Financial Inclusion

Financial exclusion is a result of poor relationships between banks and communities. Poor people, particularly in rural areas, are often wary of banks and finds branches intimidating. A profound lack of financial literacy also reinforces the sense of alienation. Overcoming these barriers and altering the economics of serving the poor require the bank to pursue a variety of innovations in product development, distribution, marketing and organization structure.

There are barriers to accessing financial services emanating from both demand side and supply side factors. From the demand side, the big barriers are the lack of awareness about financial services and products, limited literacy, especially financial literacy of the populace, and social exclusion. Many of the generic financial products are unsuitable for the poor and there is not much of an effort to design products suitable to their needs. The unfriendly and un-empathetic attitude of the banks to the customers also plays an important role in undermining the demand for financial services. On top of that, exorbitant and often non-transparent fees, combined with burdensome terms and conditions attached to the financial products, also dampens the demand.

From the supply side, the main barrier is the transaction costs that the bankers perceive. Because of current low volumes, banks find that extending financial services to the marginalized is not cost effective. Furthermore, lack of communication, lack of infrastructure, and low literacy levels all raise the cost of providing services and inhibit bankers from taking initiative from the supply side.

India is a vast country with its share of unbanked and under banked millions. The ever widening chasm between the haves and have-nots is not something that can be bridged overnight. But digital technology is making inclusive banking and thereby inclusive growth an achievable objective. At Federal Bank too we are harnessing the potential of digital technology to reach out to the underprivileged sections of society. Be it through Banking Correspondents (BC) or through Net/Mobile banking, we're able to bring more and more customers under the banking umbrella. 

The financially excluded can be the engine of the next round of global trade and prosperity, and can be a source of innovations. For serving them profitably, the Bank will have to work collaboratively with civil society organizations and local governments.

To overcome the impediments to serve the financially excluded and to tap the opportunity to serve them profitably through identified branches, the bank has to develop a separate strategy. The performance metrics of such branches should be aligned with the priorities for serving such customers. For example their performance should be measured by the number of customers served, rather than the volume of business and these branches should be allowed to emphasize growth over profitability in the short term.
To reinforce the importance of this opportunity, the bank should create an empowered executive level position that would understand the needs of the financially excluded, analyse the product and channel economics, develop new marketing campaigns, and design a new organization model.

In Federal Bank we are implementing Financial Inclusion Plan as per the following models:

  •  Basic Savings Bank Deposit account (BSBDA)
  •  Providing financial literacy 
  •  Branchless banking through Business Correspondents (BCs)
  •  FEDJYOTHI - ICT based FI solution
  •  Financial Inclusion Branches – Grama Jeevan branches

In November 2005, banks were advised by the Reserve Bank of India (RBI) to make available a basic banking ‘no-frills' account with low or nil minimum balance free from charges to expand the outreach of such accounts to vast sections of the population. All the existing "No frills" accounts opened by the banks are now converted into BSBDA in compliance with the guidelines issued on August 22, 2012 by the Reserve Bank of India (RBI).This account does not require maintenance of minimum balance and payment of service charges. We are offering BSBDA accounts through all our branches. The BSBDA accounts are publicized through leaflets and posters through our branches.

Recognizing that lack of awareness is a major factor for financial exclusion, RBI has asked the SLBC convener to set up a credit-counselling center in one district as a pilot and extend it to all other districts in due course. RBI has come out with a Model Scheme on FLCCs and later has advised banks to set up as many FLCCs in order to achieve one centre per block.

FLCCs should not act as investment advice / marketing centers for products of any particular bank. To start with, Banks may set up Trusts/Societies for running FLCCs, fully funded by the Bank. The counselling centers should maintain arm's length relationship with the parent bank. While FLCCs may be started in rural, semi urban, urban and metropolitan areas, banks may adopt a segmented approach specific to different categories of borrowers, rather than broad-based generalized one.
In consonance with RBI directives, we have established a Trust namely "Federal Ashwas Trust". The Trust was formally inaugurated by Dr. K C Chakrabarty, Deputy Governor, Reserve Bank of India. The main objective of Federal Ashwas Trust is the establishment and running of "Federal Ashwas Financial Literacy Centers" (FAFLC) for providing Financial Education to the public.
The Trust is managed by seasoned bankers and pioneers in agriculture who have held key positions during the course of their prestigious careers. The current trustees are Shri.John Kurien (Retired NABARD Chief General Manager), Shri. K V Peter (Former Vice Chancellor- Kerala Agricultural University), Shri. E Madhavan (Retd. General Manager, Reserve Bank of India). The centres are headed by counsellors who are picked from a pool of retired bank officers and  MSW qualified professionals.
Credit counselling is being provided for existing as well as prospective customers of all banks at all the centers by the counsellors, who are retired bank employees. The counsellors visit branches of all banks in their area and spread the message of availability of Federal Ashwas Financial Literacy Centre. Counsellors are also attending Block and District level Banker's Committee meetings to request Banks and Government Departments to advise the public to avail the services and facilities offered by FAFLCs. The services of FAFLCs are being utilized well by the public, especially by students and parents intending to avail educational loans.

Financial literacy programmes intend to provide basic banking knowledge to people across various corners of the life. The financial literacy classes are organized and conducted by the branches. We have conducted.

  • Financial literacy and education programmes, are held in the 12 villages allotted to us, with special focus on Government schools and aided higher secondary schools. These classes are intended to provide lessons on basic banking concepts to school children.

  • Conducted workshops at Alappuzha and 60 other centres across Kerala to educate the rural folks on financial services offered by banks and the advantages availing those schemes.

  • Base level financial literacy training to Kudumbasree groups* were conducted by our Branches (*Kudumbasree Groups are Community Development Societies promoted by the Govt. of Kerala under its Poverty Eradication Scheme)

RBI has attached top priority for imparting Financial Education and awareness among school children. They have also published many financial literacy materials for general public.

Branchless banking model of Financial Inclusion is being implemented through individual Business Facilitators/Correspondents (BFs/BCs). The BC/BF agents are responsible for sourcing accounts, servicing such account holders in their jurisdiction, grievance escalation, feedback to nodal Branches etc. Under this model we have conducted the following activities:

2000 fishermen were brought to the mainstream formal banking channel by opening ‘No frills' accounts in a special Financial Inclusion programme conducted by our Branches in association with Fishermen's Welfare Board and the local Churches.
  • In association with reputed Non- government Organisations (NGOs) like Gandhi Smaraka Grama Seva Kendram, Samanwaya etc., 300 accounts of rural folk belonging to the unorganized and weaker sections of the society were opened by our branches.
  • 121 BF/BC agents have been engaged so far for financial inclusion programmes
  • Trainings were conducted by us in association with partner NGOs for Business Correspondents/Business Facilitators at identified locations.
  • We propose to consider institutional BC model in places where we do not have wide network and under this model we will be concentrating mainly on liability and remittance products. Our Bank will be implementing the projects with a focus on Kerala, Southern Maharashtra & Northern Karnataka where we have a strong presence. In other areas our focus will be on urban centers.
  • The service provided by business correspondents is available to the beneficiaries on a 24x7 basis. The target groups such as fishermen, farmers, coolies, construction workers, rickshaw pullers, migrants etc are able to avail the services at their convenience near their homes during morning or evening hours or anytime at their convenience. Thus it avoids the need for visiting the bank branch which will make them lose their earnings for the day.

Our ICT (Information & Communication Technology) product has been christened as "FEDJYOTHI". FEDJYOTHI is a smart card based solution in which customer transactions are facilitated in the field using hand-held terminals, aptly called micro ATMs, by Business Correspondent agents. FEDJYOTHI card issued to each customer is stored with information on the latest balance, last few transactions and customer biometric and demographic information.

A FEDJYOTHI no-frill account of each customer is opened in Core Banking Solution (CBS) of bank using the enrolment data captured by BC agent. Each customer is uniquely identified and authenticated using a combination of smart card and fingerprint biometrics. Banking services such as cash deposit, withdrawal, balance enquiry etc. are available in the first phase. In the subsequent phase there will be support for loans, insurance, micro-pension, fund transfer transactions etc. The project launched on 18th December 2010 at Alappuzha District in Kerala targets 50,000 customers covering 62 villages across India including the 15 villages allotted to us by SLBCs of various states. Initially we were allotted with 12 villages in Kerala by SLBC Kerala to implement financial inclusion by March 2012. We could start implementing the project in these 12 villages from launch of the product on 18.12.2010 and complete the implementation by 17.03.2011 which was one year earlier than the prescribed deadline of March, 2012 by the SLBC. Later in August, 2011 SLBC, Kerala requested us to implement financial inclusion in Puthuppally village, Alappuzha. We could implement our ICT model FI product FedJyothi in record time of two weeks and our efforts were well appreciated by SLBC and RBI.
The bank thus could play the model role for all other banks in Kerala and become the key player in making Kerala the first state to achieve Total Financial Inclusion. Our expertise and efficiency were again appreciated by the SLBC and RBI by selecting Federal Bank as the official bank to demonstrate the operations of Smart Cards on Hand Held Terminal during the official declaration function of total financial inclusion by Hon'ble Chief Minister of Kerala.
As on 31.01.2014 we have enrolled more than 21,000 customers under Fedjyothi scheme and smart cards are issued to them. The bank branches to which villages are attached are conducting mass publicity campaigns and creating awareness among public through brochures, banners, notices etc. We have extended our Fedjyothi project to Maharashtra, Chattisgarh, Tamil Nadu and Karnataka.


Grama Jeevan is the name given to our Financial Inclusion Branches. A Financial Inclusion branch is a full fledged brick-and-mortar banking branch opened as a part of Financial Inclusion programme. The first Grama Jeevan branch of Federal Bank with ATM facility was opened at Thuruthy in Vengoor West village, Ernakulam District on 22.03.2011 which is one of the villages allotted to us by RBI for Financial inclusion. Federal Bank is the first bank to open a Financial inclusion Branch in the state of Kerala and the first ever bank in the private sector to do so in India.The Grama Jeevan branch at Thuruthy Vengoor west was visited by Dr. D Subbarao, hon'ble governor of Reserve Bank of India and appreciated on the inauguration day itself.

‘Grama Jeevan' branch aims at providing formal banking services to the entire village in a meaningful way. The branch serves the entire population of the village with all kinds of banking services. The major initiatives undertaken by the branch towards this mission is detailed below:

1. ICT Model Financial Inclusion Saving Bank Account

  • The ICT model accounts which are operated using Biometric Smart Cards and Micro ATM turned out to be an effective tool in the process of implementation of Financial Inclusion programme. We have christened our financial inclusion product as "FEDJYOTHI". In this model we have conducted mass publicity campaigns which was presided by Sri P P Thankchan, Former minister of Kerala with the support of Panchayath functionaries and SHG groups functioning in the village. During these publicity campaigns, BC agent Shri K P baby was introduced to the public. The publicity meetings conducted in this regard along with the public announcements, banners, brochures and posters displayed in the village helped to create awareness in the minds of villagers which was substantiated by the acceptability of FedJyothi accounts in the village. As on today we have created 1014 accounts and smart cards are issued to them. Customers are also actively transacting with their cards.

2. Basic Savings Bank Deposit account (BSBDA)

  • We are extending the banking services to the weaker sections of the village by helping them to open bank accounts as Basic Savings Bank Deposit account (BSBDA) which do not requires to maintain minimum balance or pay service charges. The account holders are provided with ATM cards and the customers under this scheme are benefitted by our ATM machine attached to the Grama Jeevan branch.

3. Promotion of SHG Groups

  • The Grama Jeevan branch is extending help to the Self Help Groups functioning in the village to open bank account to do their daily transactions. The branch is providing guidance to the SHGs by taking up projects and getting them recognized by the concerned authorities. SHGs who have availed credit from Federal Bank are engaged in activities such as agriculture, dairy farming, running restaurants, flour mill, manufacturing of soap powder, preparation and packing of pickles etc.

4. Meaningful Financial Inclusion

  • On his visit to Vengoor West village to attend the Outreach program conducted by RBI on 22.03.10, Dr D Subbarao has expressed his happiness over the reach of banking into the villagers and he remarked the need of bringing about meaningful financial Inclusion in the village by providing more banking products. To accomplish this mission Federal Bank has conducted a basic household survey in the village to identify those households who are denied of having a bank account, credit or insurance coverage. The survey result was analysed and steps have been taken to bring the financially excluded community into the formal banking mainstream. As a prelude to this venture the branch has been engaging the employees of Milk Society to contact the villagers who are excluded from the banking services and helping them to open an account with the bank.

5. Credit Facilities

  • ‘Grama Jeevan' branch aims at providing formal banking services to the entire village in a meaningful way. The branch serves the entire population of the village with all kinds of banking services. To achieve meaningful financial inclusion through Grama Jeevan branches we have adopted a two pronged strategy to increase rural income. These strategies help the poor people to add to the present income and also to enter into engagements over and above their present employment.The short medium term strategy envisages extending credit for productive purposes such as setting up dairy units, poultry units for short term income generation whereas the long term strategy has been devised for extending credit for activities which would yield perennial income.The branch has conducted advance oriented programs with the help of various Societies to create awareness among the public about the availability of various credit facilities. These meetings are attended by Agriculture officers, Veterinary doctors and Panchayath officials also. They aim at providing information on the subsidies available from governments, RBI and other boards. These programs result in making customers willing to start new ventures by availing the subsidy.The branch is also ensuring the availability of credit to agriculture and allied activities under available schemes including advance against securities such as gold. The branch is looking forward to induce the habit of savings in the villagers and enable them to start new ventures and ensure meaningful financial inclusion of the village.

 Farmers' Club

  • National Bank for Agriculture and Rural Development (NABARD) encourages banks to promote Farmers' Clubs in rural areas under the Farmers' Club Programme, earlier known as "Vikas Volunteer Vahini (VVV) Programme". Farmers' Clubs are grassroot level informal forums of farmers. Such Clubs are organised by our rural and semi-urban branches of banks with the support and financial assistance of NABARD for the benefit of the village farming community/rural people. The Grama Jeevan branch has formed a farmers club which includes farmers from the village who are engaged in dairy farming, poultry farming, vegetable farming, rubber growing etc.
View the list of Financial Inclusion Branches – Grama Jeevan branches


National Bank for Agriculture and Rural Development (NABARD) encourages banks to promote Farmers' Clubs in rural areas under the Farmers' Club Programme, earlier known as "Vikas Volunteer Vahini (VVV) Programme". Farmers' Clubs are grassroot level informal forums of farmers. Such Clubs are organised by our rural and semi-urban branches of banks with the support and financial assistance of NABARD for the benefit of the village farming community/rural people. The Grama Jeevan branch has formed a farmers club which includes farmers from the village who are engaged in dairy farming, poultry farming, vegetable farming, rubber growing etc.