....“Right now, rural banking is not viable because the government is pushing it as a social responsibility. People in rural areas withdraw almost the entire amount and still prefer to transact via cash. Banks make money via transaction fees,” said Parekh. The numbers tally will RBI estimates, which suggest that only 2% of no-frills account holders have used the overdraft facility offered with these accounts. At the end of March 2013, only 40 lakh accounts availed the overdraft facility out of 18.2 crore accounts, shows RBI data..........
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Profit and financial inclusion do not always go together. Banks cross-hold risks and transfer mechanism takes care of the entity's profit. What really holds up the functioning of rural branches is the placement of personnel and HR policies of banks that have not moved in tune with the requirements of rural branches. While working in rural branches, it is knowledge of banking and systems coupled with moving with the culture of the rural areas that would yield dividends. No branch from day one would not run on profit. There is always a cooling period. This could be five years in some centers and three years in some others. The other alternative is invest in technology up gradation of Primary Agricultural Credit Societies, invest in HR practices, adopt some of them and increase the reach. This would help in cleaning up the grassroots rural credit institutions and empower them with technology and higher human skills with cross-fertilization from the commercial banks. This would hasten the financial inclusion goals of PSBs and it is the least cost option in the long term.
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