Financial inclusion: RBI allows banks to front-load rural foray

Mumbai: Banks which exceed the target of opening branches in rural areas in a year, will be allowed to carry forward the additional number to the next fiscal, RBI has said.

According to the existing annual branch expansion plan norms, banks have to open 25 per cent of their new branches in unbanked rural areas. Those banks crossing the 25 percent annual target will be allowed to carry forward the excess number of branches to the next two years over a three-year cycle, which will be co-terminus with the financial inclusion plan, the RBI said in its annual policy statement.

[caption id=“attachment_755111” align=“alignleft” width=“380”] Rural banking[/caption]

“Banks are advised to front-load the opening of branches in unbanked rural centres over a three-year cycle co-terminus with the financial inclusion plan. “Credit will be given for branches opened in unbanked rural centres in excess of the mandated 25 per cent in a year which will be carried forward to the subsequent year of the inclusion plan,” RBI Governor D Subbarao said while announcing the annual monetary policy on Friday.

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Detailed guidelines will be issued by the end of June, the central bank said, adding however, this leniency will be co-terminus with the financial inclusion plan. The move is part of the monetary authority’s financial inclusion drive, which also saw the bank extending the lead bank scheme to all the urban centres.

Explaining the rationale, the Governor said, branch expansion in rural areas is essential to address the existing asymmetries in achieving financial inclusion. The RBI further said, the move is aimed at facilitating speedier branch expansion in unbanked rural centres for ensuring seamless rollout of the direct cash benefit scheme the government.

PTI