Financial Inclusion Studies: Analysis of No-Frills Accounts Drives in Cuddalore District

This study is an evaluation of financial inclusion drives to assess goals achieved and the behaviour of clients using newly opened accounts in the district of Cuddalore, Tamil Nadu.

Policymakers the world over believe that financial inclusion could be a powerful vehicle for poverty alleviation. As part of India’s broad poverty alleviation agenda, the Reserve Bank of India (RBI) initiated a financial inclusion drive in 2005 to bring unbanked households across the country into the formal financial sector. As part of the initiative, each state in India was asked to select at least one district where the government would achieve 100% financial inclusion. Increasing access to no-frills accounts, accounts that could be opened with zero or minimum balances was the main goal of this drive. The RBI also loosened Know Your Customer (KYC) requirements, a series of protocols where banks are required to check identity documents for each customer opening an account. Two separate studies were conducted in two districts, Cuddalore in Tamil Nadu and Gulbarga in Karnataka, to evaluate access to finance after policymakers and state officials had declared that these districts had reached 100% financial inclusion. The key objectives of the study were to check whether states had achieved their financial inclusion goals and to see whether and how clients used their newly-opened accounts.

The two studies used different methodologies to gather information about the drives. The Cuddalore study was based on results published by the lead bank, surveys conducted by the banks, household and bank interviews by the study team, and transaction data from selected branches. The Gulbarga study surveyed 999 households deemed Below Poverty Line (BPL) approximately one year after the drive began. Indian Bank (the lead bank of the programme in the district) published a booklet called “Financial Inclusion Project in Cuddalore District,” sometime after Cuddalore district was declared to have reached 100% financially inclusion in September 2007. Researchers used data from this booklet for their core analysis. After finding inconsistencies in the data between different banks regarding the number of households banks had deemed “unwilling” to open an account for, surveyors prepared a simple questionnaire for these households to see what factors had prevented them from opening accounts. Finally, to complement survey data and to understand how the program was implemented, interviews were also conducted with branch managers.
Key Findings
A significant percentage of households (25 per cent) were still left out of the banking net even after the drive. The study also showed that only 15 per cent of the customers were operating the accounts and the bulk of the accounts had not been operated at all, even one year after the completion of the drive. An analysis of the operating accounts showed a steady increase in balances over one year from their account opening date. The study also highlighted that the main reasons behind the non-operative accounts were the lack of financial literacy, distance from branches. 


The study highlighted some of the major gaps in the implementation of the financial inclusion drive. Key recommendations from this study include the need for introducing financial literacy initiatives at the time of account opening, introducing incentives for branch managers delivering on socially responsible schemes, and documenting best practices from similar projects. 

Thematic Area

Financial Well-being and Social Protection

Project Leads

Minakshi Ramji, S. Thyagarajan, Jayaram Venkatesan


Cuddalore district, Tamil Nadu


College of Agricultural Banking