Only one new bank in the public sector, Bharatiya Mahila Bank, had entered the banking scene last year. During this period the total number of banks have declined by 10. Eight banks in the private sector have been merged with other banks; and two banks in the public sector have merged with State Bank of India.
The recipients of the in-principle new licences are: Infrastructure Development Finance Co Ltd, a Mumbai-based non-bank financial company that specialises in infrastructure lending and Bandhan Financial Services Pvt. Ltd., a microfinance organisation based in Kolkata.
Within the next 18 months, they are expected to open branches in conformity with the branch licensing policy of the Reserve Bank and also adhere to the credit pattern prescribed. In all probability, initially they may flock to the major cities to establish their branches to gain visibility and also to get a share of the banking business in the top banking centres. Bharathiya Mahila Bank has already shown the way by opening branches in a few state capitals.
All banks have exhibited a tendency to rush to the top 10 banking centres, despite higher cost of operations. These centres are state capitals, with the single exception of Pune. Despite all, the forced spatial expansion of bank branches, 12 per cent of the bank branches are located in these 10 centres. They generate 47 per cent of the total deposits and 60 per cent of the total credit, as on September 2013.
In the next 90 banking centres, which include many state capitals and industrial towns, quantum of credit lent is only 17 per cent of the total, where 14 per cent of the branches are operating.
The next 100 centres could attract only 5 per cent of the total branches and could disburse 3.6 per cent of the total credit. They are all potential centres, not adequately nurtured by the banking sector. Will the new banks care to begin their innings from some of these centres?