Banking Spread: Gramin Banks versus Other Banks

Dr. N K Thingalaya

Gramin banks have cropped up in different parts of the country since 1975, perhaps without a clear long term perspective. Some states were too eager to set up as many of them as possible, disregarding the sustainability of those confined to single districts. Others were watching the development initially and then joined the rest. The process of mergers initiated since 2005 has contributed to the viability of most of them. This is evident from the reduction in the number of loss incurring gramin banks. Bihar now does not have weaker gramin banks; in fact it has now a couple of the bigger gramin banks.

It is often not recognised that the gramin banks have deeply penetrated into the less developed districts and states, where the other commercial banks have entered reluctantly. In Dantewada district, for example, gramin bank has a wider presence. However, disparities in their existence in some of the backward districts remain, with no attempts being made to rectify the situation. In the relatively more prosperous states they exist in abundance along with other banks, sharing the available banking business.

Disparities in Dispersion:

While gramin banks are now in existence in all states except Goa and Sikkim, there is wide disparity in their dispersion in many states. Very conspicuous is the case of Maharashtra. There are only 591 branches of gramin banks in the state and as many as six districts do not have a single branch of gramin banks and another six districts have single branches, according to the latest issue of Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks December 2009. Some of the less developed districts in the state have very few branches of these banks; Gadchiroli (17), Washim (18) and Gondia (24). Even the agriculturally prosperous districts like Jalgaon, Kolhapur and Nasik have very poor presence of gramin banks, having single branches. Gujarat, where the cooperative sector is deep-rooted, gramin banks have a low profile

Uttar Pradesh, where all districts have the presence of gramin banks from the beginning, has a few districts with less than ten branches of gramin banks. Baghpat (3), Saharanpur (8) and Mathura (5). In Madhya Pradesh, also there are districts of this category; Betul (4), Burhanpur (7) and Sheopur (6). In Haryana out of 21 districts, six have less than 10 branches of gramin banks. The case of Punjab is not better; out of the 20 districts, 11 districts have less than 10 branches each. Moga district, where the biggest grain market is functioning, there are only three branches of Sutlej Gramin Bank.

Rajasthan and West Bengal are the two states, where there is almost an equal distribution of gramin bank branches among the districts. Under the short-lived scheme of promoting Local Area Banks, Sikar district had seen the emergence of Vinayak Local Area Bank in 2000. It died within a short period while Rajasthan Gramin Bank is functioning today in this desert district with 59 branches

Like the commercial banks, gramin banks also sometime exhibit some reluctance to spread their branches in certain backward districts. In Orissa, Boudh district has only six branches of gramin bank, where the total number of branches of all banks is 21. Similar is the case of Deogarh district: gramin bank’s branches are seven and all banks’ branches are not more than 20. But in Koraput district, one of the tribal-dominated districts, gramin bank has a major share of the branch network. It has 36 branches out of the total of 74 branches in the district.

In Jharkhand, four districts have less than ten branches of gramin banks. Koderma district has only three branches of gramin bank, while the total number of branches is 34. In Ramgarh district, out of 54 branches of all banks, gramin bank’s branches are only four. Lohardagga district has seven branches of gramin bank and all banks have 20 branches. In Khunti district, while the total number of branches is 27, gramin bank has nine branches.

Bihar has a peculiar situation, where the gramin banks have almost an equal number of branches compared with the public sector banks in quite a few districts. In districts like Nalanda, Siwan, Madhubani, Gopalganj and Sheikpura gramin banks have more branches than all the public sector banks operating in these districts. Incidentally, the private sector banks are rarely seen in these districts.

In Chhathisgarh, the three gramin banks together have more branches (441) compared to State Bank of India (319). This lead is maintained in districts like Jashpur, Surguja and Dantewada. In the Maoist menace-infested Dantewada district, Chhathisgarh Gramin Bank has 13 branches, while State Bank of India has eight branches and the public sector banks only three branches.

More Branches than State Bank?

One of the significant features of the dispersion of gramin banks’ branches is that in some states, they have more branches than the State Bank of India and its associate banks put together. Very prominent among them is West Bengal, the state of origin of State Bank of India. The State Bank group has 868 branches while the three gramin banks operating in the state have 883 branches. The big bank, which is considered as the only Indian bank to have acquired international stature (with 16,851 branches), has a smaller presence in its home turf. In three of the less developed states like Assam, Bihar and Orissa, the gramin banks have wider presence than the State Bank group. The Banker to Every Indian has 254 branches in Assam as against 399 branches of the two gramin banks serving in that state.

Uttar Pradesh is another big state, where State Bank has a minor presence in terms of its service outlets compared to those of the 12 gramin banks presently functioning in the state. Its network has only 1625 branches, while the gramin banks have 2963 branches. It is interesting to note that both the groups of banks are present in all the 71districts in the state.

The four gramin banks in Bihar have built up a branch network, which is more than double the size of State Bank's. They have 1491 branches compared to 652 branches of the mighty bank. It may be added here that Uttar Bihar Gramin Bank alone has 858 branches in Bihar. In Orissa, State Bank group has 647 branches and the five gramin banks have 872 branches.

In the north-eastern states like Tripura, Mizoram and Manipur also State Bank has a lower profile compared to that of gramin banks as can be seen from the data furnished in Table.1

As far as the four southern states are concerned - which have relatively well-developed banking base - State Bank group has more branches in each of these states than the gramin banks. Andhra Pradesh has five well-established gramin banks having1303 branches, while State Bank group has 1809 branches; Karnataka’s six gramin banks’1184 branches compete with 1143 branches of State Bank group. Kerala has only two gramin banks with 404 branches as against 954 branches of SBI group. Two gramin banks in Tamil Nadu have the lowest number of branches-282, while SBI group has 926 branches.

Road map for Planned Expansion:

It is evident from the above review that the gramin banks have collectively acquired the status of omnipresence, covering almost the entire nation. Their growth pattern over the years, however, has been haphazard and un-planned due to the absence of a definite perspective plan. There was virtually a deceleration of gramin banks’ branch expansion programme some time back because of an embargo on staff recruitment. Now it is no more there and gramin banks have started opening branches.

In the context of the time-bound targets fixed for attaining financial inclusion, there is greater need for coordinating the planned efforts of banks for this purpose. Extending banking facilities to all the villages having population above 2000 is indeed a major task. One of the significant contributions of gramin banks is the inculcation of saving habits among its rural customers. This could be seen from the higher percentage share of savings bank deposits in their total deposits. It is as high as 60 percent in a few gramin banks and invariably more than 35 in most of them. These savings are mobilised from a large number of small savers. Enhancing the flow of rural savings into investment in financial assets is a desirable role the gramin banks have been silently playing. Expanding financial inclusion through real savings than through zero balance savings accounts is more meaningful. This task is more meticulously done by gramin banks than the other banks. The presence or absence of gramin banks’ branches in good numbers in the less developed districts, makes visible impact on the extent of financial inclusion achieved by banks. Gramin banks therefore have to expand their branch network on a wider scale as a part of the concerted efforts for financial inclusion.

Table.1
State-wise Distribution of Branches of Gramin Banks versus Other Banks
(As on December 2009)

Source: Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, December 2009, Reserve Bank of India

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