Govt asks banks to open 15,000 branches in FY21

BE/RBINOTE/4/2020

In a challenge to meet its financial inclusion agenda, the federal government has provided the lenders a list of location wise branches to be opened by both state-run and private banks, three people aware of the development said.

• Lenders including State Bank of India, Bank of Baroda, HDFC Bank and ICICI Bank will open 14,000-15,000 branches in the coming year to reach the unbanked as per a government directive.
• It is learnt that the mandate from the finance ministry is to open a branch within 15 km radius of a village where there are no banking facilities available.
• Other issues are
  • The branch opening has to be as per the locations provided by the ministry.
  • While large state-run banks like SBI will have to open nearly 1,500 branches, their private peers have been asked to open 600-700 branches each.
  • The list includes villages and panchayat regions where there are no bank branches so it can push cheap credit to the unbanked.
• As of March 2019, India had more than 120,000 branches and a little over 2 lakh ATMs, data showed and of these, only 35,649 branches are in the rural areas.
• RBI data on financial inclusion suggests that including regional banks’ outlets in rural locations reached over 52,000 at the end of March 2019, which means a growth of mere 3% over 2018.
• For banks, a branch in a metro city becomes profitable in two years, while a rural branch breaks even in four years.
• Also, with the RBI allowing easier branch-opening and functioning rules, branchless outlets in rural areas have clocked nearly 5.5 lakh.
• The share of business correspondents in total banking outlets in rural areas have clocked nearly 5.5 lakh.
• The share of business correspondents in total banking outlets in rural areas remains around 91%.
• Further, the Government wants banks to reach unbanked areas and replace informal credit with formal credit, and thus ensure to bring down borrowing rates for the rural folk who still rely on money-lenders
• An official added that we can have branches that can be left open for at least 4 hours per day for 5 days in a week manned either by business correspondents or by bank officials.
• In a bid to take banking services to the remote locations of the country, the RBI in 2017 permitted the opening of mini branches or banking outlets across the country without having to take permission from the regulator on a case-by-case basis.