RBI to Fund Branches in The Northeast

By Suneeti Ahuja Kohli

New Delhi, Jun 29 : To encourage banks to set up brick-and-mortar branches in the Northeast, the Reserve Bank of India has decided to part-finance the cost.

According to estimates of various bankers, Rs 20 lakh to Rs 25 lakh is the cost of opening a branch in the Northeast. There are 90 ‘unbanked’ blocks in India; around 80 are in the Northeast, the rest in Jammu and Kashmir, Jharkhand, Chhattisgarh and Bihar.

“This is part of the special package announced by the Reserve Bank. Banks have been asked to open branches falling in cities that have population between 2,000 and 5,000. Banks are expected to cover all the ‘unbanked’ areas in the country in the next three years. We have a plan and it would be worked out in phases,” said a senior official of a public-sector bank.

“Yes, this is one of experiments that we had initiated. We have already auctioned a few blocks in the northeastern region,” said the RBI spokesperson.

According to the Reserve Bank data, of the 600,000 habitations in the country, only 5 per cent or about 30,000 habitations have a commercial bank branch. Less than half the population, at 40 per cent, have bank accounts, and this ratio is much lower in the North-east. Debit card holders comprise only 13 per cent of the population and credit cards are used by 2 per cent.

“Even where bank accounts are claimed to have been opened, verification has shown that a significant portion of these accounts are dormant. Very few conduct any banking transactions and even fewer receive any credit.

Millions of people across the country are thereby denied the opportunity to harness their earning capacity and entrepreneurial talent, and are condemned to marginalisation and poverty,” RBI governor D Subbarao had said last week at an event in Hyderabad.

The regional spread of branches of scheduled commercial banks is skewed towards southern India.

Of the total bank branches in the country on June 2009, 28.1 per cent are in the southern part of the country, almost 20 per cent in the central part, 17 per cent in the north, 16 per cent in the east, 15.5 per cent in the west and a meager 2.7 per cent in the Northeast.