 22,708 43,314 91

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28 Aurangabad 1215 2214 525,657 23,107 42,119 82

29 Ratnagiri 187 768 232,413 8,054 33,045 310

30 Gondia 299 433 137,183 21,820 31,564 45

31 Thane 366 445 272,871 13,399 16,308 22

32 Raigad 62 260 166,000 3,721 15,663 321

33 Gadchiroli 119 268 178,169 6,665 15,042 126

All districts 31,411 76,116 11,478,075 27,366 66,314 142

Source: SLBC (2014). The SLBC notes that the banks have to face serious difficulties while advancing crop loans, which include non availability of the required documents with the farmers (7/12 extract, mutation entries, noting of bank’s charge on revenue records etc.). It soften not easy to get ‘no due certificates’ from co- operative societies. Farmers also fail to produce proof that they cultivate their land as tenant farmers/share croppers/ oral lessees etc. During the kharif season the work load for rural branches increases significantly making it difficult for them to cope with. Another important observation is that

1.4 Institutional Architecture of Microfinance

1.4.1 SHG Bank Linkage Programme

Maharashtra has witnessed the growth of both Self Help Group-Bank Linkage (SBLP) and microfinance institution (MFI) models. The Status of Microfinance Report 2012-13 brought out

by NABARD reports that there are 687,717 SHGs in the state that have bank savings.

Outstanding bank loans are reported in the case of 219651 SHGs.

From Table 1.14 that depicts the progress of SBLP in the state it is clear that some restructuring took place in the programme between 2011-12 and 2012-13. The major change is the decline of 16.8 percent in the absolute number of SHGs and 20 per cent in the amount of savings . Commercial banks show the greatest decline – 31 per cent. The number of SHGs saving with RRBs has come down by 6 per cent. But RRBS performed much better

than others. They registered high growth in the number of credit linked SHGs (48 %), amount of savings (66 %) and amount of loan outstanding (20 %). Though cooperative banks do not show any significant fall in groups that save with them, the amount SHG savings fell by 11 per cent. Similarly, the number of groups with loan outstanding decreased by 14 per cent while the amount of loan outstanding against SHGs grew by 6 per cent. It may be noted that out of the 31 DCCBs, 11 are financially weak and not in any position to support the SHG linkage programme.

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Table 1.14: Progress of SBLP in Maharashtra

No. of SHGs -

Saving

No. of SHGs

Loan outstanding

Savings

(Rs. lakh)

Loan outstanding

(Rs. Lakh)

2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13

Comm.

Banks 430614 297339 114666 118161 45357 24349 82621 84581

RRB 94519 89044 26066 38579 3882 6444 19045 22808

Coop.

banks 301914 301334 73280 62911 23123 20578 14588 15511

Total 827047 687717 214012 219651 72362 51370 116254 122900

%

growth -16.85 2.63 -29.01 5.72

% share in respective total

Comm.

Banks 52.07 43.24 53.58 53.79 62.68 47.40 71.07 68.82

RRB 11.43 12.95 12.18 17.56 5.36 12.54 16.38 18.56

Coop.

banks 36.51 43.82 34.24 28.64 31.95 40.06 12.55 12.62

Total 100 100 100 100 100 100 100 100

Source: NABARD (2012-13).

Table 1.15 clearly shows that the combined share of the top five public sector commercial

banks in credit flow to SBLP fell between 2011-12 and 2013-14 – from 85 per cent to 80 per cent. But, interestingly, during the period between 2011-12 and 2012-13 the top two private sector banks improved their shares from under one per cent to 10 per cent. The data for

2013-14 is not available.

Table 1.15: Loan Outstanding by Commercial Banks

2011-12 2012-13 2013-14

Top 5 PSBs

Bank of India 9445 9531 12432

Bank of Maharashtra 18378 15652 15356

Central Bank of India 17433 15111 7968

State Bank of India 17593 17751 15905

IDBI Bank 6442

State Bank of Hyderabad 4588 52r 79

Top 5 PSBs 69291 62633 56940

All PSBs 81355 75639 71445

% share of Top 5 85.17 82.81 79.70

Top 2 PvtSBs

ICICI Bank 929 5246

HDFC Bank 260 3213

Top 2 Private sector banks 1189 8459

All PvtSBs 1265 8941

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All banks 95614 90563

% share of public sector banks 85.09 83.52

% share private sector banks 1.32 9.87

According to NABARD, the changes in the numbers of SHGs and the flow of funds into SBLP need to be understood in context where the reporting of operating savings accounts overall improved. Banks have been directed to report only operative savings accounts of SHGs generated from the core banking solution (CBS). This means that banks no longer report cumulative numbers. In some instances banks closed down accounts with ‘Nil’ balances in SHGs savings accounts. While ‘data cleansing’ has improved the quality of data, the numbers suddenly registered a fall. Added to these is the gradual decline in the number of SGSY groups linked with banks through savings as the government gradually shifted the focus to NRLM(NABARD, 2012-13). Despite the reduced numbers, the state seems to have made good progress in broad-basing

SHGs. A look at the comparative position of districts between 2011-12 and 2012-13 in Table 1.16 clearly shows that most of them have experienced an increase in coverage of SHGs.

Table 1.16: Extent of Coverage of SHGs: Changing Picture

Extent of coverage

Districts

2011-12

2012-13

Above 80 per cent

Thane, Pune, Ahmednagar, Yavatmal, Chandrapur, Nagpur

Thane, Pune, Ahmednagar, Aurangabad, Sindhudurg,

Osmanabad, Latur, Yavatmal, Chandrapur, Nagpur, Bhandara

50 – 80 per cent

Ratnagiri, Sangli, Aurangabad, Beed, Parbhani, Nanded, Jalna, Buldana, Akola, Amravati,

Wardha, Gadchiroli

Raigad, Ratnagiri, Sangli, Beed Parbhani, Nanded, Hingoli, Jalna, Buldana, Akola,

Amravati, Wardha, Gadchiroli

Below 50 per

cent

Kolhapur, Satara, Raigad,

Nashik, Dhule, Nandurbar, Jalgaon, Solapur, Osmanabad,

Latur, Washim, Hingoli, Bhandara, Gondia

Kolhapur, Satara, Solapur,

Nashik, Nandurbar, Dhule, Jalgaon, Washim, Gondia

Source: NABARD (2012-13). It must be noted that Maharashtra is among the 10 focus states where NABARD intends to make promotional interventions under the SBLP during 2014-17. Many innovative projects are being piloted or implemented in many parts of the state. We have listed the recent ones in Table 1.17.

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Table 1.17: Some SHG focused Initiatives by NABARD

• Voluntary savings pilot to facilitate purpose oriented additional savings in credit linked SHGs

• Web based and Tablet PC-based accounting pilot in Nandurbar to facilitate field staff SHG members to enter data and generate reports

• Credit with mentoring support for rural entrepreneurs (with Rang De)

• Loans to construct toilets for SHG members (with Nagarjuna Charitable Trust) in Nagpur and adjoining districts

The state has witnessed some innovative experiments where SHGs have grown beyond sheer conduits of finances. For instance, Chaitanya has developed a system for legal counseling with SHG members acting as barefoot legal counsellors.

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Source: NABARD, Status of Microfinance in India 2013-14.

Other major SHG Initiatives The Mahila Arthik Vikas Mahamandal (MAVIM), the state agency mandated to work for

women's empowerment in the state, is one of the largest self help promoting institutions in Maharashtra. Since its setting up MAVIM has beenorganising SHGs of women under

various programmes like the Maharashtra Rural Credit Programme, the SGSY, the Swayamsiddha programme, Ramai Mahila Sakshamikaran programme, Rashtriya Sam Vikas Yojana, Krushi Saptak Yojana, and Tribal Development programme. Currently it implements the IFAD-supported project, the Tejaswini Maharashtra Rural Women Empowerment Programme, under which a total of 67,319 SHGs (with close to 880,000

members) have been formed . These are supported by 315 Community Managed Resource Centres (CMRC).About 30 per cent of SHG accounts under MAVIM are with the DCCBs. Financial inclusion is one of the three pillars of the National Rural Livelihoods Mission

(NRLM) launched by the Ministry of Rural Development (MoRD), Government of India in 2011 as a restructured version of Swarna Jayanti Gram Swarozgar Yojna (SGSY). The other two pillars are social mobilization and institution building. The National Rural Livelihoods Mission was launched in Maharashtra in 2011 with the aim of eradicating of rural poverty by building sustainable institutions of poor and ultimately leading them to sustainable livelihoods. The basic purpose of NRLM is to put in place a dedicated and sensitive support structure from the national level to the sub-district level which will focus on the poor, build and sustain their organizations at different levels. This will provide the poor a platform for collective action based on self-help and mutual cooperation, build linkages with mainstream institutions, including banks, and government departments to address the various dimensions of poverty. For the implementation of the Mission in the state, an independent society named ‘Maharashtra State Rural Livelihoods Mission’ (MSRLM) has been created and registered under the Societies Registration Act 1860. Out of the 33 districts that have rural areas, MSRLM is working in 10 districts in intensive mode, and in 23 districts in non-intensive mode.

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Map 1.2

The NRLP Districts in Maharashtra

Making poor the preferred clients of the banking system and mobilizing bank credit is core

to the NRLM financial inclusion and investment strategy. The approach of the Mission is to facilitate all beneficiaries, SHGs and their federations to open saving accounts with banks as the first step. Eventually they would be helped to avail of the full range of banking services including savings, credit and remittances as also insurance services. The Mission has the scope to provide for both supply and demand side activities of rural finance value chain. Some of the activities proposed under the Mission are promotion of financial literacy; counselling services on savings, credit and insurance; capacity building for micro investment planning (SHG level); and positioning of Bank Mitras and Bima Mitras as relationship managers.

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1.4.2 The MFI Model

As per the data published by the Microfinance Institutions Network (MFIN), as of 31 March 2014 there are 22 NBFC-MFIs operating in Maharashtra – the highest among all states in the country – with a client base of 24.4 lakh. During 2013-14 they together disbursed Rs. 2740 crore (Table 1.18). Over the year 2012-14 the annual loan disbursal by these MFIs grew 50 per cent in terms of number of loans and 55 per cent in terms of amount. Maharashtra is among the top 5 states in gross loan portfolio, loans disbursed, number of clients and number of branches4. The major MFIs in the for-profit and non profit sectors are listed in Table 1.19.

Table 1.18: Status of NBFC-MFIs in Maharashtra 2012-13 2013-14

Number 19 22

Gross Loan Portfolio (Rs. Crore) 1722 2470

Clients (in lakh) 19.4 24.4

Loan outstanding per client (Rs.) 8887 10115

Loan disbursed in annually (Rs. Crore) 1769 2740

Loans disbursed (number in lakh) 12.8 19.3

Average loan disbursed (Rs.) 13832 14119

Branches 682 816

Employees 5096 6219

Source: MFIN (2014); http://www.sa-dhan.net/files/Sa-dhan-indian-map.htm

Table 1.19: MFIs in Maharashtra NBFC-MFI Others

Asmitha, Bandhan, BSFL, Equitas, ESAF, GV, GFSL, Jagdhan, Janalakshmi, L&T, Madura, Panchratna, Sahyog, SHARE, SKS, Spandana, Suryoday, Svasti, Swadhar, Trident, Ujjivan, Utkarsh

GMSS, GSS Trust, Halo Medical Foundation, Hindustan Coop Credit Society Ltd., Krishi Vikas Grameen Pratishtan Sanstha, Navchetna, Sakhi Samuday Kosh, Sampada, Samagra Gram Vikas Sanstha–Sagras, Sanjeevani Mahila Bachat Sangh, SWAWS Credit Corporation of India

Source: Same as Table 1.18.

1.5 Financial Inclusion: Achievements and Missing Links The discussion in the previous sections helps one in appreciating the pace and pattern of changes in the overall financial services scenario of Maharashtra and their implications for financial inclusion. The banking business in Maharashtra has been persistently dominated

4As per Sa-Dhan’s estimates there were 27 MFIs – including NBFCs and others - operating in Maharashtra as on end March 2013, 10 among which are headquartered in the state. The client outreach of MFIs has been estimated as 17.34 lakh with a portfolio outstanding of Rs. 1392.8 crore.

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by Mumbai for obvious reasons. This dominance has manifested in significant rural-urban difference in banking access. A recent survey by InterMedia (2014) reported that use of active bank accounts in Mumbai is one of the highest in country, higher than the national average. Rural Maharashtra, however, accounts for about 2 per cent of the total banking business. The survey also fund that 72 per cent of the urban bank account holders in the state actively use bank services as against 56 per cent rural account holders. This is one of the highest rural-urban gaps found in the survey5. The review presented in the chapter has pointed to a steady progress towards correcting the urban bias of the state’s banking sector. The distribution of bank branch network has started showing a definite movement towards the rural populations since 2011-12, thanks apparently to the financial inclusion drive that focused on unbanked/underbanked villages. This seems to have improved the extent of usage of banking services in the state. The InterMedia survey found that borrowing from banks is more common in Maharashtra as compared to other states.

Much needs to be done, however, to achieve financial inclusion of regions and populations that have been bypassed by the general growth of financial services in the state. Despite the

steady increase in rural branches over the recent years, the average population per bank branch is still very high – almost double than that of their urban counterparts. The share of

small borrowal accounts has declined over the past few years suggesting the diminishing attention to the financial needs of borrowers of small means. Agricultural advances seems to have been stagnated during the past couple years. Half of the primary level cooperative societies are in loss, while village-level savings groups have become quite popular. More importantly, there are intra-state disparities in financial inclusion as revealed by the CRISIL

Inclusix 2013 (Appendix 1.3).

Transfer of government benefits and payments (social security pensions for the old, widows and disabled; scholarships; NREGS payments) directly to the bank accounts of individuals is believed to improve usage of banks, reduce leakages, and bring in positive changes in the

ecosystem of financial inclusion. The recent government initiatives place significant emphasis on digital financial inclusion, or financial inclusion aided by digital technologies. As per the InterMedia survey, 35 per cent of the adult bank account holders in Maharashtra have active digital accounts. This proportion is 28 per cent for adults bellow poverty line. Moreover, use of digital accounts is grossly uneven between rural and urban areas as also between men and women (Appendix 1.4). It is obvious that trust building, awareness creation and financial education are essential to make these changes part of a larger process of social and economic transformation.

5 The other states in the category are Gujarat, Karnataka, West Bengal and Andhra Pradesh. See InterMedia (2014).

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References CRISIL (2013), CRISIL Inclusix: An Index to Measure India’s Progress on Financial Inclusion,

Mumbai, CRISIL Limited. Government of India (2013). An Overview on Financial Inclusion, Department of Financial

Services, New Delhi. Available at http://financialservices.gov.in/Banking/Overviewofefforts.pdf Government of Maharashtra (2013), Economic Survey of Maharashtra 2012-13, Department of

Planning, Mumbai. InterMedia (2014), ‘Financial Services Use and Emerging Digital Pathways’, InterMedia, Washington DC. NABARD (2013), Status of Microfinance in India 2012-13, Mumbai, Microcredit Innovations

Department, NABARD.

Reserve Bank of India (2013), Basic Statistical Returns, Mumbai, RBI.

SLBC (2014), ‘Background Notes and Agenda Papers, 17th June 2014’, Mumbai, Bank of Maharashtra. Available at http://www.bankofmaharashtra.in/downdocs/SLBC/SLBC-meeting-123-Agenda.pdf

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Appendix 1.1 (A): Banking Network in Maharashtra

Bank

Number of branches

Rural Semi urban Urban Metro Total

1 State Bank of India 409 369 189 389 1356

2 Bank of Maharashtra 492 285 129 263 1169

3 Bank of India 360 182 85 208 835

4 Central Bank of India 256 130 132 99 617

6 Union Bank of India 114 107 78 183 482

5 Bank of Baroda 106 109 75 210 500

7 IDBI Bank 103 80 66 109 358

8 State Bank of Hyderabad 62 95 62 40 259

9 Dena Bank 72 59 40 107 278

10 Canara Bank 42 54 72 147 315

11 Syndicate Bank 49 25 41 88 203

12 United Commercial Bank 35 29 46 60 170

13 Indian Overseas Bank 17 29 30 105 181

14 Punjab National Bank 20 23 78 70 191

15 Corporation bank 19 20 58 56 153

16 Allahabad Bank 28 10 36 39 113

17 Oriental Bank of Commerce 8 19 28 83 138

18 Vijaya Bank 6 14 31 67 118

19 Indian Bank 9 10 26 70 115

20 United Bank of India 0 2 15 30 47

21 Andhra Bank 1 0 60 6 67

22 Punjab and Sindh Bank 0 0 33 0 33

All PSBs 2208 1651 1410 2429 7698

1 Axis Bank 8 47 63 152 270

2 Federal Bank 10 23 19 43 95

3 HDFC Bank 40 109 68 179 396

4 ICICI Bank 127 140 86 245 598

5 ING Vysya Bank 0 1 10 39 50

6 Karnataka Bank Ltd 0 0 12 25 37

7 Ratnakar Bank 28 20 22 21 91

All Private Sector Banks 213 340 280 704 1537

1 Maharashtra Gramin Bank 257 88 33 0 378

2 Vidarbh Konkan Gramin 187 94 19 2 302

All RRBs 444 182 52 2 680

Subhadra Local Area Bank 4 2 3 0 9

Cooperative Bank 2948 434 356 100 3838

All banking institutions 5817 2609 2101 3235 13762

Source: SLBC (2014).

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Appendix 1.1 (B): Volume of Business and Credit Deposit Ratio

Bank Deposits (Rs. Crore)

Advances (Rs. Crore)

Total business (Rs. Crore)

Business per branch (Rs. Crore) CDR

1 State Bank of India 179083 259435 438518 323 144.9

2 Bank of Maharashtra 85704 53142 138846 119 62.0

3 Bank of India 133095 114414 247509 296 86.0

4 Central Bank of India 43680 57841 101521 165 132.4

6 Union Bank of India 91221 85672 176893 367 93.9

5 Bank of Baroda 85853 106845 192698 385 124.5

7 IDBI Bank 67328 89938 157266 439 133.6

8 State Bank of Hyderabad 28363 24303 52666 203 85.7

9 Dena Bank 45490 30090 75580 272 66.1

10 Canara Bank 59466 61801 121267 385 103.9

11 Syndicate Bank 27841 42700 70541 347 153.4

12 United Commercial Bank 25666 45817 71483 420 178.5

13 Indian Overseas Bank 33744 26194 59938 331 77.6

14 Punjab National Bank 31288 52889 84177 441 169.0

15 Corporation bank 66942 40401 107343 702 60.4

16 Allahabad Bank 17375 30350 47725 422 174.7

17 Oriental Bank of Commerce 53334 29479 82813 600 55.3

18 Vijaya Bank 23547 22848 46395 393 97.0

19 Indian Bank 19959 19408 39367 342 97.2

20 United Bank of India 5231 14761 19992 425 282.2

21 Andhra Bank 12879 18162 31041 463 141.0

22 Punjab and Sindh Bank 22593 9285 31878 966 41.1

All PSBs 1159682 1235775 2395457 311 106.6

23 Axis Bank 90209 47041 137250 508 52.1

24 Federal Bank 5338 8856 14194 149 165.9

25 HDFC Bank 127070 69392 196462 496 54.6

26 ICICI Bank 99343 62141 161484 270 62.6

27 ING Vysya Bank 12340 8060 20400 408 65.3

28 Karnataka Bank Ltd 4374 4631 9005 243 105.9

29 Ratnakar Bank 6879 3839 10718 118 55.8

All Private Sector Banks 345553 203960 549513 358 59.0

30 Maharashtra Gramin Bank 4100 2875 6975 18 70.1

31 Vidarbh Konkan Gramin 3041 2146 5187 17 70.6

All RRBs 7141 5021 12162 18 70.3

32 Subhadra Local Area Bank 42 51 93 10 121.4

33 Cooperative Banks 52538 40622 93160 24 77.3

All banking institutions 1564956 1485429 3050385 222 94.9

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Appendix 1.2: Performance of Cooperative Credit System in Maharashtra

DCCB

PACS

Non agricultural credit societies

DCARMDB

2011 2012 2011 2012 2011 2012 2011 2012

Number 31 31 21451 21443 23434 22847 29 29

Members (lakh) 1.53 1.53 150 150 216 200 11 11.18

Deposits (Rs. Cr.) 46611 49231 57907 57259 0.93 0.44

Loan outstanding (Rs. Cr.) 30173 36006 12024 12723 47863 50757 397 323

Overdues (Rs. crore) 5850 6804 6404 6390 6890 6755 377 303

Overdues as % of loan outstanding 19.4 18.9 53.3 50.2 14.4 13.3 95.0 93.8

Source: Government of Maharashtra (2013). Note: Non-agricultural credit societies cover urban cooperative banks, urban cooperative credit societies and salary earners’ cooperative credit societies; DCARMDB refers to District Cooperative Agriculture and Rural Multipurpose Development Banks.

Appendix 1.3 District-wise Scores and Ranks for Crisil Inclusix

CRISIL Inclusix Scores CRISIL Inclusix Ranks

District 2011 2010 2009 2011 2010 2009

Mumbai 81.3 81.1 81.3 11 8 5

Mumbai Suburban 78.7 74.0 75.7 16 18 13

Sindhudurg 48.8 45.2 42.6 154 150 147

Pune 46.6 44.3 40.7 169 164 169

Wardha 46.6 42.8 40.2 171 178 175

Nagpur 44.2 39.1 36.9 195 216 213

Ratnagiri 42.1 38.9 37.5 221 221 200

Parbhani 37.5 31.7 28.7 262 308 323

Akola 35.6 33.3 31.5 290 286 274

Amravati 35.4 32.4 29.1 292 296 311

Chandrapur 35.1 31.8 30.5 296 307 287

Raigarh 34.7 32.3 31.0 301 298 281

Jalna 34.4 31.3 28.3 305 315 333

Aurangabad 34.3 32.5 32.4 307 295 264

Bhandara 33.1 28.4 26.7 333 381 369

Kolhapur 33.1 30.6 29.6 332 332 307

Nanded 32.8 28.1 23.6 337 389 440

Buldana 31.5 29.8 26.9 360 349 361

Yavatmal 31.2 28.7 26.4 363 374 374

Sangli 31.0 28.9 28.3 367 368 335

Thane 30.4 28.2 25.9 380 385 383

Solapur 29.1 26.5 25.1 407 419 402

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Satara 28.1 25.8 25.4 431 435 399

Gondia 27.6 25.1 23.0 437 450 450

Washim 27.6 26.3 24.3 436 427 427

Bid 26.8 24.1 22.0 452 466 473

Nashik 26.7 24.3 22.4 453 463 468

Hingoli 25.7 21.7 20.3 467 522 508

Ahmednagar 25.1 23.1 21.5 481 491 481

Latur 24.6 22.6 20.4 495 500 505

Osmanabad 24.1 22.4 21.0 505 507 492

Gadchiroli 23.1 20.5 19.0 526 543 538

Jalgaon 22.3 19.9 18.7 540 552 543

Dhule 20.9 19.0 17.8 563 560 552

Nandurbar 16.2 13.2 12.2 610 616 616

Source: CRISIL (2013).

Appendix 1.4 Digital Financial Inclusion Indicators by State

State

% of adults who have ever

accessed a

bank account

% of adults with active

digital account

% of adult below the poverty line with active

digital account

% of males with active

digital account

% of females with active

digital account

% of rural males with active

digital account

% of rural females with active

digital account

Goa 71 45 44 41 50 55 52

Kerala 66 33 27 41 26 34 25

Tamil Nadu 62 34 30 39 29 34 34

Delhi 60 38 32 46 30 - -

Andhra Pradesh 58 29 23 37 21 30 20

Himachal Pradesh 57 32 32 43 22 42 19

Maharashtra 56 35 28 44 27 34 17

Punjab 54 25 15 36 14 31 10

Uttarakhand 53 28 25 33 24 23 25

Uttar Pradesh 51 22 19 28 15 26 14

Karnataka 49 31 24 41 22 33 20

Haryana 48 26 20 33 17 28 14

Source: InterMedia (2014)

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Chapter 2

MAPPING STUDY OF FINANCIAL INCLUSION IN MAHARASHTRA:

SCOPE, METHODOLOGY AND CONTEXT

Access to financial services has come to be recognised as critical for poverty reduction. Credit at affordable interest rate and at convenient terms of repayment, safe and convenient saving options, suitable insurance and pension products and cost effective and quick remittance services are all part of the financial services mix that could help the poor ease consumption constraints, support investments in livelihood assets (acquisition, renewal and expansion) and manage risks. As stated above, a major aspect of the NRLM strategy is to help inclusion of poor households within the institutional financial system. In order to operationalise the strategy, it is important for MSRLM to map the financial institutional environment in the state with specific reference to its responsiveness to and the existing and potential opportunities of the inclusion of the poor. It is also important to understand the experience of the poor in accessing institutional financial services in terms of range, cost and convenience.

2.1 Purpose and Objectives of the Study Given the above vision of the Mission and the against the backdrop of the current status of

development of institutional financial services (as outlined in Chapter 1) in Maharashtra, a study to map the contours of interactions between households and institutions involved in

financial services provision (both formal and informal) was undertaken during May-September 2014.

The main objectives of the study are: a) To map and analyse the financial landscape of the state with respect to its accessibility to the poor households

b) To understand the household demand for and supply of various financial services and the current financial status of households targeted by the Maharashtra Rural Livelihood Mission

c) To identify various channels of rural finance and their efficacy in delivering financial services to the poor in the state

d) To recommend strategies for achieving convergence and further intensifying financial inclusion effort in the state

e) To understand the existing procedures of accounting by the community and institutions and identify the gaps as well as the strengths with a view to comprehend the use of software supported MIS by the existing institutions.

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2.2 Scope and Methodology As explained in Chapter 1, MSRLM is working across the six divisions, intensively in 10 districts and in a non-intensive mode in 23 districts. The intensive districts have been identified by taking in consideration the status of overall development, including human development. Thus the least developed districts of Gadchiroli, Wardha, Yavatmal, Osmanabad, Jalna, Ratnagiri, Nandurbar, Solapur, Thane and Gondia have been brought under intensive implementation of the National Rural Livelihood Project (NRLP). In the intensive districts, the Mission has deployed human resources up till the sub-block level, whereas in non-intensive districts its presence is through the District Rural Development Agencies (DRDA). The study was undertaken in all the 10 districts where NRLP is being implemented and two non intensive districts – Ahmednagar and Amravati. From each district one block was selected randomly from among those identified for the implementation of NRLP. It was decided prior to the survey to select from each block four villages and from each village, 25

households through systematic random sampling. In the case of non-intensive blocks, two villages each i.e. (50 households per village) from were to be included in the survey. .In all the study was to cover 12 districts, 12 blocks and 1200 households. While the overall

scheme was followed through the survey, there was some over-sampling in the intensive blocks (by 15 per cent) and under-sampling (by 4 per cent) in non-intensive blocks. The

actual number of households surveyed for the study stood at 1339.

Figure 2.1

Sampling Scheme

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The sample contained four ‘Resource Blocks’ or blocks where the MSRLM has sought partnership with external resource organisations for social mobilization and institutional building with a view to assimilating technical and managerial skills and knowledge already available with them. The study four such blocks - 2 blocks with partnership arrangements with Society for the Elimination of Rural Poverty (SERP), Andhra Pradesh and one block each with MAVIM and Wardhini. Table 2.1 summarises the sampling scheme. The survey covered a total of 44 villages – 40 villages from the intensive blocks and 4 from the non-intensive ones.

Table 2.1: Sampling Frame and Number of Selected Sampling Units

Division Study districts Study blocks Nature of block No. of HHs

surveyed

Amravati

Yavatmal Ghatanji Resource (SERP) 104

Amravati Anjangaon Non-intensive 93

Aurangabad (Marathwada)

Jalna Ghanasawangi Intensive 106

Osmanabad Tuljapur Intensive 121

Konkan Ratnagiri Lanja Intensive 120

Thane Jawhar Intensive 121

Nashik Nandurbar Akkalkua Resource (SERP) 108

Ahmednagar Akole Non-intensive 99

Nagpur Gondia Salekasa Intensive 124

Gadchiroli Kurkheda Intensive 113

Wardha Deoli Resource (WARDHINI) 109

Pune Solapur Malshiras Resource (MAVIM) 121

It may be noted that eight out of the 12 selected districts figure in the list of top 150 backward districts prepared by the Planning Commission Task Force (2003) based on the

index of backwardness calculated with the components of output per agricultural worker, agricultural wages and population of scheduled castes and scheduled tribes. These districts

are Gadchiroli, Nandurbar, Gondia, Ahmednagar, Yavatmal, Thane, Amravati and Wardha6. Map 2.1 depicts the level of human development across the districts covered in the study as per Maharashtra Human Development Report 2012. The map shows that there are nine

districts with low level of human development index (HDI) in the state. The study includes four of them – Nandurbar, Jalna, Osmanabad, and Gadchiroli. Three – Yavatmal. Gondia and Amravati – out of the eight medium human development districts and four– Ratnagiri, Solapur, Wardha and Ahmednagar - out of the eight high HDI districts are covered in the study. Thane is the only district with very high HDI (from among eight in total). It may however be noted that these indices do not reveal anything about the intra-district differences in economic and human development.

6 Planning Commission (2003), Report of the Task Force: Identification of Districts for Wage and Self employment Programmes. New Delhi.

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Map 2.1

Human Development Index 2011

Source: Maharashtra Human Development Report 2012: Towards Inclusive Human

Development. New Delhi: Sage Publications.

Some of the demographic features of the districts with close links to development are drawn from Census of India 2011 and presented in Table 2.2. The overall pattern corroborates the

human development profile discussed above.

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Table 2.2: Select Development Indicators of the Study Districts (Census 2011)

District

Sex Ratio (Person) Literacy Rate (Person) % of Agriculture labour (Rural)

Total Rural Urban Person Male Female Person Male Female

Thane 1121 1144 1014 70.12 77.13 63.87 19.96 16.69 24.70

Nandurbar 999 1001 988 62.63 68.84 56.42 39.02 35.04 45.75

Solapur 982 984 965 54.77 61.71 47.69 35.20 29.69 43.35

Ratnagiri 978 996 893 52.09 58.55 45.48 58.42 51.21 68.00

Jalna 952 949 962 61.11 66.83 55.09 60.04 53.65 69.23

Osmanabad 950 947 956 60.43 64.00 56.67 66.27 59.80 78.95

Yavatmal 946 941 955 63.86 68.23 59.23 54.48 46.29 68.65

Wardha 939 938 942 56.75 63.25 49.83 27.54 23.15 33.42

Gondia 938 922 971 52.36 59.22 45.06 37.47 30.75 48.48

Gadchiroli 936 935 943 47.13 55.41 38.29 34.82 29.80 41.54

Ahmednagar 923 921 934 52.64 58.96 45.81 40.79 35.26 49.41

Amravati 885 957 865 67.78 71.84 63.21 27.30 22.13 37.90

Source: Census of India 2011.

2.3 Approach

The study views financial inclusion in terms of both access and usage of services offered by the mainstream banking system independently by individuals and mediated through SHGs as envisaged in NRLP. The study hence attempted to address issues at four levels: (1)

overall financial system; (2) banks; (3) SHGs; and (4) households. At the level of the financial system, the survey focused on describing the architecture of

financial inclusion in the state based mainly on the secondary information. This involved (1) listing of the existing financial service providers and examining their role, outreach,

services rendered and costs; and (2) examining in a comparative perspective the models of service delivery of different providers in terms of their advantages and disadvantages.

At the bank level, the crucial issues examined are the quantum of credit disbursed to the rural sector over the past years by different channels, including SHGs, and the gaps and challenges. At the SHG level, enquiry focused on the participation of sample households in SHGs, and their extent of use of SHG services. Finally, the household level analysis attempted to: (1) profile the livelihood context of the sample households; (2) quantify the financial services availed by the poor like savings, credit, remittance, micro insurance, pension; (3) assess the relative significance of various sources of credit in meeting the household demand; (4) assess the nature and quality of engagement with formal financial institutional like banks; and (5) appraise the factors supporting and/or hindering access to different financial services for the households.

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Household level data was collected with the help of a structured questionnaire, which was piloted in Adkhadak village in Jawhar block of Thane district. Based on the experience, the questionnaire was revised and translated into Marathi. Cluster coordinators acted as field researchers in most cases, while in some cases block level staff and DRDA staff helped in data collection. All teams were personally trained by the lead researcher. In 11 out of the 12 districts 52 per cent of the households surveyed the main respondent was a male and in the rest, female. In Solapur, 95 per cent of the respondents were women. If this district is omitted, then the gender composition of respondents becomes 56 percent males and 44 per cent women. The total population of 1339 respondent households came to 6114. Apart from the filed survey, the available secondary data was sourced from multiple sources (including Reserve Bank of India (RBI), National Bank for Agriculture and Rural Development (NABARD), State Level Bankers’ Committee (SLBC), Microfinance Institutions Network (MFIN), Institute for Financial Management Research (IFMR),

CRISIL etc.) and analysed.

2.4 Demographic and Socio-economic Profile of Sample Households

The overall profile of the surveyed villages in terms of demography and economic activity is presented in two appendix tables - Tables A1.1 and A1.2. The average size of the villages

works out to be 342 households with a population size of about 1500. Adkhadak village in Jawhar block of Thane district was the smallest – 93 households and 416 population. The

largest village – population size of 3700 – in the sample was Purandawade (Malshiras block of Solapur district). In fact all the four villages in Solapur were relatively large with

population ranging from 2400 to 3700. As shown in Table 2.3, households belonging to scheduled tribe (ST) and other backward

castes together make up about 66 per cent of the sample. Scheduled caste (SC) households constitute a fifth and general caste about 12 per cent of the sample. Minorities from a

minuscule percentage – less than 2 per cent - among the 1339 households surveyed. It may be noted that ST constitutes 30 per cent of the overall population in the 44 selected villages. The share of SC in population is 12 per cent.

Table 2.3: Distribution of Surveyed Households by Social Group Social group No. of households % of households

Scheduled Tribe (ST) 459 34.28

Other Backward Caste (OBC) 421 31.44

Scheduled Caste (SC) 271 20.24

General Caste 166 12.40

Islam 17 1.27

Christian 3 0.22

Other 2 0.15

Total 1339 100

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As for the economic profile of the respondents’ households, 60 per cent of them are found holding a BPL card (Table 2.4). Another 34.5 per cent have APL cards allotted to households with annual incomes between Rs. 22,000 and Rs. 100,000. Of the remaining households 4 per cent do not have any card and 2 per cent have annual incomes more than Rs.100,000. The highest percentage of respondent households fall under BPL category - 93 per cent - in the villages surveyed in Thane and the lowest percentage – in Wardha villages. (Village wise distribution of households by poverty status is given in Appendix A1.3).

Table 2.4: Distribution of Sample Households by Poverty Category

Districts

BPL (<Rs.22,000

income)

APL (Rs.22,000-

Rs.100,000 income)

APL (>Rs.100,000

income)

No Card

Total Average village

size

Thane 112 8 1 0 121 (92.56) 256

Nandurbar 66 36 1 5 108 (61.11) 257

Solapur 64 50 0 7 121 (52.89) 287

Ratnagiri 43 70 5 2 120 (35.83) 370

Jalna 67 36 0 3 106 (63.21) 358

Osmanabad 44 75 2 0 121 (36.36) 251

Yavatmal 57 33 9 5 104 (54.81) 642

Wardha 29 72 2 6 109 (26.61) 300

Gondia 80 29 1 14 124 (64.52) 260

Gadchiroli 89 14 0 10 113 (78.76) 354

Ahmednagar 77 21 1 0 99 (77.78) 515

Amravati 75 18 0 0 93 (80.65) 337

Total 803 462 22 52 1339 (59.97) 342

% of all households 59.97 34.50 1.64 3.88 100

Note: Figures in brackets denote the percentage of BPL category respondents in respective districts.

About 95 per cent of the respondents reside in houses owned by them (Table 2.5). Rented accommodation was reported by only 3 per cent of the respondents.

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Table 2.5: Status of House Ownership

District

Owned by household

member Rented Leased

Encroach-

ment

Owned by

relative

Panchayat

land

Don't

know Total

Thane 120 (99.17) 1 121

Nandurbar 108 (100) 0 108

Solapur 106 (87.60) 9 3 3 0 121

Ratnagiri 116 (96.67) 4 0 120

Jalna 101 (95.28) 5 0 106

Osmanabad 112 (92.56) 6 1 1 1 0 121

Yavatmal 101 (97.12) 2 1 0 104

Wardha 101 (92.66) 2 3 3 0 109

Gondia 119 (95.97) 4 1 0 124

Gadchiroli 107 (94.69) 3 3 0 113

Ahmednagar 93 (93.94) 6 0 99

Amravati 92 (98.92) 1 93

All

1276 38 5 4 11 4 1 1339

95.29 2.84 0.37 0.30 0.82 0.30 0.07 100

Based on the details of agricultural land holding collected for 9 districts, a typical sample household owns about 1.5 hectares of land. The smallest average figures are worked out for

Gondia, followed by Ahmednagar and Gadchiroli. The highest average landholding is observed in Yavatmal (2.6). By social category, the highest average land holding was found in the case of OBC and general category households (Table 2.7).

Table 2.6: Distribution of Households by Average Landholding

District No. of households Average land (in hectare)

Gondia 43 0.56

Ahmednagar 61 0.87

Gadchiroli 86 0.91

Solapur 5 1.04

Wardha 53 1.63

Amravati 70 1.76

Osmanabad 56 1.80

Jalna 79 1.95

Yavatmal 49 2.39

All 502 1.48

Note: Land related information was not collected in Thane, Nandurbar and Ratnagiri.

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Table 2.7: Ownership of Agricultural Land by Social Category

Social Category Average agri land (in ha)

No. of HHs that furnished data

Other Backward Caste (OBC) 175 1.83

General 94 1.60

Scheduled Caste (SC) 86 1.23

Scheduled Tribe (ST) 138 1.15

Islam 8 0.86

Christian 1 0.20

Total 502 1.48

A third of the respondents reported no formal education. An equal percentage is found to have completed high school. In terms of educational status of the total population covered in the survey (6114) it is found that nearly 22 per cent has never been to school. 15 per cent of males and 30 per cent females fall in this category (Table 2.8). Sample villages in Thane and Nandurbar have the largest proportions of men and women who reported no education.

Table 2.8: Percentage of Individuals without Formal Education in the Surveyed

Households

Number of males without formal education

Number of females without formal education

Number of persons without formal education

% of males without formal education

% of females without formal education

% of persons without formal education

Thane 103 143 246 33.88 49.65 41.55

Nandurbar 90 122 212 32.14 47.84 39.63

Solapur 39 83 122 14.44 32.68 23.28

Ratnagiri 21 65 86 7.14 22.41 14.73

Jalna 40 71 111 16.81 33.81 24.78

Osmanabad 59 106 165 17.88 36.43 26.57

Yavatmal 28 47 75 11.81 24.35 17.44

Wardha 23 35 58 9.50 16.67 12.83

Gondia 26 60 86 9.85 22.47 16.20

Gadchiroli 19 59 78 7.34 24.69 15.66

Ahmednagar 31 69 100 11.44 28.99 19.65

Amravati 7 17 24 3.37 9.09 6.08

Total 486 877 1363 15.20 30.01 22.27

It is observed that 93 per cent of all the principal respondents met during the study know about Aadhar card and had applied for it. About 87 per cent of them have already received the cards by the time of the survey (Table 2.9). Villages in the Vidarbha region have registered the largest Aadhar enrolment – 95 to 98 per cent. In Osmanabad, Nandurbar and Solapur The relatively lower percentage of respondents were found with Aadhar cards. Nandurbar and Osmanabad would have caught up with the rest subsequently as a large proportion of the respondents were found to have already applied when the survey was undertaken.

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Table 2.9: Possession of Aadhar Card by Respondents

Position with respect to Aadhar Card % of respondents with Aadhar card

% in Process

Already got it

Not applied for

In process

Total

Nandurbar 79 3 26 108 73.15 24.07

Solapur 90 30 1 121 74.38 0.83

Ratnagiri 103 2 15 120 85.83 12.50

Jalna 93 13 0 106 87.74 0.00

Osmanabad 87 8 26 121 71.90 21.49

Yavatmal 93 8 3 104 89.42 2.88

Wardha 104 3 2 109 95.41 1.83

Gondia 121 3 0 124 97.58 0.00

Gadchiroli 108 5 0 113 95.58 0.00

Ahmednagar 95 3 1 99 95.96 1.01

Amravati 91 2 0 93 97.85 0.00

All 1064 80 74 1218 87.36 6.08

Agriculture is the single most important source of livelihood in the villages surveyed. The

percentage of households dependent on farming as main source of income is found to be 47 per cent and subsidiary occupation, 9 per cent (Table 2.10). Wage labour in agriculture

constitutes the main occupation in the case of 33 per cent households and subsidiary source of income for 11 per cent. The proportion of cultivators in the total population of the 44 selected villages come to 38 per cent and that of agricultural workers 35 per cent (Appendix

Table A1.2), indicating that the sample chosen is fairly representative of the population. Non-agricultural wage labour including migrant labour forms the main occupation of 15 per

cent and subsidiary occupation of 14 per cent of households. Self employment provides livelihood support for about four per cent.

On an average a household is estimated to have 1.55 occupations to draw income from. As per the data reported by the respondents the average income per household from main economic activities is Rs. 39,333 and from other activities is Rs. 17,208. Farming yields on an average Rs. 41,404 as per reported information. The self reported income figures plausibly are underestimates of what the households actually earn from the different occupations.

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Table 2.10: Occupational Profile of Respondent Households

Occupation

Main occupation Other occupation

Number of households

% of households (N=1339)

Number of households

% of households (N=1339)

Cultivation 626 46.79 125 9.34

Agriculture labour 438 32.74 152 11.35

Non-agriculture daily wage labour (local) 147 10.99 147 10.98

Salaried employment 66 4.93 11 0.82

Migrant labour 55 4.11 38 2.84

Animal husbandry 31 2.32 77 5.75

Government pension 19 1.42 8 0.60

Shops 18 1.35 14 1.05

Itinerant trade 13 0.97 7 0.52

Contract-Commission agency 11 0.82 15 1.12

Driver (private service) 4 0.30 3 0.22

Sewing work 3 0.22 7 0.52

Auto rickshaw owner 2 0.15 1 0.07

Decoration/blacksmith 2 0.15 4 0.30

Doctor 1 0.07 - - Begging 1 0.07 - - Seasonal business (chilli) - - 2 0.15

Remittance - - 1 0.07

Hair saloon - - 1 0.07

Technician - - 2 0.15

Other (specify) 11 0.82 9 0.67

2.5 Conclusion

This chapter sets out the purpose of the present study, its main objectives and approach and methodology. Also explained are the basic characteristics of the regions that from the spatial background of the study and the households and households covered. It is clear from the description and analysis that the study was undertaken among some of the relatively backward locales and population segments in Maharashtra, that have suffered historically from institutional and physical barriers to inclusion in the mainstream development process. As shown, tribals and backward castes dominated the sample and the occupation structure was skewed towards primary sector activities. Small farmers and agricultural workers form a significant chunk among the workers. In the following chapter we will examine the nature and extent of engagement of the sample households with different forms of financial institutions.

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Appendix A2.1: Demographic Profile of Sample Villages

District

Block

Village

No. of

Households

Population

% of SC

% of ST

Literacy

(%)

Sex ratio

(All)

Sex ratio (0 – 6

years)

Thane

Jawhar

Vavar 386 2675 0.00 98.95 64.67 894 919

Adkhadak 93 416 0.00 99.04 61.18 1112 1171

Hade 259 1241 0.00 99.36 46.65 995 1213

Kelghar 287 1304 0.00 99.39 36.47 1080 1031

Nandurbar

Akkalkuva

Pechari Deo 245 1321 0.53 95.08 75.76 810 870

Bijaligavhan 257 1417 0.00 100.00 44.89 1084 1023

Veri 344 1795 4.46 73.54 58.21 970 911

Bharadipadar 183 963 0.00 99.48 50.63 911 940

Wardha

Deoli

Isapur 181 759 6.32 11.59 85.30 908 817

Andori 626 2412 9.00 11.48 80.28 888 860

Apti 175 698 20.20 15.33 81.72 935 981

Takli (Khode) 167 670 15.67 12.39 87.98 952 969

Osmanabad

Tuljapur

Khadki 247 1326 29.19 1.28 75.22 1111 938

Jalkotwadi 320 1722 3.54 0.00 74.25 1314 1421

Chincholi 332 1459 22.21 2.06 72.78 1014 862

Shahapur 580 2903 8.82 1.89 73.19 1123 910

Ratnagiri

Lanja

Punas 320 1334 0.22 0.00 77.15 985 965

Zapade 156 597 9.55 0.00 78.95 1034 726

Veravli (Bk.) 295 1283 1.48 0.00 80.60 959 936

Bhambed 663 2679 1.23 0.34 77.15 948 708

Yavatmal

Ghatanji

Titwi 309 1371 0.36 69.15 72.75 970 941

Manusdhari 221 911 17.01 53.46 77.04 907 617

Tadsawali 266 1092 29.95 28.48 72.84 902 713

Kumbhari 209 790 15.70 25.95 83.17 982 1021

Solapur

Malshiras

Purandawade 881 3706 23.61 1.40 75.45 1004 720

Chandapuri 449 2398 29.07 0.71 75.65 1020 1327

Fadtari 473 2396 18.20 0.00 66.17 1030 871

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Shindewadi 765 3589 22.76 0.03 79.86 960 1075

Jalna

Ghansawangi

Mangu Jalgaon 506 2460 23.46 3.01 63.75 1019 1250

Bahiregaon 175 775 12.52 5.94 71.41 936 1000

Bachegaon 267 1279 11.65 0.00 67.29 934 758

Shripatdhaman-gaon 253 1266 19.67 1.26 68.50 988 919

Gadchiroli

Kurkheda

Wadegaon 474 2401 12.54 62.77 87.17 1027 900

Khairi 128 488 2.05 28.69 81.47 967 885

Sonerangi 246 1035 11.21 65.51 76.50 991 969

Khadki 194 738 31.84 66.67 78.16 1007 889

Gondiya

Salekasa

Pipariya 1025 3550 2.96 57.97 81.27 960 1184

Kawarabandh 126 600 0.33 2.17 87.66 870 379

Durgutola 138 645 25.58 21.09 87.80 994 1106

Isanatola 128 602 0.00 5.65 84.57 979 850

Ahmadnagar

Akola

Dongargaon 637 3049 3.80 15.71 79.80 966 723

Bhandardara 393 1765 4.70 75.64 79.50 999 875

Amravati

Anjangaon

Dhanegaon 534 2269 23.75 1.19 92.82 975 883

Jawala (Bk.) 140 528 31.25 0.00 91.63 963 1174

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Appendix A2.2: Employment Profile of Sample Villages

District

Block Village

% share in population of % share in total workers of

Total workers Non-workers Cultivators Agri. labour Marginal workers

Thane

Jawhar

Vavar 43.63 56.37 12.43 56.47 30.68

Adkhadak 59.62 40.38 45.16 50.00 2.42

Bachegaon 55.59 44.41 77.22 8.58 10.55

Kelghar 45.78 54.22 27.14 15.08 54.44

Nandurbar

Akkalkuva

Pechari Deo 30.05 69.95 11.34 77.58 4.28

Bijaligavhan 49.33 50.67 21.03 42.06 34.19

Veri 44.40 55.60 54.33 28.36 16.06

Bharadipadar 56.28 43.72 19.00 50.92 28.60

Wardha

Deoli

Isapur 55.20 44.80 45.82 40.57 2.63

Andori 56.26 43.74 32.79 53.28 8.99

Apti 65.76 34.24 10.46 77.12 10.68

Takli (Khode) 51.34 48.66 30.23 35.76 31.69

Osmanabad

Tuljapur

Khadki 48.27 51.73 24.84 46.09 16.56

Jalkotwadi 39.84 60.16 21.28 28.28 27.26

Chincholi 50.45 49.55 49.18 38.59 2.31

Shahapur 50.60 49.40 23.76 42.14 10.21

Ratnagiri

Lanja

Punas 34.71 65.29 7.56 2.59 66.95

Zapade 55.95 44.05 9.28 80.84 7.19

Veravli (Bk.) 48.95 51.05 35.99 38.06 2.87

Bhambed 48.94 51.06 23.04 23.87 34.55

Yavatmal

Ghatanji

Titwi 61.05 38.95 33.09 62.25 1.67

Manusdhari 58.51 41.49 48.03 44.09 4.13

Tadsawali 64.74 35.26 28.15 65.91 2.97

Kumbhari 57.22 42.78 39.60 46.24 9.96

Solapur

Malshiras

Purandawade 47.46 52.54 20.30 59.75 2.22

Hade 60.76 39.24 69.63 29.44 0.00

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Fadtari 57.64 42.36 62.20 22.01 2.24

Shindewadi 52.44 47.56 45.59 39.80 0.64

Jalna

Ghansawangi

Mangu Jalgaon 41.22 58.78 66.57 26.33 2.96

Bahiregaon 48.39 51.61 27.20 49.07 0.27

Shripatdhamangaon 53.79 46.21 66.52 21.88 0.88

Chandapuri 49.96 50.04 66.36 29.22 0.08

Gadchiroli

Kurkheda

Wadegaon 48.44 51.56 19.17 2.84 74.72

Khairi 61.68 38.32 21.26 3.65 69.77

Sonerangi 67.54 32.46 36.05 7.73 52.50

Khadki 57.72 42.28 18.31 3.52 76.53

Gondiya

Salekasa

Pipariya 53.89 46.11 48.77 33.82 11.34

Kawarabandh 53.83 46.17 0.93 1.24 91.95

Durgutola 55.19 44.81 42.42 4.21 48.03

Isanatola 64.45 35.55 26.29 1.80 66.49

Ahmadnagar Akola

Dongargaon 57.36 42.64 52.89 23.73 8.86

Bhandardara 41.30 58.70 64.06 1.51 2.19

Amravati Anjangaon

Dhanegaon 41.69 58.31 25.79 65.22 4.97

Jawala (Bk.) 56.44 43.56 24.50 62.75 10.74

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Appendix Table A2.3: Distribution of Aadhar Card by Sample Village

District Village

Number of respondents having Aadhar card

Number of respondents not having Aadhar card

Number of respondents who are in the process of getting the card Total

Nandurbar Pechari deo 20 2 8 30

Bijirigavhan 23 0 2 25

Veri 24 0 1 25

Bharadipadar 12 1 15 28

79 3 26 108

Solapur Purandawade 26 5 0 31

Chandapuri 22 9 0 31

Fadtari 18 11 1 30

Shindewadi 24 5 0 29

90 30 1 121

Ratnagiri Punas 18 2 10 30

Zapde 30 0 0 30

Veravli 27 0 3 30

Bhambed 28 0 2 30

103 2 15 120

Jalna Manga jalgaon 23 3 26

Bahere gaon 24 1 25

Bache gaon 26 4 30

Shripat Dhamangavhan 20 5 25

93 13 106

Osmanabad Khadki 19 1 12 32

Jalkotwadi 19 3 6 28

Chincholi 25 2 4 31

Shahpur 24 2 4 30

87 8 26 121

Yavatmal Titwi 20 2 3 25

Manusdhari 23 3 0 26

Tadsavali 25 2 0 27

Kumbhari 25 1 0 26

93 8 3 104

Wardha Isapur 27 1 0 28

Andori 27 1 0 28

Apti 27 0 0 27

Takli 23 1 2 26

104 3 2 109

Gondia Durgotola 32 2 34

Kawrabandh 28 0 28

Piparia 31 0 31

Isnatola 30 1 31

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121 3 124

Gadchiroli Wade gaon 29 0 29

Khairi 28 0 28

Sone rangi 27 1 28

Khadki 24 4 28

108 5 113

Ahmednagar Dongargaon 48 1 1 50

Bhandardara 47 2 0 49

95 3 1 99

Amravati Dhanegaon 48 2 50

Jawala 43 0 43

91 2 93

All 1064 80 74 1218

Note: The information was not collected from the pilot villages of Adkhadak, Hade, Kelghar and Vavar villages of Jawhar taluka, Thane district.

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Chapter 3

ENGAGEMENT OF HOUSEHOLDS WITH

FINANCIAL INSTITUTIONS AND SERVICES

In this chapter we shall analyse how the surveyed households behave with respect to accessing different financial services and institutions. On the service side the analysis is largely confined to savings, credit and insurance. As for institutions, the survey has attempted to capture details of all institutions, including the informal ones. As explained in Chapter 2, the study used two different survey instruments, one to capture the village level details (32 villages) and the other, to gather household (1339) and individual level (6114) information.

3.1 Institutional Arrangements in Financial Services: Village level Scenario The predominant institutional sources of financial services in the surveyed villages are cooperative and commercial banks. Out of the 32 villages that furnished information on financial institutions, 28 have access to cooperative banks and 25, to commercial banks.

Regional rural banks provide services in 14 villages. Other institutions like Pat Sansthas or

cooperative credit societies are found in 6 villages.

Cooperative banks are found to be more accessible in terms of distance compared to others. The average distance from a typical study village to a cooperative bank is 9.5 km and to

commercial bank is 12 km. Mean distance with respect to RRBs is 14 km. Public transport facilities are available in 18 villages to reach a bank. In the case of 12 villages individuals

have to either use private vehicles or own vehicles to access the nearest banking facility. SHGs are found to be widely present in the study villages. In all but two villages SHGs have been formed. In terms of number of SHGs there are 330 women’s SHGs, 21 men’s SHGs and 27 SHGs of mixed membership. Yavatmal, Gondia, Gadchiroli and Ratnagiri account

for 80 per cent of all SHGs.

As regards the informal sources of credit, eight villages (from Wardha, Osmanabad, Yavatmal, Gondia, Jalna and Gadchiroli) report the presence of 23 moneylenders. The rate

of interest charged by them range from 36 per cent to 90 per cent per annum. Much of the borrowing is reportedly for farming related activities.

3.2 Engaging with Financial Institutions: Household level Analysis The survey instrument has four distinct sections having questions about the household debt status (source, purpose, amount of loan, interest rate, outstanding balance), household savings status (place of savings, frequency, gross current savings, rate of interest), bank accounts (name of bank(s), number of accounts, type of accounts, purpose of opening accounts, mode of account opening, extent of operation of accounts), and awareness about

other financial products. The information gathered is analysed in this section.

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3.2.1 Household Borrowing

The information about outstanding debt of households generally is a difficult point of enquiry in any study. We too have faced some difficulty in eliciting complete information about the different loans that the sample households have availed till the date of the survey which have balance outstanding. In all the survey could obtain information about 765 active loans with of Rs. 3.02 crore. In other words, the average outstanding debt per reporting sample household comes to Rs. 39,526.

Table 3.1 presents the classification scheme of sources of credit. The sources are grouped into five – institutional sources – public; institutional sources – private; personal sources; informal individual sources and informal community-based sources. The percentage of households reporting indebtedness to public institutional sourced is the highest – 36 per cent – followed by those that have availed loans from personal sources – 25 per cent. Among institutional sources, commercial banks have relatively larger share, while among personal sources, relatives seem more important than others. Close to a fifth of the households have borrowed from SHGs, the community based channel to access credit for the poorer sections. Loans outstanding from money lenders have been reported by 10 per cent of the households.

It may be noted that borrowing from MFIs has been reported by only 5.5 per cent of the households that furnish the relevant details.

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Table 3.1: Source of Current Outstanding Debt

Source

HHs reporting outstanding debt

Number %

Institutional: Public

Commercial bank 105 13.73

Co operative bank 100 13.07

RRB 44 5.75

Other banks 4 0.52

Sub total 253 33.07

Institutional: Private

Finance company 12 1.57

MFI 42 5.49

Pat Sanstha 40 5.23

Sub total 94 12.29

Personal

Relatives 131 17.12

Friends 45 5.88

Employer 14 1.83

Other 4 0.52

Sub total 194 25.36

Informal: Individual

Money lender 78 10.20

Sub total 78 10.20

Informal: Community-based

SHG 146 19.08

Sub total 146 19.08

All 765 100

Table 3.2 contains further analysis of household debt by source and average cash loan

outstanding. The analysis is doe on the basis of 555 loans for which information regarding source could be clearly obtained. As shown in the table banks have the largest share in the amount of current outstanding debt in the villages surveyed, while cooperative banks comes a very close second. The former, along with RRBs, account for 36 per cent of the outstanding debt reported, though their share in the number of loans outstanding is 22 per cent. Cooperative banks have a share of 26 per cent in outstanding loan amount against 15 per cent share in number of loans. In terms of percentage share in number of loans, SHGs have done the best. But in terms of amount, their share is just 3 per cent. Money lenders account for 9 per cent share each in both number and amount.

Average outstanding is found the highest (ranging from Rs. 50,000 to Rs. 65,000) for formal banks – scheduled commercial, cooperative and regional rural banks – followed by moneylenders and MFIs (Rs. 30,000 –Rs.38,000). Debt due to friends and relatives is found in the range of Rs. 13,000 to Rs.25,000. SHGs loan sizes are found to be the smallest – just about Rs. 6,700. -

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Table 3.2: Distribution of Debt by Source and Average Amount

Source of loan

Number of loans outstanding

Amount Outstanding (Rs.)

Average debt (Rs.)

% share in

Number of loans outstanding

Amount Outstanding

Commercial Banks 91 5,927,098 65,133 16.40 28.10

Cooperative Banks 85 5,598,300 65,862 15.32 26.54

Relatives 94 2,317,700 24,656 16.94 10.99

Moneylenders 51 1,925,400 37,753 9.19 9.13

RRB 32 1,676,100 52,378 5.77 7.95

MFI 29 896,268 30,906 5.23 4.25

SHG 104 700,450 6,735 18.74 3.32

Friends 23 309750 13,467 4.14 1.47

All 555 21,092,416 38,004 100 100

Coming to the purpose of borrowing, it is found that the surveyed households have

borrowed mainly to finance agriculture (37 per cent). About 15 per cent of loans have been availed to meet routine household expenditure.

We have clustered the various purposes as reported by the respondents into four main categories - productive, human capital investment, sustenance and social obligations. This categorisation reflects the underlying strategic motivation of the households to resort to borrowing. It is evident from Table 3.3 that the sample households have incurred loans

mainly in connection with productive activities; 44 per cent of the reported loans come under this category. Investing in activities that maintain the stock and quality of human

capital is the second important purpose (27 per cent loans) that has driven households to incur debt. About 12 per cent of the loans have been availed to meet social obligations. In

about 2 per cent of the loans, any single purpose could not be ascertained.

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Table 3.3: Distribution of Loans by Purpose

Purpose

Number of loans reported % of loans

Productive

Farming 281 36.73

Business 38 4.97

Travel in search of work 9 1.18

Old debt repayment 10 1.31

Purchase of livestock 2 0.26

340 44.45

Human capital investment

House construction 72 9.41

Major medical expenses 66 8.63

Children’s education 38 4.97

House repair 27 3.53

Purchase of two-wheeler 6 0.78

209 27.32

Sustenance

Meeting routine household

expenses 114 14.90

Social obligations

Marriage in the family 73 9.54

Other social functions 8 1.05

Death in the family 3 0.39

Unspecified 4 0.52

88 11.51

Multiple needs 14 1.83

765 100

How do the different credit sources relate to the purposes of borrowing? In Table 3.4 is presented the percentage share of major sources across different purposes. The predominance of personal and informal (SHG) sources in the debt portfolio of the sample households is very evident from the Table. Commercial and cooperative banks, the main institutional sources of credit in India, figure among major sources only in the case of farming. Though the sample households have loans outstanding against commercial banks in housing and education, their shares are far lower compared to sources like relatives (housing) and SHGs (education). A little more than 90 per cent of the loans held by the respondent households from commercial banks have been farm loans. For all purposes that are outside the category of ‘productive loans’, personal sources like relatives/friends and money lenders are important in the study villages. What is also noteworthy is the substantive role played by the SHGs in helping the households meet not only sustenance needs, but human capital, social obligation and productive needs.

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Considering the fact that SHG members are predominantly women, these statistics reveal the contribution of women towards managing household mobilization of resources for meeting critical household needs. Further, these observations appear to have significant implications for designing appropriate loan products, especially, for SHGs. The role of SHGs as providers of subsistence loans - thanks mainly to the flexibility that characterises the model - is well documented. This study has revealed that SHGs have acted as supplementary sources of credit even for larger investments including education and housing for poorer households. It is worthwhile to consider whether distinct loan products (carrying lower interest rates and extended over longer term) can be designed for such purposes so that poorer households can optimize their benefits from participating in SHGs. This would help them further reduce their dependence on high cost informal sources as also plan investments efficiently and prudently.

Table 3.4: Purpose of Loans and Major Sources

Purpose Major sources (and % share in number of loans)

Meeting routine household expenses SHGs (30%)

Relatives (25%) Moneylender (15%) Friends (12%)

Farming Cooperative Banks (28%) Commercial Banks (26%)

RRBs (10%) SHG (12%)

Housing (construction and repair) Relatives (26%) SHGs (14%) Commercial Banks (12%) MFIs (11%)

Children’s education SHG (32%) Relatives (26%) Pat Sanstha (13%) Commercial Banks (8%) Moneylender (8%)

Medical expenses Relatives (40%) SHG (24%) Moneylender (15%) Friends (11%)

Social obligations Relatives (33%) Moneylender (25%) SHG (19%) Friends (7%)

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3.2.2 SHG membership Of the respondents of the survey 448 or 33 per cent have membership in SHGs. They reported membership by others in 329 households taking the total number of SHG members to a total of 777. Among these there are 121 households (or 9 % of the total) where at least two members ate part of SHGs. The data in Table 3.5 indicate that OBC and SC households in the sample have better representation in SHGs compared to ST and general category households. The few Islam and Christian households included in the sample also have members in SHGs.

Table 3.5: Distribution of SHG Membership by Social Category

District General OBC SC ST Islam Christian Jain Total

Nandurbar 0 0 2 73 0 0 0 75

Solapur 1 14 26 3 1 0 0 45

Ratnagiri 5 15 13 0 2 0 0 35

Jalna 31 10 20 0 0 0 0 61

Osmanabad 28 14 20 5 10 2 0 79

Yavatmal 2 41 23 24 0 0 0 90

Wardha 4 50 16 20 1 1 0 92

Gondia 9 64 12 49 0 0 0 134

Gadchiroli 2 23 18 42 0 1 1 87

Ahmednagar 5 6 5 13 0 0 0 29

Amravati 1 32 16 1 0 0 0 50

Total 88 269 171 230 14 4 1 777

% share in respective category 53.01 63.90 63.10 50.11 82.35 133.33 50.00 58.03

3.2.3 Household Savings

If general economic characteristics of the surveyed households discussed in the previous chapter are any indication, the ability of these households to save over and above basic

consumption expenditure would be low. The data presented in Table 3.6 bear this out. While 41 per cent households have reported savings with SHGs, only 13 per cent report regular savings with formal institutions (commercial banks/RRBs/cooperative banks). Post office savings accounts are reported by a lesser percentage – 6 per cent. An equal percentage of households are observed to report having

informal savings at the time of the survey.

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Table 3.6: Place of Savings Reported by Respondents

Place of savings

Number of HHs that save regularly

% of HHs

SHG 553 41.30

Commercial banks/ RRBs 138 10.31

Cooperative societies/ banks 39 2.91

Post office 86 6.42

Informal 78 5.83

Chit fund 11 0.82

Multistate Cooperative 10 0.75

Business correspondent 7 0.52

Finance company 6 0.45

3.3 Engaging with Banks

The financial inclusion policy of India is bank-linked and bank driven as elucidated d by the RBI. The financial inclusion programme hence has singularly focused on bringing more and

more people from the remotely situated geographies into the banking fold. A variety of agents and arrangements drawing upon the possibilities of information technology have been advocated to achieve this, be it ultra thin branches, ATMs or business correspondents (BC). Though there has been perceptible improvement in the number of accounts opened over the past couple of years, a systematic mapping of the situation is yet to be undertaken.

In this section we present the results of the enquiry into how the sample households in the study areas have been ‘working’ with banks. The 1339 households surveyed are found to have 2564 bank accounts. In other words, at the aggregate level every household in the sample has 1.9 accounts. However, per capita bank accounts vary across districts – from 1.1 in Nandurbar to 2.9 in Amravati (Figure 3.1). About 70 per cent of these accounts were opened between 2006 and 2014, the period when

initiatives to accelerate financial inclusion, including direct benefit transfers were introduced in several districts of the state.

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Figure 3.1

Per Capita Bank Accounts by District

0.00 0.50 1.00 1.50 2.00 2.50 3.00

Thane

Nandurbar

Solapur

Ratnagiri

Jalna

Osmanabad

Yavatmal

Wardha

Gondia

Gadchiroli

Ahmednagar

Amravati

Dis

tric

t

Per capita bank accounts

As explained in Chapter 2, we have collected the bank account details of all the members in

the households surveyed across the study villages. Of the 6114 individuals thus covered of 2562 or 42 per cent have bank accounts. A very high proportion – 85 per cent – of the

accounts is in the name of single individual. The rest are joint accounts either with spouses (13 %) or children (2 %).

The percentage of men with bank accounts is more compared to women – 47 per cent in the case of men and 35 per cent in the case of women (Table 3.7). If we consider only those

above 18 years, the percentage increases substantially to 57 per cent – 64 per cent men and 48 per cent women. Among households below poverty line, 47 per cent have bank accounts.

Here again there is a significant gender gap – 52 per cent men and 41 per cent women.

Table 3.7: Status of Bank Account Holding by Household Members

Male Female Total

Persons covered in the sample (no.) 3195 2919 6114

All persons having bank accounts (no.) 1519 1043 2562

All persons having bank accounts (%) 47.54 35.73 41.90

Persons > 18 years in the sample (no.) 2386 2119 4505

Persons > 18 years having bank accounts (no.) 1537 1027 2564

Persons > 18 years having bank accounts (%) 64.42 48.47 56.91

Persons in BPL households (no.) 1899 1749 3648

Persons in BPL households (%) 59.44 59.92 59.67

Persons in BPL households with bank accounts (no.) 988 722 1710

Persons in BPL households with bank accounts (%) 52.03 41.28 46.88

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Distribution of account holders across districts and bank groups reveals that two thirds of the individuals covered in the survey have their accounts with commercial banks (Table 3.8). Cooperative banks account for a little more than a fifth of the accounts. RRBs come last with a share of 12 per cent. There are some variations across districts. For instance in Thane, Solapur and Ahmednagar relatively larger percentage of bank accounts are with cooperative banks. In Osmanabad and Gadchiroli RRBs close to a third of the accounts are with RRBs.

Table 3.8: Distribution of Bank Accounts by District and Type of Bank

District CB RRB Coop bank

Pat Sanstha Total CB RRB

Coop bank

Pat Sanstha Total

Thane 58 13 118 0 189 30.69 6.88 62.43 0.00 100

Nandurbar 119 2 0 0 121 98.35 1.65 0.00 0.00 100

Solapur 76 17 71 3 167 45.51 10.18 42.51 1.80 100

Ratnagiri 182 26 30 0 238 76.47 10.92 12.61 0.00 100

Jalna 159 23 35 0 217 73.27 10.60 16.13 0.00 100

Osmanabad 66 60 49 0 175 37.71 34.29 28.00 0.00 100

Yavatmal 99 41 53 8 201 49.25 20.40 26.37 3.98 100

Wardha 237 2 15 0 254 93.31 0.79 5.91 0.00 100

Gondia 204 41 9 0 254 80.31 16.14 3.54 0.00 100

Gadchiroli 158 93 52 1 304 51.97 30.59 17.11 0.33 100

Ahmednagar 156 2 73 1 232 67.24 0.86 31.47 0.43 100

Amravati 200 3 60 4 267 74.91 1.12 22.47 1.50 100

Total 1670 318 561 15 2564 65.13 12.40 21.88 0.59 100

We have further analysed account holding with banks by looking at the gender composition. While both men and women show more or less similar pattern with respect to bank

accounts, one important difference is in the case of cooperative banks. The percentage share of women with their accounts in cooperative banks is much lower than their male counterparts, especially in districts like Yavatmal, Amravati, Ratnagiri and Jalna (Table 3.9). This is reflected in the overall percentage too wherein 19 per cent women hold accounts in cooperative banks as against 24 per cent men. Women’s access to the mainstream cooperative credit system has remained low historically. Concerted efforts are needed to amend this situation.

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Table 3.9: Distribution of Bank Accounts by District, Type of Bank and Gender

Men Women

CB RRB Coop bank

Pat Sanstha Total CB RRB

Coop bank

Pat Sanstha Total

Thane 29.41 10.08 60.50 100 32.86 1.43 65.71 100

Nandurbar 98.78 1.22 100 97.44 2.56 100

Solapur 44.64 12.50 41.07 1.79 100 47.27 5.45 45.45 1.82 100

Ratnagiri 73.02 11.90 15.08 100 80.36 9.82 9.82 100

Jalna 69.34 10.95 19.71 100 80.00 10.00 10.00 100

Osmanabad 44.44 29.06 26.50 100 24.14 44.83 31.03 100

Yavatmal 47.93 17.36 33.06 1.65 100 51.25 25.00 16.25 7.50 100

Wardha 92.11 0.66 7.24 100 95.10 0.98 3.92 100

Gondia 78.86 15.45 5.69 100 81.68 16.79 1.53 100

Gadchiroli 51.19 33.93 14.29 0.60 100 52.94 26.47 20.59 100

Ahmednagar 65.82 1.27 32.91 100 70.27 28.38 1.35 100

Amravati 67.55 1.32 28.48 2.65 100 84.48 0.86 14.66 100

Total 63.24 12.36 23.94 0.46 100 67.96 12.46 18.79 0.78 100

In terms of social groups, as shown in Table 3.10, half of the individuals belonging to

general castes and scheduled castes are found to have bank accounts. As for individuals in tribal households, 42 per cent have bank accounts. The least proportion of banked individuals is seen among OBC households in the sample – just 14 per cent. The share of bank accounts among women is lower than men across categories. The difference between

men’s and women’s shares is the highest among Muslims, followed by general castes.

Table 3.10: Distribution of Bank Accounts by Social Groups and Gender

Social group

Individuals in the sample (No.)

Individuals with bank accounts (No.)

Individuals with bank accounts (%)

General Men 408 236 57.84

Women 333 140 42.04

Persons 741 376 50.74

OBC Men 979 160 16.34

Women 902 113 12.53

Persons 1881 273 14.51

SC Men 623 340 54.57

Women 579 257 44.39

Persons 1202 597 49.67

ST Men 1135 532 46.87

Women 1052 383 36.41

Persons 2187 915 41.84

Islam Men 37 14 37.84

Women 41 8 19.51

Persons 78 22 28.21

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Among those who hold bank accounts, the distribution of social groups across different bank types reveals that 60 per cent or above accounts in all categories are with commercial banks (Table 3.11). Women appear to be more likely to have their accounts in commercial banks, except in the case of Muslim households.

Table 3.11: Distribution of Bank Accounts by Social Group and Bank Group Social group CB RRB Coop bank Others Total

General Men 57.20 15.25 27.54 0.00 100

Women 63.57 14.29 22.14 0.00 100

Persons 59.57 14.89 25.53 0.00 100

OBC Men 66.25 17.50 15.00 1.25 100

Women 69.91 8.85 20.35 0.88 100

Persons 67.77 13.92 17.22 1.10 100

SC Men 66.76 11.18 20.88 1.18 100

Women 70.82 10.89 15.95 2.33 100

Persons 68.51 11.06 18.76 1.68 100

ST Men 63.91 11.84 24.25 0.00 100

Women 66.84 12.79 20.10 0.26 100

Persons 65.14 12.24 22.51 0.11 100

Islam Men 92.86 7.14 0.00 0.00 100

Women 62.50 0.00 37.50 0.00 100

Persons 81.82 4.55 13.64 0.00 100

Among the public sector commercial banks, Bank of Maharashtra has the largest number of accounts of the members of the sample households, followed by State Bank of India (SBI), Bank of India (BOI) and Central Bank of India (CBI) in that order. They together account

for 85 per cent of all bank accounts that are with commercial banks in the sample. Accounts with different district central credit banks (DCCB) constitute 19 per cent and with RRBs, 4 per cent. In the case of 10 per cent accounts we could not ascertain the bank details.

3.3.1 Bank accounts: Major Features The main features of the bank accounts will be discussed in this section based on the

information received on 2277 accounts across districts. Savings bank (SB) accounts are found as the most prevalent account type (84 % accounts). About 6 per cent accounts only could be ascertained as no frill or zero balance accounts (Table 3.12). It must be acknowledged that there could be some overlap between SB and no frill accounts. More refined savings products like recurring or fixed deposits are rare among the sample households. It may be mentioned that only 64 respondents are found to possess

Kisan Credit Cards (KCC).

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Table 3.12: Type of Bank Account

Account type Number %

Savings bank account 1921 84.37

No frill accounts 131 5.75

Current account 160 7.03

Recurring deposit 6 0.26

Fixed deposit 8 0.35

Unspecified 22 0.97

No information 29 1.27

Total 2277 100

The predominant reason for opening bank accounts is to receive government benefits and payments. Nearly 43 per cent of the accounts have been opened with this purpose (Table 3.13). Safe-keep of money comes second in importance.

Table 3.13: Reason for Opening Bank Account

Reason No. of

responses % of

responses

For safe keep of money 790 34.69

To receive government benefits* 712 31.27

To receive government payments@ 277 12.17

To get access to a loan 175 7.69

To receive salary 48 2.11

Motivated by bank employees 28 1.23

To send money home 22 0.97

The BC started providing bank

services 22 0.97

To receive remittance 20 0.88

To finance a purchase 17 0.75

Motivated by the NGO 5 0.22

No idea 113 4.96

Information not provided 48 2.11

2277 100

Note: * Include student scholarships; @ NREGS payments. On being asked about the mode of account opening, 88 per cent of the account holders responded that they did it on their own at the branch (Table 3.14). Of the rest 4 per cent opened their accounts during campaigns organized by banks within villages. SHGs, NGOs, village leaders and relatives seem to have extended helping hand to about 2 per cent. BCs opened accounts for just 1 per cent.

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Table 3.14: Mode of Account Opening

Mode Account holders

(No.) Account holders (%)

At the branch by self 2016 88.54

In the village during bank campaign 92 4.04

Through School 31 1.36

At the branch with the help of SHG 30 1.32

Through BC 24 1.05

At the branch with the help of NGO 12 0.53

Through village leaders 6 0.26

Through close relative 2 0.09

Unspecified 64 2.81

Total 2277 100

In three districts – Jalna, Gondia and Gadchiroli – the survey was done during the implementation Jan Dhan Yojana(JDY), the refurbished financial inclusion scheme launched

by the new central government that came into power in 2014. We have gathered

information on JDY accounts in these districts. The details are given in Table 3.15. Relatively larger numbers of new JDY accounts were opened in Jalna, the district where a

lower number of DBT accounts had earlier been opened. Gondia and Gadchiroli villages already had a sizeable number of DBT accounts and hence only few JDY accounts seem to have been opened. The data also suggest that a least some JDY accounts were opened for individuals who already have other accounts.

Table 3.15: JDY Accounts

District

No. of all accounts

No. of DBT accounts

% of DBT accounts

No. of JDY accounts

Of which no. of new accounts

Jalna 216 159 27.31 34 28

Gondia 307 128 41.69 2 0

Gadchiroli 425 263 61.88 4 1

The debates on financial inclusion emphasises that dormancy of accounts or non transactional accounts go against the very logic and mission of the inclusion project. In the current sample 8 per cent of the account holders are found not to have made any transactions since the time the account was opened (Table 3.16). About a fourth of them have made any transaction 6 months ago or beyond. Another 25 per cent used the bank account over the last one to six months. Those who have carried out some transaction in the month that preceded the survey date constitute 37 per cent. Such low transactional status indicates that effective financial inclusion is still not achieved in the villages that the study covered.

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Table 3.16: Access to Services: Frequency of Transaction

The date of last transaction falls Number of account

holders % of account

holders

Within the past 30 days 849 37.29

Beyond a month but within 6 months 578 25.38

Beyond 6 months but within one year 211 9.27

Beyond one year 354 15.55

Never 192 8.43

Unspecified 93 4.08

All 2277 100

Why do people not have bank accounts or why do they refuse to deal with banks? The study tried to seek answers to this question by asking it to the 400 respondents without bank

accounts. The responses are summarized in Table 3.17. The most typical response is that there is no money to deposit with banks – 47 per cent of the respondents have cited this as the main reason. The need for bank services is not felt by 16 per cent of the respondents, while 11 per cent do not have much idea about banking. Interestingly, 4.75 per cent do not

feel the need for keeping their deposits with banks as they already save with SHGs. Remoteness of banks has discouraged close to 4 per cent from opening or using accounts, another 4.5 per cent have found it difficult to open bank account for lack of identification documents.

Table 3.17: Reasons for Not Dealing with Banks

Reasons No. of

responses % of

responses

I don't have enough money to keep in the bank 188 47.00

I don't need bank services 65 16.25

I don't know about bank 43 10.75

I save with SHG 19 4.75

I don't have the required identification or

documentation to open an account 18 4.50

Banks are far away 15 3.75

Have an account, but passbook is not given 10 2.50

I prefer not to keep money in the bank 5 1.25

Banks charges are high 3 0.75

I had a bad experience with banks in the past 3 0.75

Resistance from husband/ mother-in-law 3 0.75

Banks are not secure-trustworthy 2 0.50

No response 26 6.50

Total 400 100

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3.3.2 Interaction with Bankers: Important Pointers We have met several bankers and visited many bank branches7, mostly rural branches, during the course of the study. The interactions with the bankers centred mainly on financial inclusion, SHG-bank linkage programme and business correspondents. It was observed that many of the rural branches report an excess of savings over advances. For instance, one branch of Bank of Maharashtra in Thane reported deposits worth Rs. 30 crore and advances amounting to just Rs 2 crore. In another case of the same bank in Nandurbar the liabilities amounted close to Rs. 22 crore and assets, Rs. 6 crore. A third branch, which is of Bank of India in Solapur was found to have a deposit base of Rs.74.5 crore and loans worth Rs. 26 crore. A fourth branch of BOI in Wardha reported Rs.66 crore of savings and Rs. 17 crore in advances. The first two branches are located in backward tribal talukas. As per the respective branch managers the demand for loans is very limited in the regions covered by them as there are no significant economic opportunities. The first BOI branch appeared cautious in its lending operations as it had some accumulated NPAs (of about Rs. 9 crore). Much of it was reportedly willful default made by politically powerful people. The

branch had already sold 100 accounts to the Asset Restructuring Company Limited (ARCL) when we had met them. They were also using BCs to recover loans and trying to put moral

pressure on the defaulters to repay.

The branch managers appear to have widely varying impressions about the programme of financial inclusion and, quite surprisingly, of SHGs. Most of them have rather mechanical

approach towards financial inclusion of fulfilling the targets handed over by the State Level Bankers’ Committee and their bosses. Most of them exhibited a lack of innovative approach to promote inclusion in their areas of operation. A lead district manager we met did not

even think there is any need to do think afresh on financial inclusion as his bank has set the model up quite effectively. Much of our discussion contained extremely mundane details

and some statistics about villages covered and BCs appointed.

Some branches have admitted to opening multiple accounts for the same person in the same branch in the initial years of financial inclusion drive under pressure from meeting targets. They were however confident to resolve the issue of multiple identities within the same

branch once Aadhar seeding is completed. In many branches we could not get disaggregated information on financial inclusion accounts, DBT accounts and SHG accounts. We could also not get the details of NREGA accounts separately. 3.3.3 Access to Alternative Banking Channels The awareness about channels like BCs and ATMs among respondents is quite low. About 15 per cent said they have transacted through BCs, whereas only 9 per cent have ever used an ATM. The banks on their part reported that

7 These included Bank of Maharashtra (Jawhar, Thane; Akkalkua, Nandurbar), Bank of India (Malshiras, Solapur;

RV Naka and Bhidi, Wardha; Lanja, Ratnagiri), State Bank of India (Osmanabad), Punjab National Bank (Wardha),

Central Bank of India (Kasbehgavhan, Amravati), Maharashtra Grameen Bank (Tuljapur, Osmanabad), Ratnagiri

District Central Cooperative Bank (Lanja, Ratnagiri), Vidarbha Konkan Gramin Bank (Lanja, Ratnagiri).

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The experiences of banking through BCs differ significantly across locations. In one branch we were told that BCs are used only for account opening. In another branch we came across a BC who carries out a variety of activities – account opening, preparation of loan renewal documents, loan recovery etc. Interestingly he was not sure about his earnings from all these. The agent we met in Nandurbar was working for over two years for SBI on behalf of Oxigen, the corporate BC. He works as the bank agent along with his responsibility of managing the online work of a panchayat for Maha Online. According to him his payment got delayed sometimes due to technological hitches in system integration between Oxigen and SBI. He thought the old staff of the bank is not familiar with technology, which gives rise to routine data management issues. Technical trouble-shooting often takes time. This point was reiterated by the manager of the Jawhar branch of Bank of Maharashtra too. He and several others said that poor connectivity is a major bottleneck for smooth operation of BCs. The scene at the Bank of India Bhidi branch (Wardha) was just contrasting. The two young BCs of the branch were enterprising and were able to earn Rs.10,000 to 12,000 a month on

an average. The commission offered to the agents is as follows

% of Transaction

Recovery of loans written off 10.0

Recovery of NPAs 2.5

Recovery of loan about to turn NPA 1.0

New client mobilisation 0.5

Benefit payment 0.5

The branch manager provided the necessary motivation to them. The day when we visited the branch, it was overcrowded with beneficiaries of the pension scheme. The BCs were dealing with a large number of these beneficiaries sitting outside the branch building. They

had to call them over to the branch as there was serious connectivity problem in the villages.

These contrasting experiences highlight two factors as determining the success of BC arrangement: (1) proactive attitude of the mentoring bank branch; (2) plausible volume of local business. Interestingly, both Nandurbar and Wardha were among the 51 districts where DBT was piloted in India. In Wardha, this has led to banks reaching out to the villages. BCs were integrated efficiently into this process of expansion.

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Picture 3.1

BCs at Work at Bank of India in Bhidi Village, Wardha (17 June 2014)

Overall, there is low awareness about other financial products like insurance and pension (Table 3.18). The data clearly indicates the wide gap between awareness/knowledge of such products. Even in the case of products like life and crop insurance, where there is relatively more awareness among respondents, the percentage who have actually availed policies is much lower.

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Table 3.18: Other Financial Products: Access and Use

Financial product Have heard about it

Knowledge

Have a policy of usefulness

Life Insurance 31.37 5.30 5.30

Crop Insurance 13.37 1.34 0.60

Health Insurance 12.40 2.32 0.15

Micro Pension 1.34 0.07 0.00

Accident Insurance 7.99 0.75

Livestock Insurance 5.00

That the direct benefit transfer scheme has helped households gain exposure to banking is very clear from this study. As we mentioned earlier, a large chunk of bank accounts were opened to transfer these benefits. Housing, student scholarship, old age pension, sanitation, wadi development, assistance for hospital delivery, pension for the disabled, subsidy for agriculture including purposes like digging well etc. are the most quoted programmes that used DBT route.

Appendix A3.1: Distribution of Accounts by Bank

Bank

Reported Accounts (No.)

%

Bank of Maharashtra 460 20.20

State Bank of India 366 16.07

Bank of India 302 13.26

Central Bank of India 165 7.25

State Bank of Hyderabad 109 4.79

Punjab National Bank 54 2.37

Syndicate Bank 25 1.10

Bank of Baroda 18 0.79

IDBI Bank 4 0.18

ICICI Bank 3 0.13

Saraswat bank 3 0.13

Axis Bank 1 0.04

Canara Bank 1 0.04

HDFC Bank 1 0.04

Total Commercial Banks 1512 66.40

Cooperative Banks

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Thane District Central Cooperative Bank 84 3.69

Solapur District Central Cooperative Bank 69 3.03

Ahmednagar District Central Cooperative Bank (ADCC) 57 2.50

Yavatmal District Central Cooperative Bank 48 2.11

Amravati District Central Cooperative Bank 45 1.98

Ratnagiri District Central Cooperative Bank 44 1.93

Osmanabad Janta Sahkari Bank 25 1.10

Multi-state Cooperative banks 11 0.48

Urban Cooperative Bank 16 0.70

Jilla Madhyavarthi Bank, Yavatmal 6 0.26

Nagrik Sahkari Bank, Wardha 5 0.22

Satara District Central Cooperative Bank 3 0.13

Shikshak Bank 3 0.13

The Jawhar Urban Bank 3 0.13

Dhule District Central Cooperative Bank 2

Rajpur Urban Cooperative Bank Ltd. 2

Buldhana Urban Cooperative Credit Society 1

Janta Sahkari Bank 1

Vijaysinh Mohite Patil Cooperative bank, Vatgarh 1

Osmanabad District Central Cooperative Bank 15

Total Cooperative Banks 441

RRBs

Maharashtra Gramin Bank 56

Vidarbha Konkan Gramin Bank 34

Vaiganga Krushna Gramin Bank 2

Total RRBs 92

Unspecified 232

All banks 2277

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Chapter 4

CONCLUSION:

MAKING SENSE OF THE MAPPING STUDY

This study by design focused on some of the backward regions of Maharashtra. The villages selected randomly for the detailed primary survey turned out to be depending largely on primary sector, with the occupation structure dominated by small farmers and agricultural workers. A sizeable percentage of the households lack formal education, especially among women and members of tribal households, which creates significant barriers to dissemination of information. Despite the progress made by the state at the aggregate level in the formal banking financial services sector, the study villages are found to still depend on informal and personal sources

for credit, for farming and routine consumption smoothing purposes. Personal sources, money lenders and community based models like SHGs account for more than half the outstanding loans of the respondent households. SHGs, the only community-based channel

for savings and credit, appear to play a significant role in the study villages as they appear as a major source across loan purposes. As it is well known, loans from formal sources tend to

be concentrated in productive and priority sectors and thus exclude activities that are critical to the sustenance of the household economies of the poor. Interestingly, at least in this survey, MFIs do not appear as having responded adequately to the needs of sustenance of rural households.

Several of the study villages received substantial inflow of government benefits. More than 40 per cent of all bank accounts we traced were opened to receive government benefits and

payments. This is also manifested as impressive improvement in opening of savings bank accounts with banks post 2006. Number of per capita bank accounts in all districts, except

Nandurbar, is found to exceed one. Jan Dhan Yojana, the revamped financial inclusion

project, seems to have helped more individuals to open accounts.

The study shows that having a bank account is no financial inclusion. From the point of view of usage of accounts the situation is not very encouraging. Transactions in the

accounts have been irregular. More than a third of the account holders have not transacted their accounts for more than 6 months. Alternative channels of banking including BCs are yet to reach these regions to make any difference to their banking activities. Moreover, households still have to tap into traditional systems of financial assistance even to meet their needs to finance basic livelihood activities, leave alone other emergent and social needs. This is despite the simultaneous presence of several financial institutions – formal, quasi formal and informal – in the villages. We came across women who save Rs. 100 regularly

with SHGs but deposit much larger sums with private financiers who offer attractive interest rates. The whereabouts such companies are hardy verified. Such irrational behaviour, no doubt, is not typical of Maharashtra as exemplified by the myriad scams that have broken out in different parts of India in recent years. But how to help poorer households insure

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themselves against exploitation by the transient, unregulated, fly-by-night speculative players whose primary interest does not lie in providing financial services? It is important to appreciate the native wisdom of individuals, however irrational it may appear to be, and create institutional options to appeal to that wisdom. The first step in this direction is to appraise the nature of financial needs of the excluded geographies and population. Secondly, their preferred financial behaviour and their capacities to deal with instruments and institutions must be assessed. Finally such capacities must be matched with cost effective local institutional network. The study indicates that there are serious gaps in the working of the formal institutional architecture for financial service delivery at the study locations. Post offices are not popular as places of safe saving, while RRBs do not demonstrate any distinct appetite for serving the underserved. In fact many of them work with thin businesses. PACs do not figure in financial inclusion initiatives, whereas cooperatives promoted by private business interests or politically connected groups and individuals have flourished by attracting the ill-informed

poor households. Banks have structural difficulties in spreading beyond certain physical limits, and hence are encouraged to enlist private agents to drive their businesses in villages.

MFIs, being obsessed excessively with operational viability, have come to be seen as hands- off financial agents.

This study unequivocally establishes that SHGs, though offer small volumes of financial services, are effective mechanisms to address the specific needs of the poorer households in backward regions. They may not have evolved into perfect institutions. But they can be strengthened with marginal investments to capacitate local resource agencies. These

agencies can mediate the learning and experience sharing among communities with respect to financial transactions as also engagement with formal financial arrangements.

If need be structured financial education interventions be made to modify individual and household financial behaviour and to build capacities. Such a strategy needs to be context-

driven. There could hence be multiple inclusion models focusing on distinct spaces of exclusion, for instance, the tribal regions, remote rural regions, poor urban neighbourhoods, women, minorities etc. The existing institutional arrangements in distinct locations must be realistically appraised and integrated with the inclusion project. In sum, an effective inclusion programme has to have ‘decentralization’ as its core value. Financial inclusion cannot also be seen independent of social and economic inclusion. The most strategic intervention towards effecting economic inclusion is expansion of livelihood opportunities and of social inclusion is strengthening grassroots institutions. The NRLM framework allows for the conceptualization of an expanded and workable definition of ‘inclusion’ with economic, social and financial inclusions as three independent, but interrelated pillars. What is then needed is an operational model that corresponds the conceptual framework.