View: A look at banking presence and PM Modi's financial inclusion efforts

economictimes.indiatimes.com:

Reserve Bank of India has announced that Regional Rural Banks would be given more freedom to mobilise resources and to deploy them within their geographical boundaries. The RBI has highlighted that important forces boosting socio-economic growth are the financial activity of the banking industry. Rural development also means transformation of the rural population.

It is a strategic move, in line with the government’s aim to double farmers' income. But is that happening? The answer is ‘No’ because banks, except State Bank of India, have hardly ventured into rural India because of reasons ranging from poor connectivity to lack of business growth. Bankers say villagers are more keen on investing in real estate and commodities like gold and silver than putting cash in banks.

This imbalance in the rural credit system must end. Banks must be encouraged to open branches in villages. By providing financial services to rural areas, banks facilitate the growth of small businesses and spur economic development.

The shortage of bank branches and ATMs across the hinterland could hold back PM Narendra Modi’s financial inclusion efforts. In 2014, Modi had set a target to open abank account for every household to ensure welfare funds flow directly to the poor, while improving access to credit and insurance programmes. He pushed policies that helped bring 310 million people into the formal banking system in just four years, according to the World Bank.

Claims of banks that they are penetrating the hinterland are not matching with their records. These services are often slow to reach the rural population. The government has been making efforts to rope in banking correspondents in rural areas.