A PROJECT REPORT ON

MICRO PRODUCT OF BASIX

SUBMITTED BY-:
DINESH KUMAR VADERA
SAVINGS
Financial intermediation has two very important aspects: credit and savings. Mobilization of
savings/ micro savings plays a very important role in the expansion and deepening of the outreach
of Financial Institutions especially the ones engaged in rural areas, under-developed and under-
banked areas. Savings is required as a tool for effective management of liquidity of individuals,
particularly, the poor and the under-privileged, for whom savings also has a great potential for
poverty alleviation. The poor would deposit their surplus funds if appropriate financial institutions
and savings facilities are available.

Savings is done for a number of reasons like:

• To even out income streams that are subject to seasonal variations, (example- Incomes
from Agriculture)

• To serve as insurance substitutes in case of bad health, disability, sudden income losses
and retirement,

• As a means of accumulation of wealth, they help to achieve the household’s long-term

goals that may include social and religious obligations, or facilitate future investment and
consumption.

Savings can be in various forms: assets, cash or deposits in formal, semi-formal and informal
institutional arrangements. The mix of savings depends on a variety of factors including the
motive for savings. The level of liquidity, ease of access, confidence in the security of the
savings, rate of return are of crucial importance. Those with a strong preference for wealth
accumulation will emphasize the profitability of their savings.

The design of deposit facilities reflects depositors’ specific preferences such as security, access,
divisibility and rate of return. In contrast to in-kind savings, deposits allow the combination of
several product characteristics to meet individual customers’ demand, i.e., to provide tailor-made
products. In addition, deposits have the advantage of greater transparency and predictability as
savers know when and how they can withdraw their deposits and what interest rate they can
expect.

The demand for deposit facilities largely depends on the confidence in the deposit-taking
institution’s ability to safeguard deposits and provide immediate access to savings when
requested.

The transformation of in-kind savings into deposits improves the saver’s liquidity management.
When poor people have the opportunity to deposit funds in financial institutions instead of
freezing them in unproductive assets, they may use them to finance productive investments.
Deposit facilities can also reduce the demand for credit, as liquidity that was formerly blocked in
less efficient forms of savings could be readily available.

Role of KBS Bank in Savings Promotion:

Realizing the need to mobilize rural savings, to provide savings services to such customers who
do not have access to formal financial institutions, and to channelise these savings for investment
in Local Areas, BASIX campaigned for a policy change enabling the setting up of Local Area
Banks in India and has set up the Krishna Bhima Samruddhi Local Area Bank.

The KBS Bank since inception is devising innovative deposit products as per the needs of
different sections of clients it serves. Bank has products with daily or monthly collection by staff
at door step; insurance linked savings/fixed deposit products. The complete list of products
available is as under:

Saving
Sl.No Nature of the Product
Product
A fixed deposit, which will mature on a specific
Fixed
1 Interest payable on period in the future and payable
Deposit
after maturity ( maturity) along with the interest.
A fixed deposit which will mature on a specific
Fixed (Interest payable period in the future and interest
2
Deposit payable periodical periodically) basis as requested by
the depositor
Savings A Normal savings bank with multiple deposits and
3
Bank multiple withdrawals.
A savings bank with multiple deposit and multiple
Samruddhi Savings Bank withdrawals. The deposit holders will
4
Life get a free
Accidental insurance as well as Life Insurance
Samruddhi A fixed deposit payable after maturity.
5
Cash Certificate
Recurring A Fixed deposit with monthly installments,
6
Deposit payable on maturity along with interest.

Interest
Sl.No Product Period Rate per
annum
Savings Accounts/ Sudhama Life
1 3.50%
SB
2 Samruddhi Daily Deposit 100 Days 4.00%
 16 days to 45
3 Recurring and Fixed Deposits 5.50%
days
46 days to 90
6.50%
days
91 days to 179
7.00%
days
Recurring/FDR/Samruddhi Life
180 days to less
4 Term Deposit/Samruddhi Cash 7.50%
than one year
Certificate
365 days (Spl
Product valid 11.00%
upto 31/03/2008)
More than One
year to less than 8.00%
two years
Two years and
8.50%
above
Minimum two
5 Samruddhi Special Deposit (SSD) years and above 9.5%
from Rs.10,001/-
Samruddhi Freedom Recurring Minimum six
6 5%
Deposit (SFRD) months

In addition to the above 0.5% p.a. extra interest rate for Senior Citizens/Women/Physically
Handicapped Persons, except for 365 days product and SFRD product.

1% extra on
Samruddhi Balavikas Minimum five years with
7 current Interest
Recurring Account (SBRA) min. savings of Rs.100/-
rate
Samruddhi Asrai Term
Minimum two years and
8 Deposit (SATD) for Senior 10%
above from Rs.1,00,000/-
Citizens
2.Insurance

BASIX is a livelihood promotion institution working in several arid and backward districts
spread over sixteen states. BASIX works towards its mission of livelihood promotion by
providing a comprehensive set of services, which include As part of its mission to deliver
comprehensive financial services to rural customer, BASIX began its initiatives to deliver
insurance services in 2001, coinciding with the opening up of the insurance sector. From the
beginning BASIX has actively partnered with multiple insurance companies to design insurance
products for rural customers. BASIX has an articulated vision in providing micro-insurance
services.

Vision: All poor households, especially those served by BASIX, will have access to risk-
management services covering their lives and livelihoods, and insurance companies will provide
these services willingly on a financially sustainable basis.

Business Model:

Business Partners:

AVIVA

RoyalSundaram

ICICI Lombard

A. Products developed and being distributed:

Life Insurance

1. Credit Plus: A group life insurance product that covers all BSFL credit customers and
their spouse. In case of KBSLAB the product currently covers the loan customers only.
2. Savings Plus: A group life insurance product that covers all the savings and deposit a/c
holders of KBSLAB.
3. Grameen Suraksha: A limited payment pure term insurance product. .
4. Amar Suraksha: A pure term product with return of premium after the completion of the
term.
5. Anmol Suraksha: A savings product with guaranteed return.
6. Sangh Samruddhi (Life)- A group life insurance to cover institutional clients and their
spouse.
Health Insurance

1. Grameen Arogya Raksha : A group health insurance product that covers all BSFL credit
customers and their spouse. In case of KBSLAB the product currently covers the loan
customers only.
2. Sangh Samruddhi (Health)- A group life insurance to cover institutional clients and their
spouse.
3. Janata Personal Accident: A retail policy providing coverage for Death or Permanent
Total disablement to the insured arising due to accidental injury
4. Rural Personal Accidents: A retail policy providing coverage for Death, Permanent Total
disablement or inpatient hospitalization cover to the insured arising due to accidental
injury.
5. Rural Hospital Cash: A retail product which offers hospital cash benefit to the
insured against hospitalized due to illness or accidental injury.

Asset Insurance

1. Livestock Insurance: A policy which provides benefit against the death of the cattle.
2. Micro Enterprise: A policy which covers risk of loss to the insured non-farm enterprise
due to any kind of accident and natural calamities.
3. Weather Insurance: Insuring loss to the crop against adverse deviation in weather
conditions.

3.MICRO CREDIT
In Micro Credit, BSFL is pioneer in practicing multiple channels of lending to different market
segments. Various channels used are Joint Liability groups (JLG), Self Help Groups (SHG),
Mutually Aided Cooperative Thrift and Societies (MACTS), Revolving of savings and credit
Associations (ROSCAS) and direct individual loans to individuals.

Micro credit is offered for Agriculture (Crop, irrigation and land development), Agri Allied
(Dairy, sheep & goats, poultry and fishery), Non farm loans (Grocery shops, artisans, tailoring,
mobile vendors etc), General purpose (SHGs & Federations ) and housing loan (repair &
extension).

As on December 31,2007 it has disbursed Rs.2,060 million and had 285,476 customers and the
outstanding is Rs 2,114 million. The average loan size is Rs.10,559. On time repayment rate of
is 98.5% .

BSFL is also piloting Vidya Samurddhi(Educational Loan) , Gruh Samruddhi (Housing Finance) ,
Bhandar Samruddhi (Ware housing) , Urja Samruddhi (Energy loan) , Drishti Samurddhi (Vision
loan) and Swasth Samruddhi (Health loan).
4.TAFI
On August 27th, 2007 BASIX launched a project on Technology Assisted Financial Inclusion in
a few low-income neighborhoods in Delhi and Muzzafarpur, Bihar. This pilot covers an urban
and a rural location, and can potentially be scaled across all BASIX locations. This is being done
as the Business Correspondent of Axis Bank, on the basis of a tripartite agreement between
BASIX, Axis Bank and the technology provider, A Little World.

By December 2007, BASIX had enrolled over 4000 customers for no-frills saving bank accounts.
The account opening of these customers has been done inside slums and villages on the basis of
very basic Know Your Customer (KYC) documents. The customers are being issued biometric
authentication based smart cards. These customers now have access to both savings and
withdrawal services, in addition to other financial services at either a SPOT (Specified Point of
Transaction) within 5 Kms of their homes, or at their doorstep.

The current services being offered include

• savings,

• insurance,

• remittances,

• credit,

and other financial services such as pensions and systematic investment plans (SIP) of mutual
funds will also be offered soon.

The customers include rickshaw pullers, hawkers and vendors, rag pickers, scrap collectors, auto
drivers, illiterate and poor women. The customers include both those directly engaged in low-
grade economic activities, and those who have a need to save, regardless of any direct income
earning activity.

The technology used is Near Field Communications, and transactions are done with a kit
comprising a mobile phone, a fingerprint scanner and a printer. Transactions can be done both
online (instant server updation) or offline, for remote areas where there is no signal. The field
operators carrying the transaction-kit is the human equivalent of an ATM Machine, with mobility
added. The technology allows for effective risk-management and fraud control.

BASIX plans to maximize the impact of the BC framework by combining a suite of financial and
non-financial services, to enable sustainable strides towards greater inclusion and stronger
livelihoods. This requires offering multiple services and high operational efficiency, while
managing technology well, which we are working towards.