Wednesday, August 18, 2010

A new battleground

Jangipur – a relatively unknown name (except for the fact that it is Finance Minister Pranab Mukherje’s constituency) – has all of a sudden become the preferred destination for initiatives aimed at financial inclusion. With RBI allowing domestic banks to open branches in Tier 3 and Tier 4 cities (with population below 50,000) without prior approval, small town India is warming up to the new banking battle. The private sector banks are drawing plans to attack public sector banks (PSBs) in their backyard – rural India – by opening hundreds of new branches. The initiative makes great business sense for the new age banks as the business growth from rural and semi-urban branches is over 40% compared with 30% from urban area branches. Over half a million farmer households still do not have any access to credit from financial institutional sources and private sector banks are well poised to cash in the very concept of financial inclusion. So are the PSBs feeling threatened?

J. M. Garg, CMD, Corporation Bank, says, “We compete with them (private and foreign banks) in urban areas and still grow very healthily, why should their entry in rural areas worry us?” While the efforts of bankers (particularly PSBs) in opening branches in Jangipur are praiseworthy, their counterpart, the private sector banks, are perhaps targeting the remaining 6,00,000 odd villages.

Gyanendra k. Kashyap
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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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