RBI commissions banks to set up operations in rural areas by Dec 31

Reserve Bank of India (RBI), India's apex bank has directed the conveners of state-level bank committees to extend their operations to the rural centres of the country. RBI commissioned the banks to set up at least one banking outlet equipped with core banking solution in rural areas with population over 5,000, by December 31, 2017.

Eliminating the plans to set up traditional bank branches, the central bank introduced the concept of banking outlets in the previous month, sanctioning the launch of fixed point service delivery unit manned by bank staff or business correspondents for minimum of four hours a day, on five days. These outlets will offer deposit taking facilities, along with cash withdrawals, cheque encashment and money lending.

According to a report, nearly 780 million rural population is devoid of proper financial services due to high cost of conventional banking with costly operations and higher cost of setting up branches in rural regions, coupled with illiteracy and lack of awareness among the rural population.  

While the elaborate requirements of asset deeds, identity and income proofs also contribute to a lower level of financial inclusion in rural areas, impending the realisation of financial inclusion.   

However government initiatives like compulsory UIDAI and Pradhanmantri Jan Dhan Yojna have improved the situation of late. The Pradhanmantri Jan Dhan Yojna, bidding to intensify the financial inclusion revolution in the country, has added 3.9 crore beneficiaries to the banking sector in rural and semi-rural regions.

Financial inclusion in the country is likely to increase further due to RBI’s directive to the banks to extend banking operations to rural areas, more so as the apex bank will be monitoring the developments on banking outlets on a quarterly basis.

At the time of writing this report, during intra-day trading hours of June 9, 2017, BSE Bankex was trading flat at 26708.32, up by 0.10 per cent, while BSE Sensex was trading negative at 31,147.88, down by 0.21 per cent.