Governments
at the centre since independence focused on providing easy access to
finance and poverty alleviation. The branch expansion programmes were
started in the country since the nationalisation of banks in 1969.
Expansion of rural credit market has been the centre of financial
policies in developing countries. Reach of banking services in rural
areas is the precursor of growth. In order to be perfect rural credit
market, there should be availability of credit at nominal rate of
interest, easy access for credit, less complexities and availability of
sufficient fund.
India’s credit markets were highly unorganised. People resorted
non-institutional lenders at high rate of interest especially before the
bank nationalisation in 1969. They have become indebted such indigenous
money lenders. Meanwhile, Government of India came up with the massive
nationalisation of 14 big private sector banks. It facilitated
penetration of commercial banking into rural unbanked locations.
Financial access before and after the 1969 nationalisation
Only
nearly 50 per cent of the towns and almost none of villages had
commercial bank branches. In 1968, the National Credit Council (NCC) was
set up to guide the branch expansion programme. The NCC found that not
even one per cent of rural areas were served by commercial banks. It
also found that industries, which are more urban centred, got giant
share from bank credit. During 1960-70, almost 67 per cent of bank
credit was for industries while its contribution to the national product
was mere 15%. At the same time, agriculture, which contributed 50 % of
GDP, virtually got nothing as bank credit. Nationalisation of 14 banks
in 1969 was in fact in this context.
Branch expansion of Scheduled Commercial Banks (SCBs) in India:
Between 1969 and 1990 bank branches of commercial banks were opened in
30,000 unbanked locations. In December 1969, India had only 1443 rural
branches while semi-urban and urban areas had 3337 and 3407 branches
respectively (total 8187 branches). So to say, only 17% of bank branches
was in rural areas. This situation has been changed within 20 years of
bank nationalisation before the reform period. In 1990, out of 59752
bank offices (branches), bank branches in rural areas multiplied to
34791 (58.23%) while that of urban areas (semi-urban and urban) was only
41.77%. At that, this has been completely changed in the post reform
period. In 2013, rural areas occupied only 35.9% branches while that of
urban areas increased again to higher level at 64.1%. (Table 1).
Table 1: Area-wise share of bank branches (In percentage)
1969
|
1990
|
2013
| |||
Rural
|
Urban
|
Rural
|
Urban
|
Rural
|
Urban
|
17.6
|
82.4
|
58.23
|
41.77
|
35.9
|
64.1
|
In
1990, rural bank branches increased phenomenally to 34,791 from 1443 in
1969. The number of rural branches increased slightly thereafter. That
was mere 39,233 in 2013.
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