Going cashless only a dream in the Northeast

A population of 45 mn had 3,131 bank offices in the region as at end of September FY15

Poor banking infrastructure in the Northeast poses formidable challenges to the government’s target of a cashless economy.
 
Poor internet connectivity, low per capita income and a thin banking network are some of the factors that could thwart the cashless dream in the region. With a population of 45 million (2011 Census), there were 3,131 bank offices in the Northeast at end-September of FY15, according to the latest data with the Reserve Bank of India (RBI). Or, on average, a bank branch serves 14,500 people there. In comparison, according to World Bank data in 2014, India on average had 13 commercial bank branches for every 10,000 adults.
 
The geographical distribution of branches in the Northeast is highly uneven. A large number are in the urban areas. As for internet penetration, “in the Northeast, it is one of the weakest in the country, which renders the idea of a cashless society near-utopia”, said an executive of a public sector bank.
 
At the end of September 2014, the number of banked centres in the Northeast was 1,399; of these, 1,110 centres had only one bank office. The lowest concentration of branches was in Nagaland, with 55 banked centres, and 141 bank offices. “Branches are very spread out, especially around the tea gardens. We are looking at long-term solutions like VSAT and solar power to reach out,” said R K Takkar, chairman, UCO Bank.
 
Soon after demonetisation, the government had imposed an ambitious target of covering all tea garden workers under the fold of formal banking services. Rough estimates suggest banks were required to open close to 700,000 accounts by December 5. Not more than 35,000 accounts could be opened. “Tea gardens do not have any concrete data on the actual requirement. There is hardly any infrastructure for banking services to handle such a large number of payments,” said a banker from the region.
 
In the wake of the cash crunch after demonetisation, payments of tea garden workers were routed through the office of the district magistrate, till December 5. Now, with banks not being able to open the needed number of accounts for the workers, the next payments are due in a couple of days.
 
“Tea garden workers see banks as in unwanted intrusion, as they prefer dealing in cash. With an average monthly salary of close to ~3,000, there are hardly any savings and moneylenders are an active group,” said a PSB official.
 
Most financially excluded are Arunachal, Nagaland and Meghalaya. The number of Basic Savings Bank Deposit Accounts per 1,000 population in these states is around 100, against the national average of 300 by end-March 2015, according to RBI data.