Jangipur (West Bengal): The opening of an Allahabad Bank branch near his home in Panchgram village, in the interiors of West Bengal’s Murshidabad district, has brought relief to Mohammed Samiruddin, a wholesale dealer of fertilizer and insecticide.
The bank where he had an account until Allahabad Bank opened a branch in his village was nearly 7km away. “I would often have to carry Rs4-5 lakh in cash when I returned home, which at night wasn’t an advisable thing to do, but at times there would be no alternative,” said Samiruddin, who now wants his loan account, too, moved to the branch near his home. Samiruddin is one of tens of thousands of people in Murshidabad for whom accessibility to banks has improved dramatically since Pranab Mukherjee became finance minister last year—after winning the parliamentary election from Jangipur constituency.
State-owned banks have made Jangipur and its neighbourhood their preferred destination for initiatives aimed at “financial inclusion”, which range from opening of branches to the so-called “adoption of villages”.
In the past six months, Mukherjee has inaugurated at least 18 new branches of different state-owned banks in Jangipur and its vicinity. Contrast this with the financial year ended March 2009, during which 26 branches were opened in all of rural West Bengal, according to banking regulator Reserve Bank of India (RBI).
“This is the highest for any district of West Bengal in a year,” said Nitish Kumar Poddar, an official at the Kolkata-based United Bank of India (UBI), who is also the lead manager for public sector banks in Murshidabad.
The country’s biggest lender, State Bank of India (SBI), alone has opened eight new branches in the past six months, followed by UBI’s seven.
On Sunday, SBI announced the “extension of banking services” to Sanyasidanga village near Jangipur town, where banking services were not available until now. It has appointed an agent in the village to facilitate banking transactions for people with SBI’s nearest branch, which is a few kilometres away.
This, claimed SBI, was the 100,000th village it reached ahead of any other bank in the country. On Sunday, chairman O.P. Bhatt announced 50,000 more villages would be brought under its network within a year. India has some 600,000 villages in all.
Former finance minister P. Chidambaram’s parliamentary constituency, Sivaganga in Tamil Nadu, had become a similar magnet for state-owned banks two years ago. In two years until the middle of 2008, public sector banks had opened at least 30 branches in Sivaganga, adding up to one bank branch for every 6,800 people. The story of Murshidabad, however, is slightly different. The district, which had a population of 5.9 million in 2001, now has 261 bank branches. This translates to one branch for every 22,600 people, significantly worse than the national average of one for every 14,000 people.
“Banks are opening branches here, but this isn’t because I am from Murshidabad,” Mukherjee said in Jangipur on Sunday. “This district is indeed one of the poorest in the country, and has a large number of people from the minority community (Muslims). Financial inclusion of people in Murshidabad will benefit the whole country.”
A recent study by Kolkata’s Indian Statistical Institute found that Murshidabad, which was once known for its opulence, was now home to the largest number of rural poor in India—about three million people, or 56% of the district’s rural population, were found to be below the poverty threshold.
“What is happening in Jangipur is indeed great—for financial inclusion there is no alternative to opening bank branches,” West Bengal’s finance minister Asim Dasgupta said. “But it is just a beginning.”
Out of the state’s 3,304 gram panchayats (village councils) 935 still don’t have a bank branch, according to Dasgupta. “By RBI’s own admission, bank penetration in 17 out of 19 districts of West Bengal is low,” he added.
Business has been reasonably good for banks that have launched branches in Murshidabad recently. For instance, UBI’s branch at Palsonda village has in a month received 500 applications for agricultural loans and opened 400 savings bank accounts.
A lot of people are opening so-called no-frills accounts, or zero-balance savings accounts. But, on their own, such accounts are not profitable for banks, according to Satish C. Gupta, UBI’s chairman and managing director.
“They are used to build relationships with customers so that we could eventually offer them other products such as overdraft facilities and insurance,” he said.
There is already demand for credit in Murshidabad’s interiors, yet targets for the current year may not be met, according to Poddar of UBI.
In the current fiscal ending in March, banks in the district had a collective credit disbursal target of Rs922 crore, but only 35% has been achieved so far, he said. “Things are going to get better in the last two months of the year, yet the target is unlikely to be achieved,” he added.
As of 30 September, banks in Murshidabad district had total deposits of Rs4,354 crore and advances were at 40% of that amount at Rs1,728 crore, whereas the credit-deposit ratio for Indian banks was at 74% at the end of fiscal 2009.
A large section of the people rushing in to borrow from these newly launched bank branches are those indebted to moneylenders, said another banker on condition of anonymity.
“Often people here can’t wait for banks to process loan applications, and end up borrowing from moneylenders, who typically charge 10% interest a month,” he added.
Standing nearby, two farmers—Abul Khayer and Mohammed Sukurullah—nodded in agreement. Khayer had submitted several loan applications with the regional rural bank (RRB) nearby, but it wouldn’t even discuss the proposals.
“Eventually, I had to borrow from a moneylender. But once Allahabad Bank opened its branch in Panchgram, things changed. Even the people at the RRB were keen to give me a loan, but I refused,” Khayer said.
Sukurullah’s story is similar. He, too, borrowed from a public sector bank to repay a Rs20,000 loan he had taken from a moneylender.
While it is true that thousands have benefited from the opening of new bank branches in Murshidabad, a large section of the people, who live across the river Ganga, complained that banks had done nothing for them.
“Opening of branches in Jangipur or Raghunathgunj doesn’t help us,” said 60-year old Nazrul Islam, who is dependent on the money his son sends from Kerala, where he works as a labourer. “For us, the nearest bank is still 6 km away in Berhampore,” the district headquarters of Murshidabad.