Govt gets proactive on financial inclusion

Most of the country’s 100 blocks without a bank branch are in the North-East.

In a bid to take banking services to the remotest parts of the country, the government has asked banks to open at least one branch in each of the 13 unbanked blocks outside the North-East region.

There are about 100 blocks in the country without a bank branch. Of these, 87 are in the North-East. The rest are mainly in Bihar, Jharkhand and Jammu & Kashmir.

To begin with, the government wants to cover at least these 13 blocks. “We are eager to have at least one branch in every block. We have taken up the matter with the states concerned and the lead banks. The banks and the states will provide the basic infrastructure for opening these branches,” said a finance ministry official.

The branches could be set up by the lead bank or the regional rural banks. The Reserve Bank of India (RBI) assigns lead banks for specified areas to promote banking services. These have a strong presence in their regions.

Banks are generally reluctant to open branches in remote areas due to their unviability. So, the goverment has kept aside Rs 100 crore in the current year as a one-time grant to ensure that banking services reach every block.

The official denied any other incentive from the central government to banks opening branches in unbanked blocks. He said RBI had already launched a scheme to provide assistance to banks opening branches in unbanked areas of the North East. Under the scheme, RBI provides viability gap funding for three years for opening branches in unbanked areas in the North-East, with the backing of state governments. So far, only Meghalaya has opted for this scheme. Punjab National Bank is opening a branch in the state. The central bank is piloting the scheme. If successful, it may be implemented in other parts of the country.

The number of bank branches in the country has gone up by 18 times in the last 40 years. As against 4,600 branches in 1969, there are now over 82,000 branches, including those of private banks. Bank branches have grown around 5 per cent annually in the last three years.