Six districts are underbanked in Karnataka

RBI directs banks to launch campaign for opening at least one bank account for one family in every village

The State Level Bankers’ Committee (SLBC), Karnataka, has identified six districts in the state as underbanked districts. The districts are Bidar, Bangalore rural, Chamarajanagar, Gulbarga, Koppal, and Raichur. It has initiated steps to open bank branches in these districts before September 2012 as directed by the Reserve Bank of India (RBI).

According to the SLBC, 40 villages have been identified in these districts with population of 5,000 and above for opening bank branches. Till now, branches have been opened in eight villages as of April 2012 and in habitations of 10,000 and above, one village (Kurekoppa in Bellary district) has been identified and allotted to the State Bank of Mysore for opening a branch before September 2012.

Announcing this at the 121st quarterly review meeting of the SLBC, its convener and chairman and managing director of Syndicate Bank M G Sanghvi said, “Wherever full-fledged branches are not found to be viable, ultra-small branches can be opened wherein premises with an area of 100-200 sq ft may be obtained from the Gram Panchayat office or other government building free of rent. The Business Correspondent will function everyday and one designated officer has to visit at least once a week with a laptop and VPN connectivity to complete the customer-related activities.”

The Department of Financial Services (DFS), Ministry of Finance, issued guidelines in October 2011 to banks for opening branches in villages with population of 5,000 and above before September 2012.

Sanghvi said, under the extant policy of the RBI on branch authorisation, prior approval of the regulator is not required to open branches in Tier 3 to Tier 6 areas. In fact, opening of branches in the underbanked districts of the underbanked states would entitle the banks to seek branches in Tier-1 towns under their Annual Branch Authorisation Plan. Such a branch would be assigned a service area by the SLBC covering one or more gram panchayats.

While planning for branch expansion, it may be seen that in the unbanked areas, the branches are available within a radial distance of five kms. Further, the Ministry of Finance, in their letter to banks on March 20, 2012, informed that in underbanked districts, all unbanked villages with a population of 5,000 or more need to have a bank branch irrespective of the existence of a bank branch within a radius of five kms. However, banks can start with an Ultra Small Branch (USB) in these villages and then convert it into a full-fledged branch.

Meanwhile, in a communication to banks on May 15, 2012, the department of financial services directed all the public sector banks and regional rural banks to launch a campaign for opening at least one bank account for one family in financial inclusion villages.

Each bank will launch a campaign to ensure that each family living in the service area of a branch having villages attached to it has an account with the branch. If the family already has an account, no new account needs to be opened, DFS said.

During the campaign, people may be motivated to open accounts in banks considering that banks are already on the Core Banking Solution and electronic transfer of subsidies to the account of the beneficiary and its withdrawal through the a huge network of branches / ATM / micro ATMs will be convenient.

DFS has also directed the PSBs and RRBs to report strict compliance to the SLBC.