Kolkata: Recently revised targets for extending banking services to under-banked regions can only be met with regional rural banks (RRBs) opening at least 30% of new branches required under the new guidelines, bankers told finance minister Pranab Mukherjee on Tuesday at a meeting in Kolkata.
The finance ministry issued a directive on 21 September to state-owned and private banks, besides RRBs, that all villages with a population of 5,000 and above in the 296 districts identified by the Reserve Bank of India (RBI) as “under-banked” should have at least one bank branch.
Mukherjee met Pratip Chaudhuri, chairman of State Bank of India, the country’s biggest lender, along with the heads of the three Kolkata-based public sector banks, to discuss financial inclusion and the bankers’ views on boosting distribution of financial services in villages.
A file photo of villagers outside a rural bank
“We have told the finance minister that we will be able to meet the deadline of September 2012 only with active participation from the regional rural banks,” Chaudhari said after the meeting. RRBs should take responsibility for at least 30% of the new branches that banks are required to open to meet the target, he added.
Banks have begun estimating district by district how many new branches are to be opened to comply with the new guidelines.
The total number hasn’t emerged yet, but in West Bengal’s Murshidabad district alone, United Bank of India has estimated that at least 150 new branches have to be opened over the next 11 months.
Murshidabad is significant because Mukherjee was voted to the Lok Sabha twice from its Jangipur constituency. A large number of private and state-owned banks have extended banking services to Murshidabad, mostly by launching new branches.
It shouldn’t be difficult for RRBs to fulfil the target because a large number of them have adopted core banking solutions, or technology-based banking systems that integrate all branches, said Chaudhuri. According to RBI’s annual report, 21 of 82 RRBs in operation have adopted core banking solutions.
RRBs were launched in 1975 to ramp up banking services in rural areas, with the Centre providing 50% of the capital, the states 15%, and state-owned commercial banks the remaining 35%.
Several RRBs were launched, but over the past few years many have been amalgamated because of financial stress. Some 40 RRBs together require a fresh capital infusion of Rs 2,200 crore before March, a committee headed by RBI deputy governor K.C. Chakrabarty has said.
“RRBs were always supposed to be a part of the financial inclusion programme and, therefore, they must participate in meeting the recent targets as well,” said Bhaskar Sen, chairman and managing director of United Bank of India.
Mukherjee asked bankers to form a committee under Kolkata-based Allahabad Bank to assess and submit a report by 15 December on the impediments to spreading banking services in the seven north-eastern states—Assam, Arunachal Pradesh, Tripura, Meghalaya, Mizoram, Manipur and Nagaland—with a special focus on connectivity and the law and order situation.