Government Asks PSU Banks To Open More Branches in Northeast India

Kolkata, Oct 4 : The government of India has issued a directive to public sector banks to open branches in every un-banked block in the North East by September next year. The seven sister states - Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland and Tripura - are home to 70 unbanked blocks and 55 under-banked districts as banks have generally shied away from this economically backward terrain mired by insurgency.

The progress under Reserve Bank of India's (RBI) viability gap funding scheme for opening branches in this region has also been slow.

Development of the North East assumes great importance to the UPA-2 government as the region is a prominent gateway for the country's border trade with Bangladesh and Myanmar. In step with this, the RBI has decided to open offices in all seven northeastern states. It recently opened one in Agartala, Tripura.

The government, has written to the chairpersons of public sector banks to prepare individual plans for improving bank penetration in the North East. Two senior banking executives confirmed having received such a letter from the ministry of finance.

Banks had earlier decided to open 26 branches in brickand mortar form and a total of 400 banking outlets in this region. The government feels there should be at least one branch for every village with a population of 5,000. Severe communication bottlenecks in the remote areas of the North East have stifled economic and banking development here over the years.

To surmount these hurdles, the Usha Thorat Committee had advocated IT adoption levels and usage of intermediaries like business correspondents and business facilitators to serve people in these areas. In the last few years, however, banks have grasped the business potential of the region as branches here significantly help improve current and savings bank account ratios. Various banks have opened around 400 branches in the seven states in the last six years. But the government, concerned about the dismal level of bank penetration, wants to do more and reach out to every unbanked block in the next year.