About four years ago, the then Reserve Bank of India (RBI) governor Yaga Venugopal Reddy visited the four northeastern states - Meghalaya, Assam,Nagaland and Tripura. It was not unusual for a governor driven to do it. But this visit was special. It was the first time that a solution Reddy about the reasons for the sad state of banking in the Northeast.
Something that led him to delegate a key lieutenant - RBI Deputy Governor Usha Thorat - to develop a plan for financial services development in the region on a war footing.
Never before had RBI came so conscious of the coast against incursions by banks in Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim.
The challenges are many - the difficult terrain, living areas on the distance to the many logistical bottlenecks cum communication, not to mention the problem of insurgency. All have stifled economic development and banking sector in recent years.
It was an attempt to overcome these obstacles, the Commission lawyer Usha Thorat largest IT adoption rates and use of intermediaries such as business correspondents and business facilitators to serve people in remote areas. And the good news is that banks - public sector banks (PSB), and the new generation of private actors - has made a conscious effort to put the Northeast on his map of the expansion after dictation RBIs.
Since then, the total number of bank branches has been a sharp increase. In a sub-1900 level as in June 2005 that the region now has about 2,100 bank branches. In addition, banks are taking the route of mediation and support of IT-enabled biometric card to penetrate deeper pockets.
From a purely business perspective, would an extension of the financial activities of the Northeast has been profitable, due to lack of banking institutions there. Even today, the bank branches in the region, covering an average population of around 21,000.
According to the prescription of Reed Business, the average population per branch should not ideally be more than 10,000. But the problems the banking growth was blocked by the lack of economic activity beyond the usual problems such as infrastructure and rebellion. The scene seems to be changing rapidly.
Indeed, public funds seem to be pouring in thick and solid in this region. "This usually increases the potential for banking business," says Satish Chand Gupta, Chairman and CEO of United Bank of India (UBI), which has a better presence in the region, with 250-odd branches. UBI experience showed that the region is a goldmine in the form of low cost current and savings deposits. Mobilization of deposits, directly increases the profitability of a bank.
So much so that banks have started to make a straight line with a proposal to extend their foorprint in the region. Big guns, like the State Bank of India, United Bank of India, Allahabad Bank and UCO Bank added 55 branches between them over the next six months to take its total number of groups to 1039th.
SBI has 550 ATMs in the region, and adds additional 500th It is the use of intermediaries such as Grameen Services India as business correspondents. It has another 300-business facilitators also curious as arm's length to provide minimum banking services. Search of low cost deposits have also produced private actors as Axis Bank and HDFC Bank.
Even the small Kerala-based South Indian Bank, which has only two branches - in Guwahati and Agartala each - signed a plan to open four additional branches of their standard agrressive.
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