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

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 Gulbarga, Karnataka.

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. Surveyors selected 2 of the 11 blocks in Gulbarga district: Shorapur and Gulbarga for the study. They then randomly selected 25 villages from each block and 20 BPL households from each village whom they then interviewed. They also spoke to bank managers about their experience during the drive.
The study highlighted some of the major gaps in the implementation of the drive. 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 hadn’t even operated once, 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, etc. Some of the recommendations from this study include the need for financial literacy at the time of account opening, incentives for branch managers delivering on socially responsible schemes, documentation of best practices on such projects, etc.

Thematic Area

Financial Well-being and Social Protection

Project Leads

Minakshi Ramji, S. Thyagarajan, Jayaram Venkatesan


Gulbarga district, Karnataka