Govt asks banks to open 15,000 branches in FY21
MUMBAI: In a scramble to meet its financial inclusion agenda, the federal government handed lenders a list of location wise branches to be opened by both state-run and private banks, three people aware of the development said.
Lenders including State Bank of India, Bank of BarodaNSE -0.46 %, HDFC Bank and ICICI BankNSE -0.64 % will open 14,000-15,000 branches in the coming year to reach the unbanked as per a government directive. “The mandate from the finance ministry is to open a branch within 15 km radius of a village where there are no banking facilities available,” said a banker who was part of the meeting where the finance minister handed over the responsibility. “The branch opening has to be as per the locations provided by the ministry.” While large state-run banks like SBINSE -1.86 % have to open nearly 1,500 branches, their private peers have been asked to open 600-700 branches each. The list includes villages and panchayat regions where there are no bank branches so it can push cheap credit to the unbanked.
As of March 2019, India had more than 120,000 branches & a little over 2 lakh ATMs, data showed. Of these, only 35,649 branches are in the rural areas.
RBI data on financial inclusion suggests that including regional banks’ outlets in rural locations reached over 52,000 at the end of March 2019, a growth of mere 3% over 2018. For banks, a branch in a metro city becomes profitable in two years, while a rural branch breaks even in four years.
But, with the RBI allowing easier branch-opening and functioning rules, branchless outlets in rural areas have clocked nearly 5.5 lakh. The share of business correspondents in total banking outlets in rural areas remains around 91%. “Government wants banks to reach unbanked areas and replace informal credit with formal credit, bringing down borrowing rates for the rural folk who still rely on money-lenders,” another private sector banker who was part of the meeting, said. “We can have branches that can be left open for at least 4 hours per day for 5 days in a week manned either by business correspondents or by bank officials.” In a bid to take banking services to the remote locations of the country, the RBI in 2017 permitted the opening of mini branches or banking outlets across the country without having to take permission from the regulator on a case-by-case basis.