Inclusion net spreads: banks set to fan out to small villages

So you thought bankers were only for blue-suited businesspeople, big farmers and urban consumers? Think again, reports Mahua Venkatesh.

So you thought bankers were only for blue-suited businesspeople, big farmers and urban consumers? Think again.

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State-owned banks will soon chalk out roadmaps to ensure that every village with a population of 2,000 and above is provided with a bank branch or a business correspondent – an authorised agent who can carry out banking activities on behalf of a bank.

A senior government official told Hindustan Times that the progress of the project would be closely monitored, as bankers fan out in the hinterland to cover as much as possible of India’s 600,000 villages.

Finance minister Pranab Mukherjee is likely to make an announcement to this effect in his budget this month, underlining the UPA government’s message of inclusive growth. Government sources said that the minister is keen to expand the scope of financial inclusion.

This is important for policy-makers, who have been concerned over issues such as a spate of suicides by debt-ridden farmers. The benefits of the Rs 70,000 crore farm debt relief package the government announced in 2008 did not reach many farmers as they had no bank account and had borrowed from local money lenders.

The project to extend banking to even small villages is expected to be over by 2014.

At present, as much as 50 per cent of the rural households are outside the banking net – a situation policy-makers often describe as that of an “underbanked” economy. Compare that with developed countries such as the UK, where only 5 or 6 per cent of the population does not have bank accounts.

“Opening a bank branch may not translate into opening of bank accounts but our first step is to ensure that there is some kind of banking network in the villages and then the next step would be to lure more and more households to put their money in banks,” the official said.

The move would also ensure that people do not have to travel for 20-30 km to have access to a bank account, he added.