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requiring minimum infrastructure for operating small customer transactions
and supporting up to 8-10 BCs at a reasonable distance of 2-3 kms (RBI, 2011:
86). This renewal of interest in the rural institutional structure in terms of
branch banking should go a long way in achieving the objectives of financial
inclusion, particularly expanding the credit base of farmers.
Given the option, the scheduled commercial banks would not like to
operate in rural areas. This has been proved clearly since March 1995 after
the disbanding of branch licensing policy and the granting of freedom to bank
boards to decide on their branch expansion programme. Since then, there
has been a reduction of roughly 3,000 rural branches instead of an addition
of at least 10,000 bank branches in rural areas under the erstwhile policy
weaknesses. This approach has, thus, spawned a serious institutional vacuum
in rural credit structure. Merging and strengthening of RRBs and allowing them
to open branches are a policy in the right direction, but then they can hardly
meet the branch requirements of vast areas of central, eastern and north-
eastern India. They are also financially and organisationally weak institutions,
whereas principal public sector banks have the necessary resources and
strength. As recommended by the Rangarajan Committee on Financial Inclusion
(GoI, 2008), the scheduled commercial banks have to re-introduce a definitive
programme of branch expansion in rural areas, particularly in districts where
population per rural and semi-urban branch office is much higher than the
national average (Ibid.: 4). Social pressures are beginning to bear fruit. It is
reported that SBI has opened about 481 new branches in rural and semi-
urban areas during 2008-09 and another 520 during 2009-10. In 2007-08
and 2008-09, there were opening of 525 and 591 new rural bank branches,
respectively, by all SCBs including RRBs.
The central government now seems to have gone to the other extreme of
pushing commercial banks to open more branches in rural areas. Inaugurating
the opening of 300 bank branches in a day in Uttar Pradesh on March 29,
2013, the largest number of bank branches launched in a single day in India.
Emphasizing that bank branches were important for financial inclusion an
increase in credit-deposit ratio, deposit mobilisation and credit growth, the
Union Finance Minister, P. Chidambaram, revealed on the occasion thus:
“The branches, belonging to 30 banks, are spread over 75 districts,
primarily in rural areas in UP. By March 2014, 2,700 branches would
be opened in the state to reduce the ratio of banks to population from
16,000 to the national average of 13,000. A total of 450 branches would
be opened in June, 600 in September, 750 in December and 900 in
March 2014.
