Barriers to Basic Banking: Results From an Audit Study in South India

This study adopts a “mystery shopping approach” to identify constraints faced by customers when attempting to open BSBDA and other low-cost accounts in banks.

India’s low rate of formal savings continue to pose a challenge for the government’s push for financial inclusion initiatives. As per a 2011 national survey, 35% of adults hold an account at a formal financial institution, but only 12% had saved at a formal institution in the 12 months preceding the survey. In order to understand and identify barriers to take-up of banking facilities, the question that pops up os whether banks are capable of handling operations including dealing with customers to support the financial inclusion ambitions of the government. A LEAD and NSE collaboration, this study examines the range of costs and constraints faced by customers attempting to purchase low-cost savings accounts in order to explore whether or not these costs could partially explain the Indian households’ persistent and rising preference for informal and physical savings instruments. The study is part of a research initiative, in which researchers use a “mystery shopping”, an Approachwhere trained auditors, posing as low-income customers, attempt to open BSBDA (Basic Savings Bank Deposit Account) and low-cost accounts at banks in Chennai.

The study was conducted across 27 banks in Chennai. The sampled banks was representative of all types of banks (nationalised, private, foreign, regional rural and State Bank of India and Associates) engaged in a mix of residential and enterprise activity. Employing a “mystery shopping” Approach, the process involved field investigators, who were trained and provided with specific scripts, to attempt to open a BSBDA (Basic Savings Bank Deposit Account) or any low-cost account at the selected banks. The investigators were tasked with enquiring about (i) opening a savings account in 42 branches and, (ii) the full process of opening an account in 20 branches. Data from all the visits were classified and encoded for analysis as were all interactions recorded on audio for purposes of a qualitative analysis.


The study found that banks have a high ability to influence financial access outcomes, even when product availability and eligibility rules are non discretionary. Nearly all banks refused to market the regulator-mandated basic accounts, despite the customers being atypically persistent in asking for “basic accounts.” Additionally, in more than half (55%) of the bank branches visited, customers were turned away when they attempted to negotiate for an alternative, affordable savings product—in half of the cases, the bank refused to accept the customer’s valid identity or address proof, while in the other half of the cases, the bank refused to market an alternative low-cost product. For the accounts that were opened, the banks demanded excessive identity and address documents, withheld key information about the product’s terms and fees, and imposed significant time, effort, and incidental costs on the customers. Given the benefits of low-cost accounts and their linkage to the Indian government’s broader financial inclusion goals, our findings suggest a need for careful monitoring and targeted enforcement of India’s financial inclusion policy implementation.

The researchers suggest immediate intervention to monitor ongoing financial inclusion policy implementation, and caution against driving G2P transfers until banks demonstrate capacity and willingness to meet basic standards of service and client protection. Further analysis indicates that despite the BSBDA being a straightforward product with clear rules and (near universal) eligibility, the largest banks in two zones in Chennai, had nearly zero effective access to the BSBDA. The results further suggest gaps between policy intention and policy implementation, which deserve closer examination in other settings.

Thematic Area

Financial Well-being and Social Protection

Project Leads

Amy Jenson Mowl, Camille Boudot