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Ferrying digital banking to Lakshadweep
The Union Territory of Lakshadweep is rarely in the news. A remarkable development on the banking front has silently taken place in these far off island.

It is a unique case, where not only the island economy is monetised but its banking also is digitised. These islands, isolated as they were, could see banking activities only in 1971.

Money was not a medium of exchange here till the 1930s. British economist Prof. D H Robertson, who visited these islands in 1931, recorded his impressions in an article, A Visit to Laccadive Islands. Observing the prominent prevalence of barter, he wrote: “rice is not bought for money, but is bartered by the Government, at a fixed rate of interchange, for coir or coconut hair, which is the staple product of the islanders.”

When the Lead Bank Scheme was introduced in 1970, Lakshadweep was allotted jointly to Syndicate Bank and Canara Bank. While Canara Bank was unwilling, Syndicate Bank took the sole Lead.  I must say that I had a role in Syndicate Bank’s entry into Lakshadweep.


Entry of banking

Syndicate Bank opened the first branch at Kavaratti in 1971 and now it has nine branches in different islands and ten ATMs in these branches. Two other public sector banks, State Bank of India and UCO Bank, have also opened offices here and have four ATMs. One of the private sector banks, Yes Bank, also has a branch and an ATM. The total number of branches of the four banks is 12, and all of them are under Core Banking Solutions.

The total deposits mobilised by these banks in the islands are Rs.6635 million as on December 2014. The number of deposit accounts served by the banks is 73,286 as on March 2013, of which savings bank deposit accounts are 68,468.  For a population of 64,429 (Census 2011), the total number of savings bank accounts of 68,468 (Data of 2013) is very high.

A bulk of the deposits is from the household sector.  According to data published by the Reserve Bank of India, 77 per cent of the deposits in these branches are owned by families. Evidently saving habits - investing in bank deposits - have visibly grown in the households. It is indeed a long journey towards monetisation from the barter economy of 1931.


Financial inclusion

One more interesting feature of banking development in these colourful islands is the notable progress made in financial inclusion. According to Census 2011, out of 10,703 households in Lakshadweep, 9127 families have availed banking services. The percentage of households availing banking facilities at 85.3 is one of the highest among all the states (The All India average is 58.7 per cent). In some of the smaller states in the north-east, this ratio is much lower: Manipur 29.6 per cent; Nagaland 34.9 per cent and Meghalaya 37.5 per cent. Surprisingly, Andaman and Nicobar Islands have a better record, at 89.3 per cent.

It must be admitted that banking penetration into these far off islands would not have taken place but for the nationalisation of banks. Whatever may be the other outcomes of nationalisation, positive or negative, this is a tangible development.

The author is a former CMD of Syndicate Bank

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