BANKS TO COVER 350,000 VILLAGES BY 2013: RBI

Around 350,000 villages across India would secure access to financial services offered by banks in the next two financial years, according to a plan banks have given to the Reserve Bank of India (RBI). RBI has asked banks to ensure that 223,473 villages have access to basic financial services by March 2012.

“Banks are still engaged in ecosystem development. Once that is done, banks said they would be able to scale up,” said K C Chakrabarty, deputy governor, RBI. Banks have been asked to include their financial inclusion performance when they evaluate the performances of their field staff, he added.

Chakrabarty said the number of ‘no frills’ accounts rose to 74 million from 50 million in a year in March, while the growth in no frills accounts with overdraft facilities has been sluggish. According to RBI, a ‘no frills’ account is one for which no minimum balance is insisted upon, and for which there are no charges levied if the balance is lower than the minimum balance permitted. Chakrabarty said opening no frills accounts was not enough to bring about financial inclusion. He said banks needed to strike a balance between opening branches and appointing business correspondents. “You cannot cover all services only through banking correspondents. You need to have brick-and-mortar branches, and that is why we have now made it mandatory that 25 per cent of the new branches have to be in unbanked villages,” he said. RBI had, in its annual policy, mandated banks to allocate at least 25 per cent of the total number of branches to be opened in a year to unbanked, rural centres.

In March, 99,840 villages were covered by banks, of which, 76,801 were covered through business correspondents.

SOURCE: http://www.business-standard.com/india/news/banks-to-cover-350000-villages-by-2013-rbi/437695/