Banks in state lag in financial inclusion

The banking sector in Karnataka is lagging in implementing the Reserve Bank of India’s (RBI) ambitious programme of achieving financial inclusion in all villages with a population of 2,000 and above. The banks in Karnataka, which are in the forefront of implementing the programme, have barely achieved 50 per cent of the target by the end of February, 2011, a top banker said today.

“As against the target of 2,253 villages to be covered by March 2011, the banks in Karnataka have covered only 1,121 villages with a population of over 2,000 so far. The shortfall in target relates mostly to regional rural banks (RRBs), which are presently in the midst of migrating to core banking solution (CBS),” Basanth Seth, chairman, state level bankers’ committee (SLBC) said.

Delivering a keynote address at the 116th meeting of SLBC, here, he urged the RRBs to take suitable steps and speed up the process so as to cover the maximum number of villages by March 31, 2011.

“Issues like connectivity, inadequacy of training and manpower at the field level, delay in issue and activation of smart cards among others were the chief reasons for the slow progress in achieving financial inclusion,” Seth said adding these issues require urgent attention.

Further, products like the savings bank accounts, remittances, entrepreneurial credit, micro insurance and others, should be made available to each account holder under financial inclusion, Seth, who is also chairman and managing director of Syndicate Bank, said.

The RBI has identified 3,395 unbanked villages in Karnataka to be brought under business correspondent (BC) model to achieve financial inclusion. So far, Kolar and Chikkaballapur villages have been fully covered under the BC model.

RBI governor D Subbarao, who was in Bangalore recently to review the progress of financial inclusion by banks in Karnataka, has directed all the banks to submit a concept paper on ‘meaningful financial inclusion’. All bankers need to deliberate on this crucial aspect and come out with their suggestions, Seth said.

While reviewing the performance of banks in the state as on December 2010, the SLBC chairman informed that the aggregate deposits stood at Rs 3,04,413 crore while aggregate advances were Rs 2,37,977 crore with a credit deposit ratio of 78.12 per cent. The advances to priority sector stood at Rs 1,03,302 crore, constituting 46.83 per cent of credit, surpassing RBI stipulation of 40 per cent.

Similarly, the advances to agriculture sector were Rs 45,843 crore comprising 19.26 per cent of the total credit, which is above the stipulated level of 18 per cent. Advances to MSME sector stood at Rs 37,545 crore as at December 2010.

Vijay Bhaskar, regional director, RBI, said the regulator has identified nine villages in Karnataka for adoption as model villages for financial inclusion and they will be showcased across the country to promote the novel concept.

He also urged the banks in the state to spread more awareness about the financial literacy.

During the meeting, a Kannada version of the book on “Inclusive growth through Business Correspondent”, brought out by Indian Institute of Banking and Finance, southern zonal office, was released by S V Ranganath, chief secretary, government of Karnataka.

M N Krishnamurthy, vice president, Indian Banks Association, briefed the house on “Swabhimaan”, the national level awareness campaign on financial inclusion.