The biggest challenge to the banks in this country for the next decade or more is to capture the banking business of 50% population of this country of over 120 billion. Financial exclusion is a serious concern for low earning household and small businesses located in semi-urban or rural India.

It is the lack of banking services to the people under poverty line. Around 240 million adults in the rural area do not have bank account today. The study of census has suggested that rural households that use banking services have increased from 30% to 54% from 2001 to 2011. But still 46% of the rural households are excluded from banking services.   2001 2011 Household Total no. of household Household availing banking services percent Total no. of household Household availing banking services percent Rural 138,271,559 41,639,949 30.

1 167,826,730 91,369,805 54.4 Urban 53,692,376 26,590,693 49.5 78,865,937 53,444,983 67.8 Total 191,963,935 68,230,642 35.5 246,692,667 144,814,788 58.

7  The RRBs, in most cases, seemingly have a mixed record of ‘successes’ on some fronts and ‘failures’ on some others in their business and attainment of goals. Major problems faced by regional rural banks are as follows:Lack of banking facility in the locality – Expansion of the Banks:The committee for setting up regional rural banks had suggested setting up five pilot banks in the first year at selected places on experimental basis which could be extended based on their performance. Setting up new regional rural banks at this fast pace in relatively short period of time created problems for concerned regional rural banks and their sponsored banks.  The pace of activities for setting up these new RRB’s have been forced from above which had to be accepted by sponsoring commercial Banks, State Governments and even the Co-operativesAt first, the location for branches in various districts was not selected in a co-ordinated manner at the State level, demarcating the areas of operations of the existing institutional credit agencies as was suggested by Working Group on Rural Banks. The other important test in rural banking expansion is the proportion of number of branches opened in relation to the number which was expected to be opened in the given time at unbanked centers.  There was no directive from the government in this regard but the expectation was that each regional rural bank will open 20 to 30 branches in first year of its operation and another 20-30 in second year of operation to reach the target of 50-60 branches in ‘underbank’ centers of its operation.

This branch expansion target wasn’t able to achieve by Regional Rural Banks. 

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