Letters: The rural banking dream

This refers to the report "Govt banks' rural operations to turn profitable in five years: CRISIL" (November 18). The report builds an over-optimistic case for rural banking profitability based on a number of assumed positives. Expected annual business growth of seven per cent despite an expansion of nine per cent does not mean the growth is of profitable business. It may be the pass-through business of direct benefits transfers. Improvement in rural asset quality remains a mirage since agriculture land can rarely be sold and rural residential areas neither have maps nor can be mortgaged.

Dependence on business correspondents (BCs) for cost-cutting may not happen since half of over 300,000 BCs do not exist on the ground. It would be better if research agencies evaluate the rural ground conditions and focus on reforms for rural areas. Except for around 30 per cent of the developed rural areas, rural banking in India is light years away from becoming viable.

Y P Issar Karnal

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