Kerala added another first to its credit last week when it became the first state in India to have banking facility in every village. It achieved the unique distinction with banks opening either ‘brick and mortar’ branches or appointing customer service providers in 127 villages without bank branches.It came four years after the state attained total banking by providing at least one bank account to every family. Under the total banking programme, families without bank accounts were provided with “no-frills accounts”, a pass book and an automated teller machine (ATM) card. With these, Kerala has marched close to the target set by the Reserve Bank of India for financial inclusion, which is the delivery of banking services at an affordable cost to the poor, the disadvantaged and the low-income groups. The financial inclusion that the state has achieved is confined to providing merely a bare minimum access to a savings bank account without frills. The state has to go a long way in achieving the larger objective of ensuring easy credit to the poor. Taking the banking service to every family in the state has not been a difficult task since a vast section of the population had availed the banking service due to high literacy and large scale migration. The families of the migrants, who number over two million, are forced to maintain savings accounts since they get remittances through banks. In fact, the banks have been wooing the NRI customers by opening branches in all major migrant pockets. Kerala witnessed a sporadic increase in the bank network following nationalisation of banks in 1969. The state accounted for 5.3 per cent of the total number of offices of the commercial banks in India in 1987. In addition to the commercial banks, Kerala also has large number of cooperative banks and non-banking financial institutions, mobilising deposits and disbursing credits. The state at present has 3.6 cooperative institutions in each village. As a result of these, the average population per branch in Kerala came down steadily over the years. It stood at 10, 000 in 1996 as against 15, 000 in the whole country. The savings in the state is also high compared to other states. The deposits in the commercial banks alone crossed the Rs1.5-trillion mark by the third quarter of 2010. About 30 per cent of this is non-resident deposits. These provide the right infrastructure for targeting higher financial inclusion in the state but sadly the performance of the commercial banks in credit disbursement has been very dismal. There has been a sharp decline in the credit-deposit (CD) ratio of the commercial banks in the nineties. The CD ratio declined from 64.77 in March 1988 to 44.9 in September 1997. Although it has gone up to 74.32 per cent at the end of September, 2010, it is very low compared to the neighbouring states. The DD Avari Committee appointed by the RBI endorsed the State’s view that the CD ratio commercial banks functioning in Kerala was totally inadequate and also observed that the philosophy of banking needs a new orientation and human touch under the Kerala situation. The low CD ratio has hampered the general investment tempo in the State. Politicians have been accusing the banks of diverting deposits mobilized from the state to other states. Chief Minister Oommen Chandy said that the banks were reluctant to provide education and agriculture loans. He said that he has been getting a number of complaints from people regarding the negative approach of banks towards their loan applications. Chandy said that the state will be able to achieve total financial inclusion only if the banks adopted a more liberal approach in lending money to the vulnerable sections of the society.
Khaleej Times
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