Priority sector norms pose a tough task

RBI final norms indicate business plan will have to address how the bank proposes to achieve financial inclusion

While experiencing a “high” on the Reserve Bank (RBI) having opened  doors to allow new banks, the contenders have to keep in mind the tough task ahead to meet priority sector and financial inclusion norms.

RBI’s final norms show the business plan will have to address how the bank proposes to achieve financial inclusion, with the priority sector lending norms a stiff challenge. Public sector banks, with a wide network, are struggling to reach the mandated priority sector lending targets. The existing set of private banks face a lot many hurdles in expanding to reach those in remote places and later to continue service them, say bankers.

While the new banks might get five years to achieve the targets, there are many risks, including finding enough experienced hands for the task. However, the growing use of technology and business correspondents is expected to ease the work, said an official with the Indian Banks Association.

For non-banking finance companies wanting to convert into a bank, RBI has said a minimum 25 per cent of their branches will have to be in unbanked rural centres (population up to 9,999). They (NBFCs) could convert the existing branches in tier-II to tier-VI cities/towns into bank branches.

Asked about meeting the financial inclusion norms, Hemant Kanoria, chairman of Srei Finance, an NBFC, said it had a strong presence in rural areas through ‘sahaj kendras’ (about 28,000 of these). This will give an edge to reach people outside the ambit of financial services. It is among those having shown an interest in applying for a banking licence.