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

Principal Investigators: Minakshi Ramji, S. Thyagarajan, Jayaram Venkatesan
Research Team: Minakshi Ramji, S. Thyagarajan, Jayaram Venkatesan
LEAD Centre: Centre for Microfinance
Focus Area: Savings
Project Geography: Karnataka
Partner: RBI CAB
Status: Completed


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.

CMF researchers conducted two separate studies 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 percent 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, 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, CMF staff conducted interviews with branch managers.

Related Resources
PUBLISHED PAPER – Cost –Benefit and Usage Behaviour Analysis of No Frills Accounts: A Study Report on Cuddalore District