CHAPTER FOUR PROFILING FINANCIAL INCLUSION IN ASSAM: EVIDENCE FROM SECONDARY LEVEL DATA

CHAPTER FOUR PROFILING FINANCIAL INCLUSION IN ASSAM: EVIDENCE FROM SECONDARY LEVEL DATA 4.1 This chapter makes an attempt to present a brief profile of financial inclusion in Assam, especially rural Assam based on secondary data. It begins with a broad outline of the geography and economy of the state. Then, with the limited secondary material available, it looks into the extent and various dimensions of financial inclusion at the household level in Assam in general and rural Assam in particular. The core part of the chapter deals with the various dimensions of banking outreach/inclusion in the state in comparison with all-india figure. As banking system is a significant component of financial system and as most of the definitions describe financial inclusion in terms of banking services, contextualization of financial inclusion in Assam has been done here mainly with respect to banking inclusion. In addition, the chapter also looks into the role of various other forms of financial service providers to give a comprehensive picture of the extent of financial inclusion in the state. Besides, as in this study, financial inclusion has been defined as a process that enhances availability, smoothens accessibility and ensures usage of the basic financial products and services for all sections of the society, in this chapter these three aspects of financial inclusion, i.e., availability, accessibility and usage have been looked into while assessing the status and extent of financial inclusion/exclusion in the state. 4.2 General Background of the State of Assam 4.2.1 Location Assam forms the core of the North Eastern region of India. It is located between the latitudes of 24008 N and 27009 N and the longitudes of 89042 E and 96010 E. It 80

covers a geographical area of 78,523 sq. km constituting 2.4 per cent of the country s total geographical area. The state shares its boundary with a number of Indian states and a couple of foreign countries. It has got the Kingdom of Bhutan to its north-west, Arunachal Pradesh to its north and north-east, Nagaland and Manipur to its east, Mizoram to its south, Tripura, Meghalaya and the Republic of Bangladesh to its southwest and finally the state of West Bengal to its west. 4.2.2 Natural Divisions The state is comprised of two broad natural divisions, viz., Plains division and Hills division. The Plains division comprises of Brahmaputra Valley and Barak Valley. The Brahmaputra Valley is a long strip of plain land extending from west to north-east in the northern part of the state. The valley derives its name from the mighty river Brahmaputra, which runs from north-east to west through a distance of 450 kms, splitting the valley into two long strips. Of the total 27 districts of the state, the Brahmaputra Valley constitutes 22 districts comprising about 72 per cent of the total geographical area with about 85 per cent of the population of the state. The Barak valley is situated in the southern part of the state with the river Barak passing through it. The region is relatively small accounting for only about 9 per cent of total area and accommodating about 12 per cent of the population of the state. The Hills division, consisting Karbi Anglong and Dima Hasao, lies in the middle of the state separating the two valleys. The region covers 19 per cent of the total geographical area and a relatively sparse population with less than 4 per cent of the state s total population. 4.2.3 Demography As per 2011 Census the size of population in Assam was 31.17 million, which is more than 68 per cent of the population of the entire North Eastern region. The decadal 81

growth rate of population of the state during 2001-2011 was 16.93 per cent against 18.92 per cent during 1991-2001. The corresponding growth rates for the country as a whole were 17.64 per cent and 21.54 per cent respectively. In 2011, the sex ratio (954) in the state was higher than the national figure (940). The density of population in Assam was the highest among the North Eastern states with 397 persons per square kilometer, which was even higher than the national figure of 382 persons per square kilometer. There are, however, considerable variations in the density of population across the plain districts, apart from a very low density in the two hill districts of the state. The most densely populated district Kamrup Metro has a population density of 2010 persons per square kilometer whereas the least densely populated district Dima Hasao has the population density of just 44 persons per square kilometer. The other districts with 500 plus persons per square kilometer are Dhubri (1171), Nalbari (762), Nagaon (711), Karimganj (673), Barpeta (632), Morigaon (618), and Goalpara (553). The literacy rate in the state improved from 63.3 per cent in 2001 to 73.2 per cent in 2011 (with 9.9 per cent change) whereas the national figures for the same period were 64.8 per cent and 74.0 per cent respectively (with 9.2% change). The natural growth rate of population in the Assam in 2011 was 16.9 per cent with the urban growth rate (27.6%) higher than the rural growth rate (15.4%). The level of urbanization in the state is very low with 14.08 per cent of the population living in the urban areas. Out of 27 districts, 15 have more than 90 per cent of population living in the rural areas, the largest figure being taken by Baksa district (more than 98%). 4.2.4 The Economy The State Domestic Product (SDP) is considered as the most effective indicator to scale the progress of economic development of the State. The estimate of State Domestic 82

Product over a period of time also indicates the extent and direction of changes in the level of economic development of the State. During the 11th Five Year Plan (2007-08 to 2011-2012) the State has registered an average growth of 6.86 per cent against the Nation s GDP growth of 8.2 per cent (base year 2004-05). The Net State Domestic Product (NSDP) of Assam at current prices for the year 2011-12 was Rs. 103559 crore registering a growth of 11.4 per cent as compared to the previous year figures of Rs. 92970 crore. The NSDP at constant (2004-05) prices during the same year was Rs. 70683 crore. During 1993-94 to 2005-06, the NSDP at current prices grew at a compound growth rate of 9.9 per cent. During the same period, the NSDP at constant prices grew at a compound annual growth rate of 3.44 per cent (Mandal, 2011). The economic condition of a state is often measured by its per capita net state domestic product. During 1993-94 and 2005-06, the per capita income at current prices grew at a compound annual growth rate of 8.1 per cent. During the same period the per capita income at constant (1993-94) prices grew at a compound annual growth rate of 1.73 per cent (Mandal, 2011). In 2011-12, the advance estimates of per capita income of Assam at current prices was Rs. 33633 and per capita income at constant (2004-05) prices in 2011-12 was Rs. 22956. The per capita income at constant (2004-05) prices in 2011-12 was Rs. 22956. During the 11th Five Year Plan, the per capita income at current prices in the state has registered an average growth of 11.2 per cent. Table 4.1 shows that the per capita income of the state has remained low throughout as compared to the per capita income of India. The ratio of per capita income of Assam to the per capita income of India which was 0.70 in 2004-05, declined consistently over the years and the same was just 0.56 during 2010-11. 83

Table 4.1: Recent Trends in Per Capita NSDP at Current Prices in Assam and India (in Rs.) Assam India PCI of Assam Year Per Capita Income Growth Rate (%) Per Capita Income Growth Rate (%) as ratio of PCI of India 2004-05 16782 24143 0.70 2005-06 18396 9.62 27123 12.34 0.68 2006-07 19737 7.29 31198 15.02 0.63 2007-08 21290 7.87 35820 14.82 0.59 2008-09 24099 13.19 40605 13.36 0.59 2009-10 27964 13.96 46492 14.5 0.60 2010-11 (Q) 30569 11.30 54835 17.95 0.56 Source: Adopted from Economic Survey, Assam, 2011-12 and Central Statistical Organisation, Government of India Note: Q Quick Estimates Table 4.2 presents the trends in the relative contribution of different sectors to the NSDP of Assam over a period of time. The sectoral composition of NSDP both at current and constant (2004-05) prices has undergone considerable change during the past few years. Table 4.2 shows that in 2005-06 at constant (2004-05) prices, the share of Agriculture and Allied sector was 26.4 per cent, Industry 23.4 per cent and Services sector was 50.2 per cent. Table 4.2 also indicates that at constant prices, the contribution of agriculture and allied sectors and Industry to the NSDP has declined continuously whereas the same for services sector has increased over a period of time of 2005-06 to 2010-11. At current prices too, the contribution of Agriculture and allied sectors and Industry to the NSDP declined during the period and stands at 29 per cent and 22 per cent respectively in 2010-11. The share of Services sector at current price was just under 50 per cent. However, it is worth noting that although the share of agriculture to NSDP is on the decline it is still the largest contributor as an individual component of all the three broad sectors. This signifies the importance of agriculture in the economy of the state. 84

Sector/Year Table 4.2: Sector wise Percentage Share to NSDP of Assam at Current and Constant (2004-05) Prices Current Prices Constant (2004-05) Prices 2005-06 2006-07 2007-08 2008-09 Agriculture 25.20 23.09 23.06 25.26 26.82 24.71 22.21 21.56 21.45 21.37 20.67 20.46 Forestry and logging 2.68 2.44 2.34 2.12 2.02 1.92 2.74 2.79 2.78 2.73 2.66 2.60 Fishing 1.93 2.25 2.07 1.91 1.78 2.27 1.45 1.29 1.20 1.18 1.10 1.18 Agriculture and Allied 29.81 27.79 27.47 29.29 30.61 28.90 26.40 25.63 25.43 25.27 24.44 24.23 Mining and Quarrying 7.74 7.17 6.83 6.56 6.26 5.85 8.09 7.89 7.91 7.54 7.12 4.91 Manufacturing 8.17 8.27 7.19 6.96 6.96 5.92 8.09 7.49 6.35 6.42 6.10 5.00 Construction 6.12 6.37 6.26 6.01 5.57 8.71 6.25 6.21 6.11 5.86 5.60 8.38 Electricity, Gas and Water supply 0.86 0.68 0.59 0.53 0.47 1.15 0.92 0.70 0.58 0.53 0.46 1.00 Industry 22.90 22.48 20.87 20.07 19.26 21.64 23.36 22.28 20.95 20.35 19.27 19.30 Transport, Storage and Communication 5.54 6.13 6.77 6.61 6.74 6.53 6.16 6.91 7.72 7.65 8.15 8.50 Trade, Hotel and Restaurant 16.66 17.52 17.55 16.27 14.88 15.02 17.38 17.87 17.46 16.77 16.18 16.88 Banking and Insurance 3.14 3.44 3.56 3.87 3.91 3.06 3.66 4.28 4.69 5.25 5.71 5.36 Real Estate, Dwelling and Business services 2.14 2.17 2.06 2.06 2.15 1.80 2.16 2.08 2.15 2.17 2.26 1.80 Public administration 5.33 5.34 5.70 5.53 6.98 7.73 5.72 5.52 5.70 5.79 8.40 7.84 Other services 14.48 15.13 16.02 16.31 15.48 15.32 15.15 15.42 15.89 16.75 15.59 16.09 Services 47.29 49.73 51.66 50.65 50.13 49.46 50.24 52.08 53.62 54.38 56.29 56.47 Source: Adopted from Economic Survey, Assam, 2011-12 Note: Q Quick Estimates, P Provisional Estimates 2009-10(P) 2010-11(Q) 2005-06 2006-07 2007-08 2008-09 2009-10(P) 2010-11(Q) 85

4.3 Status of Financial Inclusion in Assam 4.3.1 The Government of India and the Reserve Bank are taking initiatives from time to time for promoting financial inclusion and as a result considerable improvement in the access to the formal financial institutions have been observed. Over the years, along with SCBs, RRBs, co-operative banks and societies, post offices and insurance companies also have played an important role in meeting the financial needs of the people. However, the literature on financial inclusion lacks a common approach that can be used to assess the status or extent of financial inclusion/exclusion. Analysts/researchers/policy makers/bankers are using different statistics as per the convenience for assessing the extent or progress of financial inclusion. Most of the analysis focuses primarily on the banking data obtained through Basic Statistical Returns (BSR) of SCBs and other statistics published by the Reserve Bank of India along with the statistics/ data on SHGs/MFIs, post offices, insurance companies, etc. published by various organizations. Apart from various banking and other institutional data, All India Debt and Investment Survey (AIDIS) released once in a decade by the National Sample Survey Organisation (NSSO) also provides some useful insight into the various aspects of financial inclusion. The latest survey released by NSSO related to the reference year 2002. Another source of information is the Census of India who since 2001 started providing information on the households availing banking services. Apart from these sources, there are a few independent surveys and studies which have been carried out to gather some information/ statistics on financial inclusion/financial access. Since different data sets are based on different methodologies and definition, there is need to exercise caution while interpreting different data sets and comparing them. Further, all data sets 86

have certain set of limitations which also need to be taken care of. The AIDIS survey of NSSO, for example, provides information only on household indebtedness and it does not provide information on savings deposits and indebtedness at individual level. On the other hand, BSR and other banking data released by RBI only provide information at individual level and these do not take into account multiple accounts held by a single person, which makes it difficult to draw firm conclusions about the extent of financial inclusion/ exclusion (RBI, 2008). Further, this data mainly deals with the supply side aspects of financial inclusion, not the demand-side. Therefore, though an assessment of the status and extent of financial inclusion/exclusion has to be made on the basis of whatever partial information is available from various sources such as RBI, Census of India, NSSO, AIDIS, etc., one must keep these limitations in mind. In the following sections, data from various agencies has been put together under various sections in an attempt to overcome some of these limitations. 4.3.2 Financial Inclusion in Assam: Household Level Evidence 4.3.2.1 As the focus of the study is to investigate the extent of financial inclusion/ exclusion at household level, more particularly at rural household level, the present section tries to explore the available statistics to investigate the level of financial inclusion or access 1 at the household level. However, very few data/statistics are available on the various dimensions of financial inclusion availability, access and usage at the household level, to evaluate the extent and depth of financial inclusion from demand side aspects. In this section 2, an attempt has been made to explore the 1 World Bank (2008) uses financial access and financial inclusion interchangeably. It defines financial inclusion, or broad access to financial services as an absence of price and non-price barriers in the use of financial services. 2 This section has taken considerable reference from Bhavani and Bhanumurthy (2012). 87

three different aspects of financial inclusion - availability of financial services at village level (physical access), access of households to bank accounts and the utilization of financial resources and services by households from formal system and draw some conclusion on the status of financial inclusion/exclusion in the state. 4.3.2.2 Availability of Financial Services at Village Level The NSS 58 th Round (2002) which included financial services for the first time as a part of village facility provides information on the availability of financial services at village level. Availability of financial services is taken in the survey in terms of (i) the presence of a bank in the vicinity, i.e., within the village, or, 2-5, or 5-10 or > 10 kilometres away from the village and (ii) the presence of co-operatives or SHG in the village. Bhavani and Bhanumurthy (2012) have defined the ease of availing financial services in three broad categories based on the distance of the location of a financial service provider villages having a bank within or up to five kilometres as having easy access; villages having a bank within 5-10 kilometres as having moderate access and village having a bank branch more than 10 kilometres away as not having access to financial services. Information about physical access to financial services in selected states is presented in Table 4.3. Table 4.3 shows that as per the categorization of financial access (in the sense of vicinity), only 34 per cent of the sample villages in rural Assam have easy financial access in the sense of having a bank branch within the village or within five kilometres. Around 27 per cent of villages have moderate access to financial services, as a bank branch is located within 5-10 kilometres of the village. Around two-fifth (39 per cent) of the sample villages do not have financial access as these villages do not have bank 88

branch within a distance of 10 kilometres. Table also indicates that around 38 per cent of the sample villages in Assam have either a co-operative society or a SHG or both. At the all-india level the corresponding figures of sample villages having easy financial access, moderate access and no access are around 52 per cent, 24 per cent and 23 per cent respectively. About 54 per cent of the sample villages in India have either a cooperative society or a SHG or both. The analysis indicates that the physical access to financial services in Assam is much below the all-india average. Table 4.3: Physical Access to Financial Services of Few Selected States in 2002 (% villages) State Easy Moderate Not With With Co. soc Access 1 Access 2 Accessible 3 Co.soc 4 SHG 5 and SHG Andhra Pradesh 38.5 24.5 36.8 42.4 74.0 40.7 Assam 33.8 26.8 39.2 19.7 17.7 8.8 Bihar 50.1 29.8 20.2 12.8 5.4 2.2 Chhattisgarh 34.9 25.0 40.1 39.9 27.6 11.6 Gujarat 29.4 20.6 45.8 48.1 13.4 10.4 Jharkhand 39.3 33.4 27.2 4.6 4.8 1.3 Kerala 92.8 6.0 0.7 85.9 80.0 69.3 Maharashtra 50.3 25.5 24.1 57.3 43.1 35.7 Orissa 30.6 24.2 45.2 7.9 10.6 1.9 Punjab 87.3 12.7-50.7 7.8 6.7 Rajasthan 46.9 30.9 22.2 30.1 12.4 7.0 Tamil Nadu 72.1 12.5 15.5 53.8 69.7 45.2 Uttaranchal 35.8 34.0 30.2 13.5 2.5 1.3 West Bengal 64.0 21.6 14.4 38.5 23.2 13.7 All India 51.9 23.6 23.2 30.2 24.0 13.7 Source: NSS 58th Round Unit-level data, adopted from Bhavani and Bhanumurthy (2012), p.78 Notes: 1. Easy access refers to the presence of a bank within the village or within 5 km; 2. Moderate access refers to the presence of a bank within 5 10 km from the village; 3. Not accessible refers to villages not having a bank within 10 km; 4. Co. soc = cooperative society; 5. SHG = self-help group. 89

Table 4.3 also indicates that states like Kerala, Punjab, Tamil Nadu and Haryana stand at the top end of the physical access scale, whereas Assam and states like Bihar, Chhattisgarh, Gujarat, Jharkhand, Orissa, Rajasthan and Uttaranchal have limited financial access, as less than 50 per cent of villages in these states do not have bank in the vicinity and a small percentage of villages have a cooperative society or SHG (Bhavani and Bhanumurthy, 2012). 4.3.2.3 Availing Banking Services: Financial Access at the Household Level Since 2001, the Census of India started collecting information on the households use of banking services. According to the Census, a household is considered to be availing banking services if the head and/ or any other member in the household are holding any type of account provided by bank3 or post office. Bhavani and Bhanumurthy (2012), while analysing the Census 2001 information on the households use of banking services, found that five states, namely Assam (20.5%), Bihar, Chhattisgarh, Orissa and Tamil Nadu were at the lower end with less than a quarter of their total households and less than 20 per cent of the rural households having a bank account. In addition, four out of five states, namely, Assam, Bihar, Chhattisgarh and Orissa also had significant rural-urban disparities in availing banking services with the percentage of the urban households (53.3% in Assam) having a bank account being more than double that of the rural households (15.0% in Assam). The present section focuses on the households availing banking services in Assam. Table 4.4 indicates the households access to banking services in 2001 and 2011 in 3 This covers nationalized banks, private banks, foreign banks and co-operative banks. However, credit and thrift societies were not considered part of the banking system. 90

Assam whereas Table 4.5 shows the district-wise distribution of households access to banking services in 2011, separately for the rural and urban areas. Table 4.4: Households Availing Banking Services in Assam Total HHs Census 2001 Census 2011 HH having Banking Services % Total HHs HH having Banking Services Rural 4220173 632093 15.0 5374553 2060792 38.3 Urban 715185 381159 53.3 992742 746377 75.2 Total 4935358 1013252 20.5 6367295 2807169 44.1 Source: Census of India, 2001 and 2011, H-Series % Table 4.4 reveals that although Assam has recorded significant improvement in the percentage of households availing banking services during the period, 2001-2011, the improvement is more commendable in rural Assam. The percentage of households availing banking services in Assam in 2011 increases to 44 per cent from a decade old figure of just over 20 per cent. Similarly, the percentage of rural and urban households availing banking services in 2011 stood at 38.3 per cent and 75.2 per cent respectively, which is significantly higher that the respective 2001 figures of 15.0 per cent and 53.3 per cent. Despite the significant growth, the position of Assam is far from being satisfactory (56 per cent of households did not have bank account in the year 2011), if seen in all-india context, only three states, namely, Manipur, Nagaland and Meghalaya, all from North East, have the lower percentage of households availing banking services in 2011 (Census, 2011). Table 4.5 reveals that the number of households availing banking services varies widely across the districts. Kamrup Metro, Hailakandi, Bongaingaon, Jorhat and Nalbari top the list with half of their households having a bank account, both in rural 91

and urban areas. Dibrugarh, Dima Hasao, Sivasagar, Golaghat, Tinsukia, Lakhimpur, Kamrup and Morigaon are districts which have a higher percentage of households with a bank account compared with all-assam average, of which all, but Dima Hasao, also have a higher percentage of rural households having bank account than all-assam figure. Dhubri, Goalpara, Kokrajhar and Dhemaji are the bottom-five in terms of both total households and rural households availing banking services. Table 4.5 also indicates the wide-spread rural-urban disparities in availing banking services, both at the state level and district level. While more than three-fourth urban households have a bank account, less than two-fifth rural households hold a bank account in Assam. Barpeta, Dhemaji, Dhubri, Dima Hasao, Karbi Anglong, Karimganj, Kokrajhar, Nagaon and Sonitpur have significant rural-urban disparities in availing banking services with the percentage of urban households having a bank account being double than that of rural households. Only in the case of Hailakandi, there is less than 10 per cent difference between the rural and urban areas in terms of the percentage of households having a bank account. 4.3.2.4 Usage of the Financial System This section examines the use of financial system by households based on the unit-level data of the All India Debt and Investment Survey (AIDIS). The survey, which is conducted on a decadal basis, provides information on the pattern of households indebtedness (credit side). 92

Table 4.5: District-wise Distribution of Households Availing Banking Services in Assam in 2011 (Percentage and Ranking) District Rural Urban Total %age Rank %age Rank %age Rank Baksa 33.3 22 58.2 25 33.6 25 Barpeta 33.4 21 70.7 18 36.9 21 Bongaigaon 54.3 3 81.6 3 58.9 3 Cachar 35.0 17 66.9 22 41.0 15 Chirang 34.8 18 62.7 24 36.9 20 Darrang 34.5 19 64.1 23 36.5 22 Dhemaji 32.7 23 69.0 19 35.7 23 Dhubri 19.3 27 56.8 26 23.3 27 Dibrugarh 46.2 8 80.4 5 53.0 6 Dima Hasao 37.2 13 82.5 2 51.3 7 Goalpara 30.0 26 52.7 27 33.3 26 Golaghat 47.2 7 77.6 9 50.2 9 Hailakandi 69.7 1 78.0 8 70.3 2 Jorhat 49.9 5 78.4 6 56.2 4 Kamrup 42.9 10 66.9 21 45.4 12 Kamrup Metropolitan 58.4 2 83.7 1 80.0 1 Karbi Anglong 36.7 14 73.3 16 41.7 14 Karimganj 33.5 20 75.4 14 37.5 18 Kokrajhar 30.4 25 80.9 4 33.7 24 Lakhimpur 43.9 9 76.8 10 47.4 11 Morigaon 42.1 11 76.3 12 45.1 13 Nagaon 32.3 24 70.7 17 37.8 17 Nalbari 53.2 4 76.2 13 55.8 5 Sivasagar 48.0 6 76.4 11 51.0 8 Sonitpur 36.3 15 78.1 7 40.7 16 Tinsukia 41.6 12 75.4 15 49.0 10 Udalguri 35.3 16 68.9 20 37.0 19 All Assam 38.3 75.2 44.1 Source: Census of India, 2011, H-Series Incidence of Indebtedness (IOI) NSSO for its sample survey considers a household as indebted if the household had any cash loan outstanding as on the reference date irrespective of its amount. Figures of IOI 93

have been taken only for the last three surveys as the survey for urban areas was not conducted during NSSO 26 th round (1971). The estimates of IOI obtained from the last three All India Debt and Investment Survey are presented in Table 4.6 for both rural and urban areas of the major states. The Table shows that the IOI increased marginally during the period from 1981 to 2002 in Assam and the IOI for rural and urban areas of Assam in 2002 stood at 8 per cent and 6 per cent respectively which were far below the all-india figures of 27 per cent and 18 per cent only. Only Jammu Kashmir has lower IOI than Assam in 2002 in both rural and urban areas. Table 4.6: Incidence of Indebtedness (IOI) of Households across Major States (%) Rural Urban State 1981 (37th) 1991 (48th) 2002 (59th) 1981 (37th) 1991 (48th) 2002 (59th) Andhra Pradesh 26 35 42 23 31 30 Assam 5 6 8 4 6 6 Bihar 13 16 22 9 8 10 Delhi - - - 13 18 2 Gujarat 19 17 28 15 22 21 Haryana 11 28 27 8 10 16 Himachal Pradesh 12 22 15 7 16 10 Jammu & Kashmir 9 14 4 7 9 5 Karnataka 24 28 31 18 20 19 Kerala 28 31 39 30 32 37 Madhya Pradesh 21 21 26 15 14 18 Maharashtra 22 22 28 21 21 16 Orissa 20 23 26 12 15 19 Punjab 20 25 26 13 14 13 Rajasthan 25 30 34 15 14 17 Tamil Nadu 29 30 31 26 25 26 Uttar Pradesh 18 19 23 13 14 13 West Bengal 18 26 22 17 17 17 All-India 20 23 27 17 19 18 Source: All India Debt and Investment Survey, NSS 59 th Round, Report No. 500, p-36. 94

Institutional Credit in Total Cash Debt The share of institutional debt contracted by the rural and urban households in major states which is presented in Table 4.7 indicates that during the period from 1981 to 2002, the states do not reveal any uniform pattern in the share of institutional agencies in total debt. Compared to 1991, the picture had changed in some of the major states. Among all the major states in the rural sphere, only Himachal Pradesh and Maharashtra have shown an increase in the share of institutional agencies. On the other hand, 13 major states out of 21 had registered a rise in the share in the urban areas. Table 4.7: Share of Institutional Agencies in Outstanding Cash Debt of Major States in Rural and Urban Areas (%) Rural Urban State 1981 (37th) 1991 (48th) 2002 (59th) 1981 (37th) 1991 (48th) 2002 (59th) Andhra Pradesh 41 34 27 26 53 60 Assam 31 66 58 77 97 83 Bihar 47 73 37 61 67 65 Delhi - - - 64 89 74 Gujarat 70 75 67 86 59 74 Haryana 76 73 50 66 81 56 Himachal Pradesh 75 62 74 62 85 97 Jammu & Kashmir 44 76 73 75 62 97 Karnataka 78 78 67 54 85 83 Kerala 79 92 81 77 75 83 Madhya Pradesh 66 73 59 72 70 84 Maharashtra 86 82 85 65 78 91 Orissa 81 80 74 83 83 93 Punjab 74 79 56 61 59 76 Rajasthan 41 40 34 47 78 52 Tamil Nadu 44 58 47 56 71 59 Uttar Pradesh 55 69 56 59 65 58 West Bengal 66 82 68 55 74 75 All-India 61 64 57 60 72 75 Source: All India Debt and Investment Survey, NSS 59 th Round, Report No. 501, p.27. 95

Table 4.7 shows that in the rural areas, the share of institutional credit agencies in the outstanding cash dues of the rural households in Assam increased sharply from 31 per cent in 1981 to 66 per cent in 1991. During the following decade, the share declined by about 8 percentage points and reached at 58 per cent in 2002. At all-india level, the share percentage increased from 29 per cent in 1971 to 64 per cent in 1991 before coming down to 57 per cent in 2002. On the other hand, ever since 1981, the institutional agencies made a steady inroad in the debt amount of urban households at all-india level whereas the same was not consistent in Assam. The institutional share in the urban household debt in Assam, which was 77 per cent in 1981, rose to 97 per cent in 1991 and, then came down to 83 per cent in 2002. Except 1981, that too only for rural households, the share of institutional agencies in outstanding cash debt in Assam has been consistently higher than all-india share. The analysis of Table 4.6 and Table 4.7 indicate that although Assam has recorded considerably low IOI, it has done reasonably well in terms of the share of institutional agencies in outstanding cash debt in rural and urban areas. Break-up of Institutional and Non-Institutional Rural Credit in Assam and India In order to compare the progress of institutional and non-institutional agencies in Assam in the backdrop of the initiatives undertaken by the Reserve Bank and the Government of India since Independence and more particularly after the bank nationalization, it is necessary to analyze the flow of credit to rural areas in terms of credit agency-wise. Table 4.8 provides the comparative overview of the credit-agency wise flow of credit to rural areas of Assam and India. 96

Table 4.8: Comparison of Break-up of Institutional and Non-Institutional Rural Credit in Assam and India (%) Agency Assam All-India 1961 1971 1981 1991 2002 1951 1961 1971 1981 1991 2002 Institutional Agencies 23.8 34.1 30.0 30.2 57.9 7.2 14.8 29.2 61.2 64.0 57.1 Government 15.5 23.5 2.0 5.6 15.4 3.3 5.3 6.7 4.0 5.7 2.3 Co-op. Society/bank 8.3 10.6 6.0 15.5 5.2 3.1 9.1 20.1 28.6 18.6 27.3 Commercial bank incl. -- 0.0 16.0 9.1 23.1 0.8 0.4 2.2 28.0 29.0 24.5 RRBs Insurance -- -- 0.0 0.1 -- -- 0.1 0.3 0.5 0.3 Provident Fund -- -- 6.0 7.3 -- -- 0.1 0.3 0.9 0.3 Others institutional -- -- -- 6.9 -- -- -- -- 9.3 2.4 agencies* Non- Institutional 76.3 65.9 70.0 69.8 42.1 92.8 85.2 70.8 38.8 36.0 42.9 Agencies Landlord 0.3 -- -- 0.0 0.2 1.5 0.9 8.6 4.0 4.0 1.0 Moneylenders 50.1 19.7 6.0 25.8 26.2 69.7 60.8 36.9 16.9 15.7 29.6 Agricultural 35.5 2.0 2.4 24.9 45.9 23.1 8.6 6.3 10.0 Moneylender 19.7 25.8 Professional 14.6 4.0 23.8 44.8 14.9 13.8 8.3 9.4 19.6 Moneylender Traders and Commission 6.4 11.6 2.0 35.9 1.4 5.5 7.7 8.7 3.4 7.1 2.6 Agents Relatives and Friends 11.9 27.0 34.0 4.8 12.4 14.2 6.8 13.8 9.0 6.7 7.1 Others 7.6 7.6 28.0 3.3 1.9 1.9 8.9 2.8 4.9 2.5 2.6 Source: All India Debt and Investment Survey (Various Rounds), adopted from Pradhan (2013). Note: *: includes financial corporation/institution, financial company and other institutional agencies. Percentage share of different credit agencies to the outstanding cash dues of the households as on 30th June. -- denotes not available. 97

From Table 4.8 it can be seen that the share of institutional agencies in rural credit in Assam, which was in the range of 24-34 per cent during 1961 to 1991, increased sharply to 58 per cent during 2002. However, Table does not reveal any uniform pattern among the various institutional agencies as far as rural credit in Assam is concerned. The share of institutional agencies in rural credit in India increased consistently to 64 per cent in 1991 from 7.2 per cent in 1951, before coming down to 57.1 per cent in 2002. Co-operative societies/banks and commercial banks including RRBs are the dominant institutional player in rural credit at all-india level and have shown a significant progress since beginning. The trend in the growth of commercial banks/rrbs in rural credit in India and to some extent in Assam indicates that the large number of branches that were set up by various commercial banks in 1970s and the subsequent introduction of rural banking schemes might have driven the commercial banks to assume the role of principal credit agency in rural areas. In Assam, government also plays an important role in providing institutional credit along with cooperative society/bank, provident fund. For long, the household sector, particularly in rural India, was exploited by the traditional credit agencies like agricultural money lender, professional money lender, landlords, traders, etc. (NSSO, 2005). However, the scenario at all-india level and to some extent in Assam also, started changing since 1960s, as the share of informal/noninstitutional agencies started declining gradually during the 1960s and sharply during the 1970s, and the institutional agencies started making steady inroads into the rural scene. The share of the non-institutional agencies was 76.3 per cent and 85.2 per cent in Assam and India respectively during 1961 which came down significantly to 42.1 per 98

cent and 42.9 per cent respectively in 2002. The share of moneylenders, both agricultural and professional, has come down significantly over the years. The share of moneylenders in rural credit in Assam which was more than 50 per cent in 1961 came down to 6 per cent in 1981, before rising to 26.2 per cent in 2002. Similarly, the share of moneylenders in rural credit at all-india level came down to 15.7 per cent in 1991 from 69.7 per cent in 1951. In 2002, it rose to 29.6 per cent. Table 4.8 also reveals that apart from moneylenders, relatives & friends also had significant share in rural credit in both Assam and India throughout the period under review. State-wise Incidence of Indebtedness (IOI) and Average Debt per Household (AOD) in 2002 Table 4.9 reveals that among the states in rural India, in 2002, the highest IOI was noticed in Andhra Pradesh (42%), followed by Kerala (39%), Rajasthan (34%) and Tamil Nadu and Karnataka (each with 31%) whereas states like Jammu & Kashmir (4%), Uttaranchal (6%) and Assam (8%) were found to report very low IOI. Similarly, in the urban sector, the extent of indebtedness was found to be the highest in Kerala (37%) followed by Andhra Pradesh (30%), Tamil Nadu (26%) and Gujarat (21%). Delhi (2%) along with Jammu & Kashmir (5%), Assam (6%), Jharkhand and Uttaranchal (each with 7%) were found to have very low IOI. It can be seen that Assam was among the bottom three states with very low IOI in both, rural and urban sector. Among the major 21 states, when taken for both rural and urban sector, only two states, Andhra Pradesh (39.0%) and Kerala (38.9%) have recorded more than 30 per cent IOI, whereas four states, Delhi (1.5%), Jammu & Kashmir (3.9%), Uttaranchal (5.8%) and Assam (7.3%) have IOI less than 10 per cent. 99

As regards the average debt per household (AOD), Kerala showed the highest value of AOD in both rural and urban sector with cash loan of Rs. 19,663 and Rs. 28,446 per household. On the other hand, the lowest AOD was observed in Assam (Rs. 643) in rural sector and in Delhi (Rs. 1,441) in urban sector. Assam showed the second lowest AOD in urban sector with an average cash loan of Rs. 2,126 per household. Table 4.9: State-wise and Region-wise Incidence of Indebtedness (IOI) and Average Debt per Household (AOD) as on 30.6.02 State Rural Urban Total %age AOD (Rs.) %age AOD (Rs.) %age Andhra Pradesh 42.3 10590 29.8 19901 39.0 Assam 7.5 643 6.0 2126 7.3 Bihar 21.8 2992 9.5 2616 20.4 Jharkhand 12.0 1124 6.6 4587 10.9 Delhi - - 1.5 1441 1.5 Gujarat 28.1 11794 21.4 15715 25.7 Haryana 27.3 12359 16.0 12929 24.2 Himachal Pradesh 15.3 5196 10.1 25951 14.7 Jammu & Kashmir 3.6 1114 5.0 4438 3.9 Karnataka 31.3 9193 18.6 10544 27.1 Kerala 39.4 19663 37.3 28446 38.9 Madhya Pradesh 26.1 9093 17.7 15029 24.1 Chhattisgarh 19.8 3933 13.2 8809 18.8 Maharashtra 27.5 10391 15.5 15192 22.3 Orissa 26.4 3609 19.2 13406 25.4 Punjab 25.7 16502 13.1 10297 21.2 Rajasthan 33.8 12031 16.5 9130 29.7 Tamil Nadu 31.3 9304 25.5 11936 29.4 Uttaranchal 5.5 1113 6.8 4484 5.8 Uttar Pradesh 23.4 5059 13.0 4275 21.1 West Bengal 21.8 3194 17.1 8071 20.6 All-India 26.5 7539 17.8 11771 24.1 Source: All India Debt and Investment Survey, NSS 59 th Round, Report No. 500, p.31 & 33 and EPW Research Foundation (EPWRF) 4. Note: Total value taken from EPWRF 4 Access from http://www.epwrf.res.in/upload/current_statistics/c10710table%2009.pdf accessed on 01/07/2013 100

Incidence of Indebtedness: Institutional and Non-Institutional Credit in 2002 Table 4.10 shows that the IOI among rural households of Assam in 2002 stood at 7.5 per cent which was far below the all-india figures of 26.5 per cent. In Assam, only 1.6 per cent rural households were found to be indebted to institutional agencies as against the all-india figure of 13.4 per cent. However, the share of institutional agencies in terms of percentage of amount of cash loans outstanding in rural areas (rural credit) in Assam and India were 57.9 per cent and 57.1 per cent respectively. Table 4.10: Credit-Agency wise IOI and Distribution of Amount of Cash Loans Outstanding (2002) Agency Assam All-India IOI % of cash loan IOI % of cash loan Institutional Agencies 1.6 57.9 13.4 57.1 Government 0.3 15.4 0.8 2.3 Co-op. Society/bank 0.2 5.2 6.9 27.3 Commercial bank incl. RRBs 0.6 23.1 5.7 24.5 Insurance 0.0 0.1 0.1 0.3 Provident Fund 0.4 7.3 0.1 0.3 Others institutional agencies* 0.1 6.9 0.5 2.4 Non-Institutional Agencies 5.9 42.1 15.5 42.9 Landlord 0.0 0.2 0.4 1.0 Moneylenders 2.0 26.2 10.2 29.6 Agricultural Moneylender 0.3 2.4 3.3 10.0 Professional Moneylender 1.7 23.8 6.9 19.6 Traders and Commission Agents 0.4 1.4 0.9 2.6 Relatives and Friends 3.3 12.4 3.7 7.1 Others 0.3 1.9 1.0 2.6 Total 7.5 100 26.5 100 Source: All India Debt and Investment Survey, NSS 59 th Round, Report No. 501, p. A- 146, A-189. Note: *: includes financial corporation/institution, financial company and other institutional agencies. 101

Similarly, the indebtedness to non-institutional agencies in rural Assam in 2002 was 5.9 per cent whereas the same figure at all-india level was 15.5 per cent. In rural Assam, among all credit agencies, the IOI was the highest through relatives and friends followed by moneylenders (2%), commercial banks including RRBs (0.6%). At all- India level, the incidence of indebtedness was highest from moneylenders (10.2%) followed by co-operative society/bank (6.9%) and commercial bank including RRBs (5.7%). Table 4.10 indicates that still moneylenders are the most important agencies for rural credit in terms of percentage of households in both Assam and India. Table 4.10 shows the percentage distribution of total outstanding cash dues of rural households by credit agencies within the institutional and non-institutional types as obtained from the survey. It can be seen that the share of institutional agencies in rural credit in Assam and India in 2002 stood at around 58 per cent. It is observed from the Table that, at the all India level, among the institutional credit agencies, the cooperative societies (27.3%) and the commercial banks (24.5%) were the two most important agencies in the rural sectors, together they shared 91 per cent of the entire amount of debt advanced by the institutional agencies. On the other hand, in rural Assam, among the institutional credit agencies, the commercial banks (23.1%) were the most important agency for rural credit. Among the specified institutional agencies, the government departments came next in rural Assam, accounting for 15.4 per cent of the outstanding cash dues, as against only 2.3 per cent at all-india level. In contrast to all- India position, the co-operative societies/banks were found to be less important in rural Assam (5.2%). The share of institutional agencies other than Government, Co-operative 102

societies/banks and commercial banks was quite substantial in Assam (14.3%) whereas the same in rural India was only 3.0 per cent. Among the non-institutional credit agencies, moneylenders were found to be important sources of finance in rural areas in both Assam and India, with their shares being 26.2 per cent and 29.6 per cent respectively. Among the moneylenders, professional moneylenders were more important source in rural credit. The share of relatives and friends was 12.4 per cent and 7.1 per cent of the cash dues of rural households of Assam and India respectively. 4.3.2.5 It can be seen from the above analysis that Assam and especially rural Assam has performed poorly in all three dimensions of financial inclusion availability, accessibility and usage. In all the parameters, Assam has been much below the all-india average, not to talk of the developed states. Household level evidences clearly indicate that the level of financial inclusion in Assam in general and rural Assam in particular has been traditionally low and the situation has not improved even now. However, most of data available on household level are of 2002 only. In recent years, several initiatives have been taken to increase the access to financial services, especially to the lower income segments. Therefore, there is a need to take into account the data beyond 2002 for assessing the current status of financial inclusion. Further, the AIDIS of NSSO although provides information on household indebtedness periodically, it does not cover other financial products and services, most importantly savings account which is also a pre-requisite of financial inclusion. Even the Census figures on households availing banking services provide information only on the access 103

of bank account, not on various aspects such as the kind of account, purpose, sources of accounts, etc. and as such are not comprehensive enough to measure accurately the extent financial inclusion/exclusion. Therefore, it becomes pertinent to look into other set of information which can provide insight not only on credit but also on other financial services. RBI and other institutional sources such as commercial banks, RRBs, post offices, insurance companies, etc. provide valuable data on the supply side of financial inclusion. These give information not only on credit but also on deposit growth. Moreover, they also provide latest statistics unlike NSSO s data set of 2002. Therefore, the data obtained from these sources has been analysed in the next section to give an updated picture of the extent of financial inclusion in the state vis-a-vis India, mainly in the sphere of banking services. Besides, data has also been examined to measure the progress of financial inclusion in the context of various initiatives undertaken to promote it. 4.3.3 Status of Financial Inclusion in Assam based on Banks/Other Institutional Data 4.3.3.1 As banking system is a significant component of financial system and most of the definitions describe financial inclusion in terms of banking services, banking inclusion is used as analogous to financial inclusion. In this section an attempt has been made to explore the evidence on access to financial services, especially banking services in Assam. 104

4.3.3.2 Availability of Banking System Assam vis-à-vis India The most important indicator of an inclusive financial system is its availability to its user. Unless the banking services are available, there is no point in discussing the accessibility/penetration as well as its uses. The most common indicator used for availability of banking system is the average population served per bank branch. Bank Branches and Population per Branch The penetration of banking in Assam in general and in the rural Assam in particular has traditionally been very low. One of the important reasons for this is the lack of adequate branch network. By the end of 1949 only 8 branches of commercial banks were operating in Assam. In June 1969, the number of bank offices in Assam was 74, serving 1.88 lakh people per bank office. Although the nationalization in 1969 and subsequent initiatives brought rapid progress in banking sector in Assam, it remained far behind in comparison to other states and even India. Over the years many public sector and private sector banks have opened their branches in Assam. The branches of public sector banks have spread well all over the state whereas of private sector banks are more concentrated in and around Guwahati (Pati, 2005). Within a period of 8 years, the total number of bank offices in Assam rose from 74 in June 1969 to 354 in June 1977, thereby, reducing the APPBO to 41 thousand from 188 thousand. During the period 1969-1991, many more branches got added to the various parts of the State, but the growth in business along with other viability parameters is still discouraging. The overall CD ratio was and still is far below the national average. Table 4.11 shows the number of bank offices and population per bank office in Assam and all-india from 1967 to 2011. 105

Table 4.11: Growth of Scheduled Commercial Banks of Assam and India Number of Offices Deposits (Rs. Cr) Credit (Rs. Cr) CD Ratio Assam India Assam India Assam India Assam India 1969 74 8187 4665 3609 77.4 1972 152 14650 67 8360 30 5553 44.8 66.4 1975 208 18575 105 12637 50 9119 47.6 72.2 1981 518 36037 394 40413 178 26857 45.2 66.5 1991 1236 61724 2200 200568 1093 124203 49.7 61.9 1995 1260 63817 3956 379174 1530 210939 38.7 55.6 2000 1232 65521 8478 822133 2669 469032 31.5 57.1 2001 1239 65908 9864 950705 3193 556436 32.4 58.5 2002 1232 66276 11552 1097049 3627 683591 31.4 62.3 2003 1216 66436 12922 1278667 3695 759210 28.6 59.4 2004 1221 66970 14770 1517200 4607 890866 31.2 58.7 2005 1235 68116 18080 1753174 6220 1157807 34.4 66.0 2006 1234 68681 20871 2093042 8763 1517497 42.0 72.5 2007 1262 70711 25758 2598823 11154 1949567 43.3 75.0 2008 1317 74326 31666 3228817 13057 2394566 41.2 74.2 2009 1369 79056 39427 3937336 15115 2857525 38.3 72.6 2010 1434 83997 49545 4601926 18311 3345619 37.0 72.7 2011 1504 89110 59100 5426510 21053 4076868 35.6 75.1 Source: RBI Basic Statistics 1972-1995; Basic Statistical Returns of SCBs in India, RBI and Quarterly Statistics on Deposits and Credit of SCBs, RBI (Various Issues) Note: * 1969 & 1972 figures are of December Quarter, 1975 & 1981 figures are of June Quarter and 1991 onwards figures are of March quarters. A review of branch network data over the last four decades reveals that the region has been registering branch expansion, though not up to the desired extent. The initiatives taken by the government of India and RBI during 60s, 70s towards reaching the unreached by moving to mass banking from class banking, through nationalization of banks in 1969 and 1980, creation of the Regional Rural Banks (RRBs), lead bank scheme, etc. resulted in the rapid branch expansion of SCBs in the country as well as in Assam during 70s and 80s. The growth in the branch expansion of SCBs during 1972-1991 period was significantly higher in Assam than the all-india with Assam 106

registering simple annualized growth of around 38 per cent in comparison to all-india s figure of around 17 per cent during the referred period. During this period, the number of bank branches in Assam increased more than 8 times i. e. from 152 to 1236 whereas the same increased just over 4 times in India from 14650 to 61724. Similarly, the density of bank (population per bank branch) has also improved over time. It may be noted from Table 4.12 that one bank was serving nearly 200000 population in 1967 in Assam while the same declined sharply to 18000 in 1991. At all- India level also, the similar trend has been observed but with little lesser impact. The average population per bank branch (APPBO) at all-india level came down to less than 14000 in 1991 from 73000 in 1967. Table 4.12: Average Population per Bank Office (APPBO): Assam vis-à-vis India Year Assam All India 1967 199000 73000 1969 188000 65000 1971 120000 46000 1975 68000 29000 1981 36308 18062 1991 18135 13711 2001 21008 15209 2005 20960 14949 2011 20724 13581 Source: RBI (2006), p.20; Basic Statistical Returns of SCBs in India, RBI, 2011; Assam State Gazetteer, Chapter VI, Banking, Trade and Commerce, p.534. Note: Figures for 2011 are author s own calculation based on the population figure of Census 2011. Hence, it can be said that the post-nationalization period up to 1991 or pre-reform period was quite fruitful for Assam so far as increasing the outreach of banking 107

network was concerned. However, the significant growth in all the important parameters was also due to very low base of these indicators during 1972. However, in the post-reform period up to the early 2000s, as the focus of banking policy shifted to create a strong and efficient banking system, the objective of nationalization reaching the unreached took a backseat. This preferred notion of class banking and mounting bad debts crumpled the model of mass banking. During the period (1991-2005), the number of bank branches in Assam remains stagnant at around 1235, whereas the same figure for India increased to 68116 from 61724. It has also been observed that the extent of rise in the number of bank offices in the rural areas in the post-reform period is disappointing and the banking sector reforms post-1991 has led to a rise in access only in the urban areas (Bhavani and Bhanumurthy, 2012). The population per branch during 1991-2001 also increased for both Assam and India. The increase was more visible in Assam, where during the period the number of bank branches was almost stagnant. Overall, in terms of outreach of bank branches and access, Assam performed poorly in comparison to India during the post-reforms period up to 2005. Although the various recent initiatives undertaken by RBI and the Government of India since 2005-06 have improved the penetration of banking in Assam, the situation has not improved much. During 2006-11 period, the number of bank branches in Assam increased to 1504 from 1234 whereas the number of bank branches had decreased during previous five years period of 2001-06. During 2006-11 period, Assam recorded an increase of around 22 per cent in terms of number of bank branches whereas the figure at all-india level was 30 per cent. However, the concentration of bank branches 108

remains in an around Guwahati and other cities. In 2011, Guwahati alone has 186 number of bank branches and next 15 big centres have 313 branches, which implies that only 16 centres constitute around one-third of total bank branches in Assam. Both Assam and India have seen the population per branch coming down, though not sharply. 4.3.3.3 Banking Accessibility/Penetration Assam vis-à-vis India Another important indicator of an inclusive financial system is its accessibility amongst its user, i.e., it should be easily accessible to all and it should have as many users as possible. The facility of deposits is one of the key elements of financial inclusion. This is particularly important for the people with low and irregular income as access to facility of safe deposits not only enables these people to plan their expenditure with convenience but also promotes thrift and develops the culture of savings (RBI, 2008). Thus, deposits accounts per 100 persons/adults are important indicator to analyze the financial inclusion. Similarly, credit accounts per 100 persons/adults indicate the expansion of credit delivery services. As savings and credit are integral components of financial inclusion, both the number of deposits accounts per 100 population and the number of credit accounts per 100 population are used as indicators of measuring the banking accessibility. Table 4.13 which shows the progress in the number of deposits (current and savings) accounts per 100 adult population in Assam and all India level during 1981-2011 reveals a huge gap between the two. The ratio of deposits account per 100 adult population in Assam, after increasing significantly during 1980s, continues to increases, whereas in India, it has declined during 1990s before again rising in 2000s. 109

In 2011, as against all-india figure of 67 deposits accounts per 100 population, in Assam it was 47 deposits accounts. The credit accounts per 100 adult population in Assam is also lower than the national average, indicating lower percentage of population availing credit facility in Assam as compared to the country as a whole. Table 4.13 indicates that the Credit accounts per 100 adult population figures in Assam and India show the similar trend. The number of credit accounts per 100 adult population, after increasing significantly between 1981 to 1991, declined during 1991 and 2001. In 2011, as against all-india figure of 10 credit accounts per 100 population, the figure in Assam is only 5 accounts. Table 4.13: Deposits and Credit Accounts per 100 Adult Population Deposits Accounts Credit Accounts Assam All India Assam All India 1981 11.6 28.9 1.4 6.2 1991 34.9 60.3 7.0 13.9 2001 39.4 55.0 4.5 9.7 2005 39.1 59.3 5.9 13.3 2011* 47.3 66.9 5.3 10.0 Source: RBI (2006), p. 22; Basic Statistical Returns of SCBs in India, RBI, 2011 Note: * Figures indicates accounts per 100 population. 4.3.3.4 Usage of the Banking System Assam vis-à-vis India An inclusive financial system does not imply only having the bank branches in the locality or having access to a bank account. In broader sense, it implies the proper utilization of its services by its user. Basically, the banking system is used for its two services 5 deposits and credit and data are available only for these two services. 5 There are several other services offered by the financial system, viz. insurance, payment and remittance facilities, money advice, etc. 110

Hence, various dimensions of deposits and credit have been analyzed here to find out the usage of banking system. Deposits, Credit and Credit Deposit Ratio (CDR) According to Bhavani and Bhanumurthy (2012), it is not only the number of bank offices which is an indicator of reach, rather the business of these existing banks (credit and deposits) is equally important for understanding the reach of the financial services. Table 4.14 reveals the trends similar to the number of bank branches in both deposits and credit during 1972-1991. During the period under review, the deposits and credit amount of Assam increased 33 and 36 times in comparison to all-india figures of 24 and 22 respectively. During 1991-2005 (the post-reforms period up to 2005), the deposits for Assam and India increased 8.2 and 8.7 times respectively, whereas the same for credit was 5.7 times and 9.3 times respectively. Table reveals that the growth in credit amount in Assam was less than the all-india growth. Further, the growth figures of deposits and credit gives contrasting picture as deposits increased much higher in the period 2006-11 than the period 2001-06 whereas the growth in credit was higher during 2001-06. The all-india figures also depict the similar trend. Table 4.14: Annual Growth Rate of Credit Deposit and C-D Ratio Deposit Credit CDR 1981-1991- 2001-1981- 1991-2001- 1991 2001 2011 1991 2001 2011 1981 1991 2001 2011 Assam 18.1 16.2 19.6 14.4 11.2 20.8 42 50 32 36 India 16.4 16.8 19.0 15.9 15.8 22.0 67 62 57 75 Source: RBI (2006) and Table 4.11 Note: The growth rates for 2001-11 are calculated by the author based on the figures of Table 4.11. 111

Like bank branches, the concentration of deposits and credit too remains in an around Guwahati and other cities. In 2011, Guwahati alone contributed more than 40 per cent of total deposits and 38 per cent of credit in Assam. The credit growth rate for Assam, which showed a decline in 1990s, is showing considerable improvement in the 2000s. However, the growth rate for Assam has consistently been lower than the growth rate of India throughout the period under review. The annual rate of deposit for India has shown increasing trend over the 30 years period of 1981-2011, whereas in Assam it showed a decline trend in 1990s, has shown improvement in the 2000s and has overtaken the national average. Table clearly indicates the declining trend in both the indicators in the post-reform period (1991-2001) in Assam whereas the same cannot be said about all-india figure. Per Capita Deposits and Credit Per capita deposits and credit are two important indicators used for measuring the usage dimension of banking services. The gap between the per capita deposits in Assam and the national average is also substantial though relatively less than the gap in the per capita credit. 1980s showed the gap narrowing down a bit with all-india figures, but it once again widened in the 1990s. Even now, the per capita deposits and credit remain markedly lower than the national average (Table 4.15). Against the all-india figure of per capita deposits of Rs. 43034 in 2011, it is only Rs. 18961 in Assam (around 45 per cent of all-india figure). The per capita credit in Assam in 2011 stood at Rs. 6752, which is only 20 per cent of the all-india figure of Rs. 32574. 112

Table 4.15: Per Capita Deposits and Credit in Assam and India Deposits Credit 1981 1991 2001 2011 CAGR 1981 1991 2001 2011 CAGR Assam 210 981 3701 18961 16.2 65 405 1155 6752 16.7 India 642 2370 9245 43034 15.0 281 1167 4976 32574 17.2 Source: RBI (2006), p.119; Basic Statistical Returns of SCBs in India, RBI, 2011 Note: Figures for 2011 are author s own calculation based on the Census 2011 figure. Table 4.15 indicates that although both the indicators have exhibited significant growth, per capita credit growth is slightly faster than the growth of per capita deposits. The average of annual growth rate from 1981 to 2011 shows that per capita is growing is at the rate of 16.7 per cent in Assam while the per capita deposits are growing at 16.2 per cent. The same figures for per capita credit and deposits in India are 17.2 per cent and 15.0 per cent respectively. The higher growth rate of deposits coupled with the slower growth rate of credit in Assam than India is the prime reason behind the widening gap of credit deposit ratio between the two. Credit Deposit Ratio (CDR) The CD ratio of Assam is far below the national average. It can be seen from Figure 4.1 that the gap between the CDR of Assam and India started narrowing since 1975 up to 1991. The gap which was the lowest in 1991 started widening in the post-reforms period. The performance of Assam in this parameter had slide down considerably in 2001 and has been significantly lower than all India figure throughout the period. In 2011, the CD ratio of Assam stands at 35.6 per cent as against all-india figure of 75.1 per cent, thereby showing a gap of almost 40 per cent. 4.3.3.5 Basic Banking Statistics: Assam as Percentage of India It can be seen from Figure 4.2 that since 1972 onwards up to 1991, all the three parameters, viz. bank branches, deposits and credit have shown significant growth and 113

the percentage share of Assam in all three parameters was highest in 1991. The share of bank branches of Assam in India has continuously fallen to 1.69 per cent in 2011 from 2.00 per cent in 1991. Similarly, the share of credit of Assam has fallen to 0.52 per cent in 2011 from 0.88 per cent in 1991, which in fact is even lower than 1972 s share of 0.54 per cent. The declining share of credit is one of the important reasons for the low CD ratio in Assam. The state s share in deposits was highest at 1.10 per cent in 1991 which came down to 0.97 per cent in 2004 before again rising to 1.09 per cent in 2011. Figure 4.1: Credit Deposit Ratio (CDR) of all SCBs in Assam and India Source: Table 4.11. Figure 4.2: Basic Banking Statistics - Assam as %age of India Source: Table 4.11. 114