The Hindu Business Line : `Rural banking needs local flavour'

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Mumbai Feb. 14 A uniform financial product for rural customers across the nation will not work. "Local culture has to be taken into account," said Ms Usha Thorat, Deputy Governor, RBI. She added banking in rural areas should deal with cash flows rather than offering a bouquet of loan products.

Speaking at a seminar on "Banking in the Hinterland" organised by Indian Banks' Association and Rural Marketing Agencies Association of India, Ms Thorat said, "Face-to-face familiarity between banks and rural areas is essential." For instance, the number of deposit accounts per branch is around 4,000 in rural areas and 6,000 in urban areas. While, there are 1,000 credit accounts per branch in rural areas and 1,300 accounts in urban areas. Ms Thorat also said the dependence of rural households on non-institutional sources has shown an increase to 42.9 per cent from 32 per cent, while dependence on moneylenders has increased to 29.6 per cent (17.5 per cent). "It is clear that in the last 15 years banking system has gone urban," she said.

According to Mr H.N. Sinor, Chief Executive, Indian Banks' Association, technology will help banks to maintain profitability in rural areas and bring down transaction costs. "The RBI is also doing some work to bring money lenders into the organised sector," he said.

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