The Hindu Business Line : New pvt banks in no mood for rural spread

THE new private banks seem to be in no mood to venture into the Indian hinterland. This comes despite repeated exhortations by the Finance Minister and the Reserve Bank of India to increase their branch network in the semi-urban and rural areas.

Despite considerably lower rentals for a branch location, cheaper manpower costs and fewer requirements from the customer in rural and semi-urban areas vis-à-vis metropolitan/urban locations, the new private sector banks are keen on saturating the metropolitan cities and in reaching out to Tier II and Tier III cities.

``There are advantages of going to semi-urban locations like the ability to raise low-cost deposits and lower set-up costs, but it does not work out as a value proposition for us. Unless there is a commercial proposition involved, we would not venture into these areas,'' said a senior Vice-President in a private bank, on condition of anonymity.

Unless the RBI makes it mandatory to increase the presence of private banks in these areas, bankers are tenacious not to toe the line. Currently, the RBI mandates that 25 per cent of any bank's branch network should be in semi-urban and rural areas.

According to the RBI's branch, banking statistics as on March 2002, new private sector banks have about 31 per cent of their presence in rural and semi-urban areas while the old private sector banks have about 58 per cent.

While presenting the Union Budget, the Finance Minister spoke about how private banks should increase their presence in these areas and there have been discussions on the same in Parliament.

The Reserve Bank of India has also sent written communication to the new private banks urging them to open more branches in rural areas.

But the expansion plans of the two leading private banks in the current financial year reveal that they are in no hurry to enter rural India.

ICICI Bank with 440 branches has received 65 licences this financial year and plans to increase its visibility predominantly in the metropolitan cities.

HDFC Bank plans to start about 70-80 branches in the current year, most of which will be in the Tier I, Tier II and Tier III cities.

The bank has 60 per cent of its total network in the top 8-9 metropolitan cities. These banks are not ready to divert their attention from the booming metropolitan markets.

According to the RBI statistics, the new generation private banks have neither rural nor semi-urban presence in several States such as Assam, Bihar, Orissa, Pondicherry, Chhattisgarh, Jammu and Kashmir, Jharkhand, Meghalaya, Nagaland and Uttaranchal.

These banks have nil rural presence in several more States such as Goa, Himachal Pradesh, Kerala, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh and West Bengal in addition to the aforesaid.

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