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Micro branches to cater to rural areas

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The Union finance ministry has directed banks to set up ‘ultra small’ branches in all villages under the financial inclusion scheme by March 31. The plan is to provide a wide range of banking services, including credit transactions, in villages where only cash transactions are being provided by banking correspondents.

Such a branch, spread over just 100-200 sq ft, will be served by such correspondents, with regular follow-up visits by bank officials. A designated officer will visit the village in his area on a pre-fixed date and time every week, with the periodicity enhanced if the business volume justifies it.

Most banks are sceptical of opening branches in remote and rural areas, fearing the investment in these areas would not be commercially viable.Banks have been asked to request local bodies in these villages to provide the place to them free of cost, till the business grows to a viable level. The officer will visit the branch with a laptop, providing connectivity to the core banking system of the bank, so that various services such as verification of account balance can be provided. The officer will also collect applications for opening accounts, give loans of all types and do recovery follow-up.

The officer will not deal with cash transactions, these being handled by banking correspondents. This will enable people to avail a wide range of banking services, while also reducing the cost to the bank, said a finance ministry official.

Banks have already been advised to strengthen their rural branches so that adequate manpower is available.

Earlier the finance ministry had said while opening a regular brick and mortar branch in rural areas, after selecting the location, a branch manager must be posted at least six months in advance, to enable business development. It said the business plan of the rural branch must envisage profitability within two years.

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