Role of Postal Savings in Financial Inclusion
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Praveena Vijayan, Assistant Professor, Dept. of Commerce, Sree Narayana College, Nattika,Thrissur – 680566 E-mail: [email protected] Objectives of the study The broad objective of the study is to examine the role of postal savings in financial inclusion. The specific objectives of the study are; To measure the financial inclusion in terms of savings accounts in Elavally Gramapanchayath. To measure the level of financial inclusion in terms of postal savings. To identify the deposit scheme which is mostly preferred by the customers of post office To measure the level of financial literacy in the panchayath. Methodology This study chooses descriptive nature. The study is mainly based on primary data collected from 100 households in Elavally Grama panchayath through questionnaires. The households have been selected by employing convenient sampling. Economic reviews of the government of India, Kerala economic reviews published by Kerala Government, census data, reports of RBI, previous studies and report of Elavally Grama panchayath are the secondary sources of data. The important variables used in the study are types of deposits and insurance services. Simple mathematical tools and statistical tools like percentages and averages are used for data analysis. Profile of Elavally Panchayath Elavally Grama panchayath is a special grade Grama panchayath located on the west of Thrissur District in Kerala, consisting of 16 wards and 4517 households. The financial sector largely depends upon Gulf Malayalees. Most of the rural folk are engaged in agriculture and business. Elavally Grama panchayath has a population of 21872 of which 10,262 are males and 11610 are females. It is one among the panchayaths, having high literacy rate. There are educational institutions, 3 health care institutions, 2 commercial banks and 3 co-operative banks in the panchayath. Indian Post an overview The first post office in India was established by East India Company in the year 1688 in Bombay followed by Calcutta and Madras. It was named as ‘Company Mail’. The Post Office Department of the East India Company was first established on March 31,1774 at Calcutta. The present type of post office came into being in the year 1854 under the Post Office Act of 1854. The number of post offices as on 31.03.2014 is 1,54,882. Out of total post offices in India 1,39,182 numbers are in rural areas which accounts for 89.86% of India’s total post office and remaining 15,700 numbers situated in urban areas which is only 10.14%. Different Savings Product of Indian Post Office Saving account scheme - Post office savings bank account (POSB) is the oldest postal saving instrument. Any individual can open a POSB account with a minimum balance of Rs.50/-. Currently the rate of interest offered against POSB account is 4%. Recurring deposit scheme – Post office offers this facility with a maturity period of five years. The minimum deposit is Rs.10/- and multiples of Rs.5/- thereafter and there is no limit of maximum deposit. The present rate of interest is 8.4%. Premature closure is allowed after three years and part withdrawal is also allowed. Time deposit account – Post office offers time deposit for one year, two year, three year and five year. The rate of interest allowed is 8.4%, 8.4%, 8.4% and 8.5% respectively. The minimum amount required to deposit is Rs.200/- with no maximum limit. Premature withdrawal is allowed after expiry of six months. Monthly income scheme – Under this scheme the savers make a lump sum deposit, which gives him a monthly interest. The minimum deposit in case of single depositor is Rs.1000/- and in case of joint depositor it is Rs.1500/-. Maturity period is five years and rate of interest allowed is 8.4%. National Savings Certificate – This is a tax exempted certificate sold by post office with a minimum investment of Rs.100/- and having no maximum limit. Certificate are available in the denomination of Rs.100/-, Rs.500/-, Rs.1000/-, Rs.5000/- and Rs.10,000/-. Rate of interest is allowed at 8.9%. Public provident fund scheme – This is a tax advantage 15 years scheme with a minimum deposit of Rs.500/- in a financial year and a maximum of Rs.70,000/- per year. Withdrawal is allowed after the expiry of five years from the date of initial deposit. Interest is allowed at 8.8% per year. Insurance Services : Postal life insurance – Initially the service was limited only to the employees of post and telegram department but later on extended to the employees of some other departments and banks also. The different types of PLI are Whole Life Assurance, Endowment Assurance, Convertible Whole Life Assurance, Joint Life Insurance, Anticipated Endowment Assurance and Children’s policy. Rural postal life insurance – The prime objective of the scheme is to provide insurance cover to the rural public in general and to benefit weaker sections and women workers of rural areas in particular. The different types of RPLI are Convertible Whole Life Assurance, Joint Life Insurance, Anticipated Endowment Assurance, Children’s policy, Whole Life Insurance and Endowment Assurance. Findings Access to financial services • Majority of the respondents have the monthly income between Rs.5000 and Rs.10000. • More than half of the respondents save below Rs.5000 as their monthly savings (59%). • Majority of the respondents hold their savings in banks (37%) and post office (33%). • More thatn half of the respondents have deposits in post office and they keep their deposit in Recurring Deposit(RD) and Rural Postal Life Insurance(RPLI). • Most of them prefer post office because of safety and simple procedure for opening post office savings account. • 90% of respondents are not satisfied with the rate of interest • 60%of the respondents have insurance coverage and they mainly took life insurance. Level of financial literacy All respondents are aware about the various deposits schemes provided by banks. 96% of the respondents are aware about the interest rate of various schemes provided by banks. Majority of the respondents (81%) know different types of loans and the terms/maturity of the loan. 80% of the respondents are not aware about the internet banking and only 45% are aware about the banking on mobile. 96% of the respondents are reading the instructions provided by the bank. Conclusion It is clear from the study that post offices influence financial inclusion. People residing in rural areas still depend on postal savings, but the new generation opt banks and other modern forms for keeping their savings. Due to negative perceptions and lack of awareness, post offices are neglected in national and state financial inclusion strategies. Suggestions Leveraging the existing postal network infrastructure may be one of the ways that developing countries can use to address the financial inclusion challenges they face. The study suggests that government should provide necessary information and create awareness among people residing in rural areas about financial inclusion and role of postal savings. .