Banking ‘presence’ and banking facilities

It is a sad commentary on the planning process in the particular area of dispersal of banking presence in the country in that despite many a district humming with various levels of economic activities, banking presence even now was negligible if the fears of the Union Finance Minister in this connection , have to be taken in all seriousness. Does operating cost per unit (branch) being felt to be more than the projected incomes or is it due to the operation of inflexible norms set by the Reserve Bank of India for branch opening by the banks or is it that either the State Bank of India or the Banks under GoI undertaking alone are to open such branches while private and foreign owned banks had much autonomy in that area hence no presence – all these points are pertinent to be known in this context .We know prior to 1969, banking presence largely used to be in such urban areas ,besides in metropolitan cities in India,which were deemed to be economically viable for banks in terms of their profit earning considerations and semi-urban and urban areas were very rarely having any presence of banks. Hence, it used to be a field day for private money lenders for decades. After 1969, the scenario changed phenomenally and a network of banks increased to this extent that most of the villages had either a scheduled commercial Bank or a Co-operative Bank and the banking scene changed progressively so fast that in villages and semi-urban areas even two to three different Banks each had a branch .
To make it doubly sure that such banks functioned nicely ,soon it was made mandatory for each Bank employee in the officers’ cadre to serve a village branch at least for three years. Though it changed the very face of Indian agriculture and through liberal lending under Integrated Rural Developmental Programme (IRDP) with one third Government subsidy plus concessional rate of interest at 4 per cent coupled with lending under various schemes for agriculture mainly for irrigation, seeds and fertilizers and other related schemes , not only did it result in the growth in agriculture but also to some extent fight abject poverty. That, still some villages with a population of 2000 and with ”big” Panchayats functioning are without a Banking branch as disclosed by the Union Finance Minister as also few districts without even a banking institution physically present, sounds astonishing. However, a village with 2000 population must have a bank branch but that it will be a loss registering branch has also to be borne in mind looking to the operational costs , lending at concessional rates, repayment rate in advances portfolio being not satisfactory and the resultant mounting NPA portfolio.
However, some villages even districts being without banking presence calls for a paradigm shift in the branch opening policy if the concerned intending banks to open their branches take the requisite initiative. Referring to the need of a “brick and mortar” branch of the bank to be there where appreciable agricultural and economic activities were taking place and citing by the Finance Minister how a lawmaker was making a case for it , it is still unbelievable as to why the particular area has remained unbanked.