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Finance of the concerned State Government. Banks falling under the
category of having achieved 8% CRAR, declaring net profit for the last
three consecutive years, containing their NPAs within 15% of their
total advances and with a minimum of
`
100 crore as owned funds
have to prepare a Plan of Action for opening branches during the next
12 months. This has to be forwarded to the Reserve Bank for prior
approval after taking clearance from the concerned Board of Directors”
(RBI, 1997:42-43).
Emergence of Financial Inclusion as a Pivotal Policy and the Consequential
Impetus on Branch Banking
As brought out in a subsequent section, the phenomenon of financial
exclusion and the consequential neglect of rural areas and underdeveloped
regions, became a live subject and came into focus in many public policy
pronouncements around 2005-06 and thereafter. But, all programmes of
financial inclusion essentially focussed on providing access to the financially
excluded rural cultivator/non-cultivator households, financial products
such as “bank accounts, credit, remittances and payment services, financial
advisory services and insurance facilities” through the instrumentality of
‘agency banking’ rather than though directly present “brick and mortar” bank
branches.Even the branch banking policy commended by the Rangarajan
Committee on Financial Inclusion (GoI, 2008) had been ignored. Until recently,
there has been thus total reluctance to encourage commercial banks to open
branches in rural areas. Nevertheless, in an environment of social revulsion
against financial exclusion and physical targets set for financial inclusion,
commercial banks have been forced to increase branch banking in rural areas
too
albeit
gently and gradually. Thus, in five years between March 2007 and
March 2012, scheduled commercial banks opened 4,971 branches in rural
areas, i.e., 21.7% of the total 22,860 branches opened during the same period
(Table 9.1). RRBs have played a major role in this respect; in their case, near
50% of their branches opened during the period have been in rural areas, that
is, 736 (or 48.8%) out of a total of new 1518 branches.
Neglect of Branch Banking in Underdeveloped Regions after The 1990s
Three historically under-banked regions, also underdeveloped
economically, namely, north-eastern, eastern, and central regions, had received
special attention in the branch expansion programme of scheduled commercial
banks until the 1990s. These three regions accounting for about 50% of the
country's population, had about 25% of bank branches in 1969. By March
1992, their proportion of bank branches had shot up to 42.6%, that is, from
