This is how RBI wants banks to reach smaller villages

Saikat Das
Moneycontrol.com

In its annual monetary policy the Reserve Bank of India (RBI) directed banks to extend banking services to villages below population of 2,000. The regulator asked banks to chalk-out  plans to pursue this. Meanwhile, it has taken the matter with grave importance disseminating more details.

"Banks have to either open a branch in those villages or work through business correspondents," a senior official from RBI told Moneycontrol.com on condition of anonymity.

"Each bank has to open five accounts in a year to extend loan facility particularly to micro, small and medium enterprises. There will be one lead convener bank for district consultative committee (DCC) chaired by the respective district magistrate or block development officer in every district across the nation. RBI has asked all big banks to do this on priority basis without setting any timeline target," he said.

There is a DCC in every district in India. It would identify the areas below 2,000 populations with a view to financial requirements and local economy. Accordingly, it may suggest the lead bank, which may have the largest presence in any particular district. Smaller banks, operational in the district, will then start working with an action plan.

Moreover, State Level Bankers' Committee (SLBC), the apex body of bankers present in every state will coordinate the entire operations. The bank with largest operations in a state is the lead bank of any SLBC.  For example, United Bank of India is the lead bank for SLBC in West Bengal and UCO Bank in Orissa. The regulator has also provided SLBCs the mandate to prepare blueprints to cover unbanked villages of population less than 2,000.

Currently, lenders are giving services through 138,502 rural outlets comprising 24,085 rural branches, 111,948 business correspondent outlets.

RBI deputy governor K C Chakrabarty has been advocating for a profitable branch model of financial inclusion. According to a rough estimate, 50% of Indian populations still remain either under-banked or unbanked. 

"While all the efforts made for financial inclusion have expanded the access to banking services, it is important that quality services are provided through the newly set-up information and communication-based delivery model," RBI had said.

 saikat.das@network18online.com