RBI data on bank spread to frustrate Pranab’s hopes

By | March 2, 2010

Finance Minister Pranab Mukherjee intends to increase the area-wise spread of banks and mentioned in his budget speech that RBI was thinking about permitting more private players in banking.

But a close examination of RBI data, questions FM’s assumptions that higher area-wise spread will be fulfilled by permitting more private players. As of 30th June, 2009, the 7 new private sector banks had mere 275 branches in rural regions. This is only 6.4% of their 4,264 branches. Branches in metros comprise 35% and urban regions 32.6% of the total number of branches.

As against this, 34% of the total number of branches of public sector banks fall in the rural regions. SBI and its subsidiaries have 5.609 branches in rural regions, which is 34.5% of 16,260 branches. Other public sector banks, except IDBI have 13,303 branches in rural regions, and forms 34.2% of the total 39,095 branches. IDBI has a mere 10% branch establishment in rural regions.

From the private sector banks, ICICI Bank has the biggest network of branches in rural regions. It had 138 branches in rural regions, which is mere 10% of its 1,409 branches. HDFC Bank and Axis Bank, the 2nd and 3rd biggest private sector banks, have 67 and 30 branches in rural regions from 1,408 and 786 branches respectively.

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