Cost-Benefit and Usage Behaviour Analysis of No Frills Accounts: A Study Report on Cuddalore District

This study analyzes results of a financial inclusion drive in Cuddalore district, carried out to bring a large portion of population into the banking net by offering variety of affordable financial services. It describes the scheme, its coverage, breakeven scenarios as well as benefits to banks.

Monitoring the gap between the scheme's objective and ground results reveal that:

• Financial drive left more than 25% of the households outside the banking net;
• Reasons for households reluctance to participate were not clear;
• Usage was low, leaving bulk of the accounts unutilized;
• Lack of financial literacy seems to be important reason for low usage;
• Among the operative accounts, there was a positive trend overall with respect to balance per account;
• Banks can breakeven maintenance cost, but not account opening cost, at current level of operations.

For the no-frills initiative to be a success, financial literacy has to go hand-in-hand with account opening. Best practices of account opening with 100% willingness needs to be documented. Banks should think of providing incentives to schemes promoting social inclusion.