Kerala becomes first state where every family has a bank account

Kerala becomes first state where every family has a bank account

Kochi: At least one member of every household in Kerala now has a bank account.

This means that Kerala, which leads all other Indian states in important indicators of social developments—adult literacy, higher life expectancy, lower birth rates and infant mortality—has become the first Indian state to achieve total banking.

Kerala attained this status through 4,879 branches of commercial banks, including co-operative banks and regional rural banks spread across the state.

At least one member of its 11,82,000 households, spread over 1,624 villages and 14 districts, now has a bank account. The total number of bank accounts in Kerala is 63,26,000.

Kerala’s distinction was disclosed at the state level bankers’ committee meeting in Thiruvananthapuram, the state capital, earlier this week.

The committee is a body of public sector banks that supervises, among other matters, credit flows into weaker sections of the society.

In 2006, the committee launched a massive campaign to bring every household in Kerala under the banking fold through no-frill accounts (where no minimum balance is required to be kept by an account holder), says M.B.N. Rao, chairman of the state level body. Rao also heads Canara Bank.

According to him, in the past two years, banks in Kerala have created 12,70,331 new savings bank accounts and 8,70,463 of them are no-frill accounts. Customers enjoys cheque facility at savings bank accounts and earns 3.5% interest. The total deposits of all banks in Kerala in September were to the tune of Rs97,113 crore.

Indian banking regulator has been pushing for “financial inclusion" in the past few years, asking commercial banks to deliver services to the vast sections of disadvantaged and low income groups at an affordable cost. The coverage of banking services in India has been very low. The latest available data show the nation had 68,282 branches in March 2005 and each bank branch was covering 16,000 people. For every 100 Indians, there are only 31 bank accounts.

If one focuses on the adult population alone, then there are 59 bank accounts for every 100 adult Indians. In contrast, 92-94% adult population of the UK has bank accounts. Among the southern states, Kerala had the highest number of bank accounts before the campaign started—57 for every 100 and 89 for every 100 adults.

K.K. George, an economist and the Kerala State Planning Board member, points out that while many bank accounts were opened, only 48,885 credit cards were issued. “Opening an account is one side of the banking, but more important than this is getting access to credit. The poorest of poor must get credit at they should be offered lower interest rate," he says.

V.A. Joseph, chairman of Kerala-based private bank South Indian Bank, says it is important to educate the account holders of bank transactions and get them into banking activity regularly. His bank is educating people, especially the tribespeople and also looking at getting the self-help groups of women to spread the message of banking.

In October 2005, the Reserve Bank of India, asked banks to offer no-frill accounts with zero or balance accounts with restricted number of transactions. The regulator also simplified the know your customer (KYC) procedures for such accounts for fast expansion of banking activities. Indian Bank subsequently adopted Puducherry and offered bank accounts to all families there. Puducherry is a Union territory with a population of 9,73,829 compared with Kerala’s 3,18,38,619 in 2001.

K.S. Harshan, executive director of Federal Bank, says there should be banking and financial literacy programmes preferably by non-banking agencies and groups.

Another Kerala-based bank, the Catholic Syrian Bank, uses college students for collecting data of households and opening bank accounts. “We have got the accounts. Now it is important to continue the banking relations with the customers," says Iswar Das, chief general manager of the bank.