Ad Here  
August
September
October
November
December
January
 
 
Emerging crisis Aadhaar, niraadhaar and banking Greet Lakshmi the banking robot Small finance payment banks... New capitals of Migrant banks It’s a war on black money, support it. Why any time money? Reaching out: is it slowing down? Big bank merger, bigger expectations Monetary policy continues to adopt dis-inflationary path Fund healthcare clinics in villages... Thirty more cities seek to become SMART A development bank for BRICS Stage set for Indian ‘avatar’ of foreign banks Targets continue to be ad hoc Reaching the Unreached… Nothing much can happen…. A bank for women, by women LVB- A supermarket of financial services Drop in SLR- sparing lendable resources Bank deposits account for 46.3 per cent of household savings Mega merger is on Needed a Banking Atlas The collaboration suite of cyber criminals Growing volume of stressed assets… Ernakulam excels... From lazy banking to easy banking Hesitancy in announcing year-end results Too big to fail and too small to sail Merger mania haunts banks Small finance banks offer high interest rates New bank licences, at last... Rationalised Small is ‘more’ beautiful A new development bank rising in the east… Another route for achieving financial inclusion Drastic decline in asset quality Who is the real beneficiary? Smart banking in smart cities Lacklustre credit expansion Banking overhauling or reorganisation? How ‘secure’ are the secured loans? Banking in Telangana Anytime banking to anywhere banking Managing NPAs... Cautious and considerate One down in private sector Why priority status? Grows Bigger Good, bad and ugly Well-lived... Growing gainfully Banking on Risk Governance in Reverse Gear? Capital base of regional rural banks raised Cut in repo rate – lower than expected Indian customers are tech savvy What is the priority – mergers or NPA reduction? Bottomlines shrink, bad loans rise... Just 660 days! Target over-ambitious... Two banks: their jubilees and performances Insatiable appetite for credit How okay are new banks? The paradox: clamour for the Goliath and David Ferrying digital banking to Lakshadweep Payment banks have arrived Financial inclusion vs unclaimed deposits Holy or unholy? Cradle of banks to a smart city... Perhaps small is more beautiful than big! All that glitters is not gold... United India Insurance - Rs 110 crore losses have been claimed till now due to floods in Tamil Nadu
 
How okay are new banks?
If the idea behind fostering new banks is to improve access to banking services, it would be difficult for the new entrants to achieve that goal.

WHETHER THE NEW banks would be willing to go to the under-banked districts in the backward states is a major issue that the regulator must address before granting licences. True, the new policy guidelines indicate that the banks have to locate 25 per cent of their branches in rural areas. But since they would be more concerned about profits, it is difficult to visualise as to how effectively they would extend the geographic coverage.

 

Inevitability of rural presence

A financial daily, in its editorial has gone to the extent of declaring that it is absurd to direct the new banks to go to rural areas. The absurdity of this assertion is due to the ignorance about the changes taking place in rural India. Census 2011 reveals that rural India is not merely Bharat, which is devoid of economic development, but a small segment of Nava Bharat is also emerging in many villages. According to some industry-estimates, the share of rural India in the sales of two wheelers is 40 per cent; sales of fridges and TVs -35 per cent; in car sales it is 22 per cent; and in cosmetics and soaps it is 20 per cent. There are bankable households in many regions of rural India and their number is also slowly increasing.

There are 62 gramin banks operating in villages, with a total number of 17,856 branches, all of them have migrated to CBS platform. Out of these banks, only one, namely Nagaland Rural Bank, is in the red. The biggest bank among them, Uttar Bihar Gramin Bank, has 1001 branches in the BIMARU state. The strongest of them Karnataka Vikasa Gramin Bank has made a net profit of Rs194.58 crore, with a zero net NPA ratio in FY2013. Rural banking is no more an unremunerative venture. It requires proper approach with a suitable frame of mind.

There is  need for more banks to meet the growing demand for achieving financial inclusion in a time bound programme.  As vast majority of Indian population remains beyond the reach of the present banking sector, new banks are required to be set up specially in the rural areas of under-banked states. At least one of them should be located in the north-east.

 

Eligibility for acquiring licence

The eligibility to obtain the banking licence should be based on the track record of the applicants and their performance in discharging their corporate social responsibility in the past. They should have a genuine concern for rural development besides making big profits from urban operations. A veteran banker has made a strong plea recently, arguing that licences should not be given to industrial houses. There is some force in his arguments, which are based on the past experience. Exceptions, however, can be made.

Micro finance companies may be avoided, as some of them are known for their exploitation of the poor. Charging exorbitant interest rates under the munificent concurrence of the regulator, they have exploited the hapless borrowers.

It may be added here that two of the gramin banks operating in Andhra Pradesh are topping the list in terms of the profits earned. They are sponsored by two public sector banks and their interest rates are 50 per cent of what the local micro finance companies were charging. They have proved that the poor can be served effectively without incurring losses.  

 

Action plan of new banks

The new banks should be in a position to comply with the RBI’s mandate of opening branches in under-banked centres. What is more suitable is the branchless banking model. Adopting the tech route for reaching out to the unreached would not be a difficult task for any dynamic corporate entity. If some of the FMCG industries could successfully expand their rural market segment by adopting IT, it should be possible for the  new banks too to do so, to carve out for themselves a lucrative market segment in rural India.

Prompt and better services are expected from the new banks, besides innovative products.  White-label ATMs and the branchless banking models may be adopted to reach out for covering wider areas. Straight-jacket services should be replaced by need-based services by the new banks.

Author :
Reported On :
Sector :
Shoulder :
RELATED NEWS
ABOUT IE
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
 
PRIVACY POLICY
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
TERMS AND CONDITIONS
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
 
CONTACT US
S-15, Industrial Estate,
Guindy,
Chennai - 600 032.
PHONE: +91 44 22501236
EMAIL: indecom1968@gmail.com