In March, the State Bank of India, the country’s largest commercial bank, opened its 10,000th branch at Puduvayal, a small town in the Chettinad region of Sivaganga, a southern district in Tamil Nadu. On the first day, the branch sanctioned Rs4 crore of farm, educational and housing loans.
Speaking on the occasion, finance minister P. Chidambaram said it was only after the Congress Party-led United Progressive Alliance government assumed office, that banks and insurers had begun to seek customers instead of offering their services only to those who came to their doorsteps.
In June, the Managalore-based Corporation Bank opened its 999th branch and 972nd ATM in this district.
Sivaganga, Chidambaram’s parliamentary constituency, is emerging as a pilgrimage for chief executives of India’s state-run banks. They are competing with each other to open their milestone branches and ATMs here even though, in private, most admit opening new branches there is not financially viable and most branches are not making money.
According to a recent report in Business Today magazine, in the past two years, 28 bank branches have been opened here and five more will start operations soon. There are 169 branches at Sivaganga, which has a population of 1.15 million. This means every branch here is catering to some 6,800 people—against a national average of 16,000 per branch.
Still, the finance minister wants more bank branches here. An 8 July letter, written by Chidambaram to T.S. Narayanasami, chairman of industry lobby Indian Banks’ Association, says, “There is scope for opening more branches in Pudukottai district” of Sivaganga.
There are 70 branches of public sector banks in Pudukottai. Indian Overseas Bank has the maximum presence with 23 branches, followed by Indian Bank (15 branches) and State Bank of India (11 branches). Chidambaram feels that there is scope for opening more branches in Pudukottai. “In particular, there is scope for Bank of India, Canara Bank, Union Bank of India, Syndicate Bank, Punjab National Bank, Allahabad Bank and Corporation Bank,” the letter says. Currently, Canara Bank has five branches; Bank of India, Union Bank of India, Syndicate Bank and Punjab National Bank two branches each, and Allahabad Bank and Corporation Bank, one branch each.
So, Chidambaram “would like IBA to ask its members to examine the feasibility of opening” new branches at Alangudi, Keeramangalam, and Kothamangalam of Pudukottai.
He has written the letter as a member of Parliament and not as finance minister and, to be fair to him, he has not directed the IBA chairman to open more bank branches but merely said, “I shall be grateful if you could kindly look into the matter and do the needful.”
I do not know whether the IBA chairman has discussed the parliamentarian’s letter with other bank chiefs but one can presume that soon there will be more bank branches at Pudukottai district, which measures about 4,600 sq. km, has a population of 14,59,601 and is some 390km away from Chennai on Chennai-Rameshwaram metre gauge railway. Not too many public sector bankers would dare to turn down his request.
But bank branches do not necessarily spread the message of financial inclusion and cover more people with banking services. Going by the Reserve Bank of India data, in March 2008, there were 74,326 bank branches across India and a bulk of them—more than 30,730—are in rural pockets.
Region-wise, the southern region, consisting of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Lakshadweep and Puducherry, has the maximum number of branches at 20,771. Central India houses 14,751 branches; eastern India 12,730; northern India 12,692; western India 11,365; and the North-East 2,017.
These statistics, however, do not reflect the profile of the banking business as the northern region, accounting for less than 60% of southern India’s branch network, garners more deposits than the south. Again, western India, consisting of Goa, Gujarat, Maharashtra, Daman and Diu and Dadra and Nagar Haveli, has a market share of roughly one-third of deposits mobilized across India and more than 35% of loans, even though its share in bank branches is around 15%.
The regional imbalance is more glaring when one looks at the spread of banking services. On an average, only 59 out of 100 adult Indians have bank accounts. But this is not uniform across India. For instance, 84% of adults in north India have bank accounts, but in the east, the comparable figure is 41% and, in the northeast, even less at 37%. In south India, every 65 adults out of 100 have bank accounts, more than in west (61%) and central India (51%).
Among Indian states, in Chandigarh, 221% of adults have bank deposits. The comparable figure in Goa is 187%, Delhi 166% and Punjab 105%. In south India, people of Andhra Pradesh have the least access to bank accounts (57%) and Puducherry the most (90%).
At the lowest end of the ladder is Manipur, where only 17% of adults have access to bank deposits. Nagaland comes a close second (21%). Bihar, Orissa and Chhattisgarh are the other states that have least access to banking services, with 32%-34% of the adult population holding bank accounts.
Unlike charity, banking services may not necessarily need to begin at home and Chidambaram, as finance minister, may as well request the state-run banks to consider reaching out to the people of these areas, too.
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Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as the Mumbai bureau chief of Mint. Please email comments to firstname.lastname@example.org