The All India Regional Rural Bank Employees Association wants regional rural banks to have a greater autonomy in opening branches in the rural areas, and hence in the process of financial inclusion.
Recently, a working group setup by Reserve Bank of India (RBI) had recommended that “domestic scheduled commercial banks (other than regional rural banks) would now be free to open branches in Tier-3 to Tier-6 centres as identified in Census 2001 (with population up to 50,000) under general per mission”.
All India Regional Rural Bank Employees Association has strongly opposed the move.
According to Dilip Kumar Mukherjee, general secretary of the association, “The unfortunate part of it that the hypocrites in the working group has recommended that such proposal with the message from RBI to all banks that they need to focus on inclusive banking and should bring unbanked states and districts under the banking umbrella. All such so-called facility have been extended to all scheduled commercial banks excluding “Regional Rural Banks” meaning thereby that the Regional Rural Banks have nothing to do with the “financial inclusion”.”
The Rangarajan Committee on financial inclusion had suggested that, both deposit and credit data indicate that RRB branches in rural areas performed better in relation to other scheduled commercial bank branches, he said.
The committee had noted that this was significant from the point of view of financial inclusion as rural branches were closer and more active in extending outreach to remote and interior villages.
More From This Section
“Viewed from this angle RRBs are particularly well placed to achieve the goal of financial inclusion....With merger infusing the much needed financial strength in RRBs coupled with the local feel and familiarity they command, RRBs are in a unique position to play a decisive role in financial inclusion ” the committee had observed.
About 91 per cent of the total workforce in RRBs were posted in rural and semi-urban areas as compared to 38 per cent for other scheduled commercial banks.
Even in absolute terms, out of a total workforce of 179,423 deployed by all scheduled commercial banks in rural areas, RRBs share is 25 per cent (45,062), according to Mukherjee.
“This is significant considering that at all India level, manpower of RRBs constitute only 7 per cent of the total manpower of all scheduled commercial banks,” said.
As per NSSO data; 45.9 million farmer households in the country (51.4 per cent), out of a total of 89.3 million households do not access credit, either from institutional or non-institutional sources.
Only 27 per cent of total farm households are indebted to formal sources (of which one-third also borrow from informal sources). Thus, 73 per cent of farm households do not have access to formal credit sources.
Marginal farmer households constitute 66 per cent of farm households which are not indebted to either formal or non formal sources. Derived data also shows that only about 20 per cent of marginal farmer households access credit from institutional sources.
About 87 per cent of non-indebted farm households belong to Small and Marginal Farmer category, of which 70.6 per cent are Marginal Farmers.
Thus, marginal farmers who account for 66 per cent of farm holdings remain by and large excluded from the formal financial system and by rough approximation, only around 20 per cenr of these households access credit from the banking sources.
The Rangarajan Committee also points out, “About 64 per cent of households are not accessing credit from formal sources in the North Eastern, Eastern and Central regions. In these regions, only 19.6 per cent of farm households are indebted to formal sources (4.1 per cent in North-Eastern, 18.7 per cent in Eastern and 22.4 per cent in Central regions”.
Of all the scheduled commercial banks, RRBs account for 34 per cenr of branches in North-Eastern, 30 per cent in Eastern and 32 per cent in Central Regional whereas their presence is significantly lower (9 per cent to 17 per cent) in other regions.
“ RRBs are best suited to take up the leadership role in financial inclusion across priority areas in States of North Eastern, Eastern and Central Regional featuring high levels of exclusion,” said Mukherjee.
According to the working Group setup by RBI, any bank in the country excluding RRB can open any branch at any town having population up to 50,000 in the name of Financial Inclusion.
“It also means that all such banks are free to open their branches not only in the service area of the RRB but also at the same place where the RRB branch is already in existence. Other banks can open their branches through “business correspondent” or “business facilitator” just to suck the “rural deposit” and leave the “borrowers” of the villages to the clutches of NGO and MFI / NBFC,” according to RRB employees union.