No Thrills – Dormancy in NFA Accounts

This research aims to understand the reasons for widespread dormancy in No Frills Accounts (NFAs) 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:

• Despite an impressive number of NFA account openings, many are only used for withdrawing government benefits and wages under NREGA;
• The majority are often inactive or dormant;
• 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);
• Not surprisingly, bank service is often unsatisfactory - and less encouraging for customers and extending NFA use.