Microfinance Focus, May 17, 2011: MicroSave, one of the leading research and technical assistance providers for financial services has recently released a report on Dormancy in No Frill Accounts (NFA) showing that despite an impressive number of NFA account openings, many are only used for withdrawing government benefits and wages under NREGA. The majority are often inactive or dormant.

The report is the first in a series of research studies that are being conducted by MicroSave and funded by Omidyar Network to support financial inclusion agenda in India. The research was conducted in the states of Uttar Pradesh, Rajasthan and Tamil Nadu and involved focus group discussions and individual interviews with NFA customers and bank staff.

In most areas, only 20% or fewer use their accounts for small savings, the NFA's original intention. Banks lose money on these accounts (estimated costs are Rs.13.4 per transaction and Rs.50.45 for account opening, or Rs.250 total to open and maintain accounts). Not surprisingly, bank service is often unsatisfactory - and less encouraging for customers and extending NFA use, the report says.

To read through the reports and findings, please click on the below:

NFA Overview

NFA Research in Rajasthan

NFA Research in UP and Delhi

NFA Research in Tamil Nadu