Just 6.4% of branches owned by new private sector banks are in the rural areas
Finance Minister Pranab Mukherjee wants to extend the geographic coverage of banks and told the Lok Sabha during his Budget speech that the central bank was considering allowing more private players in banking.
An analysis of Reserve Bank of India (RBI) data, however, raises doubts on whether the finance minister’s hopes of more “geographic coverage” can be met by allowing more private players.
As on June 30, 2009, the seven new private sector banks had 275 branches in rural areas, or just 6.4 per cent of the 4,264 branches they have. Metropolitan cities account for 35 per cent and urban centres 32.6 per cent of the total number of branches.
Compared to this, 34 per cent of the total public sector bank branches are in the rural areas. State Bank of India and its associate banks have 5,609 branches in rural areas, or 34.5 per cent of 16,260 branches, and all other public sector banks, except IDBI Bank, have 13,303 branches in rural areas, which is 34.2 per cent of the total number of 39,095 branches. IDBI Bank, which is considered a new generation bank with the government as majority shareholder, has a 10 per cent branch presence in rural areas.
Among private sector banks, ICICI Bank has the highest branch network in rural areas. According to RBI data, till March 31, 2009, the largest private sector bank had 138 branches in the rural areas, or 10 per cent of its 1,409 branches.
HDFC Bank and Axis Bank, the second- and third-largest private sector banks, have 67 and 30 branches in rural areas out of 1,408 and 786 branches respectively.
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RBI defines rural areas or Tier-3 to Tier-6 cities as those with a population of less than 49,000.
The regulator stipulates new private sector banks to ensure that at least 25 per cent of their total branches are in semi-urban and rural centres on an ongoing basis.
| ROOT & BRANCH DISTRIBUTION OF BANK BRANCHES | ||||
| Data till June 30, 2009 | Rural | % to total | Metro | Total |
| SBI group | 5609 | 34.5 | 2650 | 16260 |
| Nationalised banks | 13363 | 34.2 | 8244 | 39095 |
| New private sector banks | 275 | 6.4 | 1484 | 4264 |
| Data till March 31, 2009 | ||||
| SBI | 4366 | 38.1 | 1773 | 11472 |
| Punjab National Bank | 1881 | 43.5 | 702 | 4327 |
| ICICI Bank | 138 | 9.8 | 410 | 1409 |
| HDFC Bank | 67 | 4.8 | 548 | 1408 |
| Axis Bank | 30 | 3.8 | 253 | 786 |
| Source: RBI | ||||
In October, the RBI liberalised the bank branch licensing policy by allowing Indian banks to open branches in Tier-3 to Tier-6 cities without prior regulatory approval, a move aimed at spreading banking services across the country. Banks were asked to plan their expansion in Tier 3 to Tier 6 centres in such a manner that at least one-third of these branches are in under-banked districts of under-banked states.
RBI has not issued new bank licences since 2004.