A

PROJECT REPORT
ON
An Empirical Study to Find Reason for Dormancy in No-Frills
Saving Account in Unorganised Sectors Labour in Surat City

MBA SEMESTER 2(B)

RESEARCH PROJECT
2013 - 2014

SUBMITTED BY
Mr. Praful Poriya

17

Ms. Vidhi Sarvaiya

26

Ms. Tejal Thakor

40

Mr. Hitesh Vekariya

49

Mr. Shailesh Vekariya

50

PROJECT GUIDE

Dr. Manisha Panwala

Department Of Business and Industrial Management

Veer Narmad South Gujarat University

Surat
1

DECLARATION
We, the undersigned, Mr.Praful Poriya, Ms. Vidhi Sarvaiya, Ms. Tejal Thakor, Mr.
Hitesh Vekariya & Mr. Shailesh Vekariya here by, declare that this thesis titled An
Empirical Study to Find Reason for Dormancy in No-Frills Saving Account in Unorganised
Sectors Labour in Surat City and the work carried out under the guidance of Dr. Manisha
Panwala, Professor at Department of Business and Industrial Management, VNSGU, Surat.

The empirical findings in this report are based on the data collected and have not been taken
from any other reports.

This dissertation does not form any basis for other degree or diploma.

Signature of Researchers:

Mr. Praful
Poriya

Ms. Vidhi
Sarvaiya

Ms. Tejal
Thakor

Mr. Hitesh
Vekariya

Mr. Shailesh
Vekariya

Date: 10th April 2014

Place: Surat

ACKNOWLEDGEMENT
The satisfaction and excitement that accompany the successful completion of any task
would be incomplete without the mention of the Leaders, whose constant guidance and
encouragement crown all the efforts with success.
We are highly obliged to the Veer Narmad South Gujarat University for arranging the
programme of practical training in Master of Business Administration in such a manner.
It is our privilege to express our deep sense of gratitude to Dr. Manisha Panwala for her
efforts, guidance, valuable comments and suggestions for making this project report. She
helped us to complete our report on the practical study and gave contribution to improve and
expand our practical knowledge.
We would like to extend our gratitude to all the staff and especially to Dr. Namarata Khatri
and Dr. Dhaval Mehta, Assistant professor of DBIM, who provided us useful information
and data regarding the subject with their cent percent participation and supported in making
this project report a successful task. It was a memorable experience to work with them.
Finally, we express our intense gratitude to our parents whose blessings has helped us to
translate our efforts into fruitful achievement.

EXECUTIVE SUMMARY

Financial inclusion will result in expansion of banking services rather than on any
improvement in the quality with the result that facilities uses rate declined even though new
account opened ratio rose. Some factors or hurdles make account holders for no use/ limited
use of their bank account.
An estimated 2.5 billion working-age adults globally have no access to the types of formal
financial services delivered by regulated financial institutions. About 90% of the 180
million poor households in the region still lack access to institutional financial services.
The externality of asymmetric information between the financial institutions and the
disadvantaged section of the population may be the main cause of this exclusion. Besides,
the geographical distance from bank, diffident, financial illiteracy, gender-inequality,
paucity of income and collateral assets, lack of proof of identity of the disadvantaged people
are the plausible causes of financial exclusion. On the other hand shortage of staff, high
transaction cost, economic viability of the extension of branch etc. are the common
problems of the financial institutions in extending financial services to the disadvantaged
section.
Researchers have taken the 150 respondents from unorganised sectors labour. The study is
descriptive in nature and sample drawn by convenient judgemental sampling. From which
35% NFA account is DORMANT. Females account dormancy rate (23%) is relatively
higher then to males account dormancy (16%). The main reason for widespread dormancy
is price paid by account holder in terms of transportation cost, leave in work place and
processing time. Respondents hesitate to work with banks due to the difficulties involved in
signatures and filling out lengthy forms. Respondent`s lack of awareness about how to
operate account, basic rules and norms becomes obstacle for Financial Inclusion.

INDEX
Table of Contents
DECLARATION ............................................................................................ 2
ACKNOWLEDGEMENT ............................................................................ 3
EXECUTIVE SUMMARY .......................................................................... 4
CH 1 INTRODUCTION ............................................................................... 7
1.1 Approaches of Financial Inclusion................................................................ 8
1.2 Dormancy ...................................................................................................... 9
1.3 Conceptual framework .................................................................................. 9

CH 2 ENVIRONMENT RELEVANCE .................................................. 10

CH 3 REVIEW OF LITERATURE .......................................................... 11
CH 4 RESEARCH METHODOLOGY ................................................... 12
4.1 Need for study ............................................................................................. 12
4.2 Research problem statement ....................................................................... 12
4.2.1 Research objective ......................................................................................... 12
4.2.2 Research variable ........................................................................................... 12

4.3 Research Topic ............................................................................................ 13

4.4 Sample Design............................................................................................. 13
4.4.1 Sample size ................................................................................................... 13
4.4.2 Sampling method ........................................................................................... 13

4.5 Research technique ...................................................................................... 13

4.5.1 Source of data ............................................................................................................... 13
4.5.2 Research design ............................................................................................................ 13
4.5.3 Data analysis ................................................................................................................. 13

4.6 Hypothesis ................................................................................................... 13

4.7 Limitation .................................................................................................... 13
4.8 Benefits of study.......................................................................................... 14

CH 5 DATA ANALYSIS ..................................................................14

5

CH 6 FINDING & CONCLUSION . Error! Bookmark not defined.

BIBLIOGRAPHY ..............................................................................22
ANNEXURE ......................................................................................23

List of Tables and Figure

Table: 5.1 ............................................................................................................................................ 15
Table: 5.2 ............................................................................................................................................ 15
Table: 5.3 ............................................................................................................................................ 16
Table: 5.4 ............................................................................................................................................ 16
Table: 5.5 ............................................................................................................................................ 17
Table: 5.6 ............................................................................................................................................ 17
Table: 5.7 ............................................................................................................................................ 17
Table: 5.8 ............................................................................................................................................ 18
Table: 5.9 ............................................................................................................................................ 18
Table: 5.10 .......................................................................................................................................... 20
Figure 1 ............................................................................................................................................... 19

CHAPTER-1 INTRODUCTION
After more than sixty years after planned development in India, the rural transects are still
facing poverty; a consequence of failure of drop down of development efforts to the grass
roots. In spite of planners motivation to achieve development with equality popularly
known as inclusive growth, the country has been facing wide regional disparities both
between urban and rural and between regions.
The externality of asymmetric information between the financial institutions and the
disadvantaged section of the population may be the main cause of this exclusion. Besides,
the geographical distance from bank, diffident, financial illiteracy, gender-inequality,
paucity of income and collateral assets, lack of proof of identity of the disadvantaged people
are the plausible causes of financial exclusion. On the other hand shortage of staff, high
transaction cost, economic viability of the extension of branch etc. are the common
problems of the financial institutions in extending financial services to the disadvantaged
section.
Financial inclusion is important because it is considered as an important condition for
sustaining growth (Subbarao, 2009). Such access is especially powerful for the poor as it
provides opportunity to build savings, make investments and avail credit to them. Access to
financial services also helps the poor to insure themselves against income shocks and equips
them to meet emergencies such as illness, death in the family or loss of employment. It
helps them to get away from the charges of usurious money lenders. Financial inclusion also
permits governments to make payments such as social security transfers and National Rural
Employment Guarantee Programme (NREGA) wages into bank accounts of beneficiaries.
The RBI's circular is entitled Financial Inclusion, and covers The process of ensuring
access to financial services and timely and adequate credit where needed by vulnerable
groups such as weaker sections and low income groups at an affordable cost

1.1 Approaches of Financial Inclusion

1. No Frills Accounts
In 2005, the Reserve Bank of India (RBI) encouraged banks to make No Frills
Accounts accessible to vast sections of the population. No Frills Accounts (NFAs)
are basic, low-cost bank accounts for transacting and saving money. They require no
or a very low minimum balance and in most cases, they charge no fees.

2. Relaxation on know-your-customer (KYC) norms:

The banks were also permitted to take any evidence as to the identity and address of
the customer to their satisfaction. It has now been further relaxed to include the
letters issued by the Unique Identification Authority of India containing details of
name, address and Aadhaar number.

3. Engaging business correspondents (BCs):

In January 2006, RBI permitted banks to engage business facilitators (BFs) and BCs
as intermediaries for providing financial and banking services. The BC model allows
banks to provide doorstep delivery of services, especially cash in-cash out
transactions, thus addressing the last-mile problem.

4. Adoption of EBT:
Banks have been advised to implement EBT by leveraging ICT-based banking
through BCs to transfer social benefits electronically to the bank account of the
beneficiary and deliver government benefits to the doorstep of the beneficiary, thus
reducing dependence on cash and lowering transaction costs.

5. Opening of branches in unbanked rural centres:

To further step up the opening of branches in rural areas so as to improve banking
penetration and financial inclusion rapidly, the need for the opening of more
branches, besides the use of BCs, was felt. Accordingly, banks have been mandated
in the April monetary policy statement to allocate at least 25% of the total number of
branches to be opened during a year to unbanked rural centres.

1.2 Dormancy
The goals outlined above have limited meaning, however, if NFA customers open accounts
and then dont use them, or use them in limited, infrequent ways. This question of
dormancy troubles service providers in many other parts of the world as well, but India
reports unusually high levels. Minimal account activity and dormancy raise questions for
financial inclusion longer term. Will the business correspondent model and mobile banking
interfaces encourage more customers to actively use these accounts? Are No Frills Accounts
the wrong offering? Or, is dormancy merely an initial and unavoidable aspect of customer
adoption that will disappear in time?
As per RBI circular number RBI/2009-10/202 DBOD. Leg. Number BC. 55 /09.07.005
/2009-1017, savings and current accounts should be treated as inoperative / dormant if there
are no transactions in the account for a period over two years. Further the purpose of
classifying an account as inoperative, both types of transactions i.e., debit as well as credit
transactions, induced at the instance of customers as well as by third parties should be
considered.
Bank of India accounts that are not operated upon for more than one year would be
automatically tagged as inoperative/dormant; and such can be reactivated only by the
depositor himself operating on the account.
According to RBI, there are 10 Million dormant accounts in the banking system. These
dormant accounts have unclaimed deposit of around Rs. 1700 crores. (ET, July 17, 2011)*

1.2 Conceptual framework

Author

Dimension number

Dimension attribute

Parazuraman,

5 dimensions and 22

Tangibility; Reliability;

Zeithaml and Berry

items

Responsiveness;

(1986, 1988)
Grnroos (1984)

Assurance; Empathy
2 dimensions

Technical quality ;
Functional quality

Rust and Oliver (1994)

3 dimensions

Technical quality ;
Functional quality;
Environment

CHAPTER-2 ENVIRONMENT RELEVANCE

An estimated 2.5 billion working-age adults globally have no access to the types of formal
financial services delivered by regulated financial institutions. About 90% of the 180
million poor households in the region still lack access to institutional financial services.
Financial inclusion remains a distant dream for a majority of Indians. Even after 20 years of
banking sector privatization, today only 35% of the Indian population has formal bank
accounts as compare to an average of 41% in developing economies. In a country where
nearly 70% of the population lives in villages, a significant segment of about 6, 50,000
villages do not have a single branch.
At a banking conclave organised by Assocham, Union Finance Minister Pranab Mukherjee
said: Financial inclusion is a necessity for economic growth. Out of the six lakh habitats,
only about 30,000 have commercial banks branches. Only around 10% of the population
have life insurance covers while 0.6% buys general insurance policies. Merely 13% have
debit cards and 2% carry credit cards.
No Frills Accounts are intended mainly for customers without bank accounts who need
greater security and reliability for payments and savings As a result, the number of bank
branches rose from 54,000 to 147,000 in the two years to 31 March 2012, and the number of
branches being operated by banking correspondents increased from 32,000 to 120,000. The
number of no-frill accounts rose from 49 to 103 million. RBI advised bank to provide
overdrafts in such accounts, only about 1.5 million accounts or less than 1.5% of the total,
had been provided this facility. This is clearly shows the entire exercise was driven by a
desire to meet targets rather than look at the quality or depth of financial inclusion.

10

CHAPTER-3 REVIEW OF LITERATURE

Micro Save conducted the Tamil Nadu portion of NFA dormancy research in October 2010.
The study team, led by Akhilesh Singh, included Alphina Jos, Denny George, Shivshankar
V. and Stanley V Thomas. They find the majority of the respondents said that that they
opened an NFA because it is pre-requisite for taking work under NREGA. For 60% of the
respondents, NFA is their first personal account and their first bank experience, while the
rest had prior experience of banking. Most of them use the account only occasionally, or
once in a month, whenever the wages are credited to the account. Respondents appreciate
the overall safety and security of a bank account, especially to protect their savings; the low
cost and relative ease of opening an NFA.
Another survey conducted by MicroSave India (May 2011).This research aims to
understand the reasons for widespread dormancy in No Frills Accounts opened through
various service providers like public and private sector banks, RRBs and business
correspondents. The research was conducted in the states of Uttar Pradesh, Rajasthan and
Tamil Nadu and involved focus group discussions and individual interviews with NFA
customers and bank staff.
Some of the key findings are:
1.

Despite an impressive number of NFA account openings, many are only used for
withdrawing government benefits and wages under NREGA;

2.

The majority are often inactive or dormant;

3.

In most areas, only 20% or fewer use their accounts for small savings, the NFA's
original intention. Banks lose money on these accounts (estimated costs are Rs.13.4
per transaction and Rs.50.45 for account opening, or Rs.250 total to open and
maintain accounts);

4.

Not surprisingly, bank service is often unsatisfactory - and less encouraging for
customers and extending NFA use.

11

CHAPTER-4 RESEARCH METHODOLOGY

4.1 Need for study
Raghuram Rajan Committee on Financial Sector Reforms in 2009 had hoped that
90% of Indian households have a deposit account by December 2011. The target
remains out of reach. The committees focus on an entitlement driven approach to
financial inclusion will result in expansion of banking services rather than on any
improvement in the quality with the result that facilities uses rate declined even
though new account opened ratio rose. What factors or hurdles make account holders
for no use/ limited use of their bank account?

4.2 Research problem statement

The reasons for widespread dormancy or limited use (withdrawals only) in NFAs
opened through public and private sector banks.
4.2.1 Research objective
1.

To understand the objective of account opening

2.

To know the awareness of NFA

3.

To understand the service given by bank to NFA holders

4.2.2 Research variable

1. Purpose
2. Frequency
3. Accessibility
4. Availability
5. Information
6. Independence
7. Price
8. Flexibility
9. Assurance

12

4.3Research Topic
An Empirical Study to Find Reason for Dormancy in No-Frills Saving Account in
Unorganised Sectors Labour In Surat City

4.4 Sample Design

Sample design refers to the technique as the procedure that a researcher would adopt
in selective item for the sample.
4.4.1 Sample size
150 respondents from unorganised sector labour
4.4.2 Sampling method
Researchers adopt non-probability convenient judgmental sampling because non
availability of population frame.

4.5 Research technique

4.5.1 Source of data
Primary data collect through structured questionnaire by survey method and
secondary data collect from Journal, Newspaper and web.
4.5.2 Research design consist descriptive study about various demographic factors.
4.5.3 Data analysis with the help of SPSS Software. I.e. average, mean, hypothesis
testing etc.

4.6 Hypothesis
H0: There is no significant relationship between awareness about services and
consumption of services
H0: There is no significant different between literacy level and use of banking facility
H0: There is no association between awareness of NFA and literacy level

4.7 Limitations
1. This study exclusively examined responses in a single/limited geographic location.
2. Proper frame of population is not available so researcher used convenience
judgmental, non-parametric sampling method.

13

3. As per RBI rule banks does not disclose or provide data base regarding dormant
account.
4. Limited sample size itself becomes a limitation and researcher cannot apply such
statistic tools to prove hypothesis.
5. Respondent hesitate to response accurate answer due to illiterate.
6. The limited funds are available with the researchers.

4.8 Benefit of study

1. Result of study helps to banking industry for improvement of service quality and get
clues about unbanked segment according they can make policy and various
promotional activities.
2. From the result Reserve Bank of India apex body can made necessary changes in
banking rules and norms regarding KYC, procedure and attractive schemes to attract
vulnerable group.
3. It is also help full in the measurement of financial Inclusion effectiveness.
4. It also enhances the knowledge about various demographic factors and how they
affect in banking sectors.

14

CHAPTER-5 DATA ANALYSIS

H0: There is no significant relationship between awareness about services and
consumption of services
H1: There is significant relationship between awareness about services and consumption
of services.

Table: 5.1 frequency of Awareness and possess NFA

Count

are you aware about

NFA account
Total

Do you have NFA

account?
yes
no
101
9

yes
no

9
110

Total

110

31
40

40
150

Table: 5 1

Table: 5.2 Chi-Square Tests of Awareness and possess NFA

Value
Pearson Chi-Square
Continuity Co-rrectionb
Likelihood Ratio
Fisher's Exact Test
Linear-by-Linear
Association
N of Valid Cases

72.075a
68.574
69.020

df

Asymp. Sig. Exact Sig. (2(2-sided)

sided)
1
1
1

Exact Sig.
(1-sided)

.000
.000
.000
.000

71.595

.000

.000

150

Table: 5 2

INTERPRETATION:
Calculated value is less than the table value at 5% significant level. Hence we fail to accept
Null Hypothesis. So researcher interpret that there is significant relationship between
awareness about services and consumption of services.
H0: There is no significant different between literature level and use of banking facility.
H1: There is significant different between literature level and use of banking facility

15

Table: 5.3 frequency of Education and Have NFA Account

Cross tabulation
Count

Educatio
n

Illiterate
Up to SSC
Up to HSC

Total
Percentage

Do you have NFA

account?
yes
no
44
15
55
22
11
3
110
40
73.33
26.67

Total

59
77
14
150

Percentage

39.33
51.33
8.00

Table: 5 3

Table: 5.4 Chi-Square Tests Education and Have NFA Account

Do you have education
NFA
account?
Chi-Square
32.667a 42.120b
df
1
2
Asymp.
.000
.000
Sig.
Table: 5 4

INTERPRETATION:
Calculated value is less than the table value at 5% significant level. Hence we fail to accept
Null Hypothesis. So researcher interprets that there is significant different between literacy
level and use of banking facility.

From the cross tabulation researcher interpret that only 60% respondent are literate and have
no-frill account and 25% respondent does not have no-frill account and which are illiterate.

H0: there is no association between awareness of NFA and literacy level

H1: there is no association between awareness of NFA and literacy level

16

Table: 5.5 Frequency of Literacy and awareness about NFA

are you aware about NFA account * education level
education
illiterate
up to
SSC
yes
Count
42
68
are you aware about
NFA account
no
Count
17
23
Total
59.0
91.0

Total

110
40
150.0

Table: 5 5

Table: 5.6 Chi-Square Tests of Literacy and awareness about NFA

Value
Pearson Chi-Square
Continuity Correctionb
Likelihood Ratio
Fisher's Exact Test
Linear-by-Linear
Association
N of Valid Cases

df

.229a
.084
.228
.228

Asymp. Sig. Exact Sig. (2(2-sided)

sided)
1
.632
1
.772
1
.633
.706
1

Exact Sig.
(1-sided)

.384

.633

150

Table: 5 6

INTERPRETATION:
Calculated value is more than the table value at 5% significant level. Hence we fail to reject
Null Hypothesis. So researcher interpret that there is no significant different between
awareness and education.
Table: 5.7 frequency of Occupation and have NFA account

Do you have NFA

account?
Total

yes
no

construction
worker
45
13
58

occupations
Diamond
other own business
worker
43
20
2
14
13
0
57
33
2

Total

110
40
150

Table: 5 7

17

INTERPRETATION:
From the cross tabulation researcher there is merely 77% construction and Diamond
workers have No-frills account and 23% still out of reach.

Table: 5.8 Gender wise willing to open account

gender
Total

male
female

willing to open NFA

account
yes
no
21
7
28

Total

28

5
12

12
40

Table: 5 8

INTERPRETATION:
From the above table researcher interpret that from 26% of unbanked respondent, 70%
respondent willing to open no-frill account which consist male and female ratio 3:1.

Table: 5.9 Gender and frequency of use

once in a week
once in a month
How frequently you
Once in a year
Operate NFA account?
More than
2consecutive year
Total

gender
male
female
2
0
23
5
33
8

Total
2
28
41

28

11

39

86

24

110

Table: 5 9

INTERPRETATION:
As per RBI circular treated dormant account if there are no transactions in the account for a
period over two years. From above cross table researcher interpret that there is 35% NFA
account is DORMANT. Females (23%) account dormancy rate is relatively higher then
to male`s account 16%).

18

Chart: 5.1 Purpose of open NFA

Figure 1

INTERPRETATION:
From the above chart it is interpret that 23.62% respondent open account to realisation of
cheque payment and thereafter to earn interest on savings followed by NREGA pre-require,
avail loan and to avail government benefits.

19

Table: 5.10 weighted average mean

Attribute

AVERAGE WAM

Rank

Accessibility

3.06

Availability

3.04

Information

3.00

Independent

3.06

Price

2.74

Flexibility

3.20

Assurance

3.27

Table: 5 10

INTERPRETATION:
From the above WAM table researcher interpret that the main reason for widespread
dormancy is price paid by account holder in terms of transportation cost, leave in work place
and processing time.
Secondly lack of awareness about how to operate account, basic rules and norms.
Third reason from customer service basically bank fail to meet the expectation of account
holder. Other factors followed by independent, availability, assurance and flexibility.

20

CHAPTER-6 FINDING & CONCLUSION

1. 74% respondent have NFA account in unorganised sectors labour and still 26% out of
reach to get financial services from organised financial institute.
2. Only 60% respondent are literate and have no-frill account and 25% respondent does not
have no-frill account and which are illiterate.
3. 77% construction and Diamond workers have No-frills account and 23% still out of
reach.
4. 26% of unbanked respondent, 70% respondent willing to open no-frill account which
consist male and female ratio 3:1.
5. 35% NFA account is DORMANT. Females (23%) account dormancy rate is
relatively higher then to male`s account dormancy (16%).
6. 23.62% respondent open account to realisation of cheque payment and thereafter to earn
interest on savings followed by NREGA pre-require, avail loan and to avail government
benefits. (see chart 1.1)
7. The main reason for widespread dormancy is price paid by account holder in terms of
transportation cost, leave in work place and processing time.

8. Respondents hesitate to work with banks due to the difficulties involved in signatures
and filling out lengthy forms.
9. Respondent`s lack of awareness about how to operate account, basic rules and norms
becomes obstacle for Financial Inclusion.

21

BIBLIOGRAPHY
Journal & Newspaper
1. Dr. Supravat Bagli Assistant Professor in Economics (2012) A STUDY OF
FINANCIAL INCLUSION IN INDIA, Journal of Radix International Educational
and Research Consortium, Volume 1, Issue 8(Aug. 2012), ISSN: 2277 10.
Available at www.rierc.org
2. M G George Muthoot, A New Mode of Financial Inclusion, Economics Times, 27th
February 2014.
3. Ashok jha, statistical illusions do not Make a reality, Economics of Times, 23rd
January 2014.
4. RBI may rope in for-profit firms for financial inclusion, 5 Jul 2010, ET Bureau.

Website Reference link

http://www.businessworld.in/news/opinion/bw-opinion/more-without-frills/480611/page1.html (Accessed on 2nd April 2014 1:45 AM)
http://www.microsave.net/resource/no_thrills_dormancy_in_nfa_accounts (Accessed on 3rd
April 2014)
http://www.adb.org/sectors/finance/microfinance(Accessed on 4thApril 2014)
http://www.microfinancegateway.org/p/site/m/home/ (Accessed on 4th April 2014)

22

ANNEXURE

23