Rural banks statistics

Even before nationalization, the proportion of bank branches in rural areas was over a fifth. After nationalization, banks started opening more branches in villages; by the end of the 1980s, 58 per cent of the branches were in villages. But then, banks somehow sickened of opening rural branches; by now the proportion of rural branches is no more than two-fifths. Why did they go off the villages? Their experience that farmers do not repay loans could have been a factor.

In 1980, a quarter of banks’ deposit accounts were rural; now the proportion is something like 8 per cent. But that does not mean that they are collecting less money in villages; the proportion of rural deposits has gone up from 3 to 8 per cent. In other words, banks are now having fewer accounts with larger balances in villages. Maybe, farmers got rich; maybe, banks discourage poor depositors.

But the change in depositors is nothing compared to the change in borrowers. In 1980, a quarter of banks’ borrowers were in villages, but the credit to them was just a 20th of the total. In other words, an average loan to a villager was one-fifth the size of the overall average. By 2008, the proportion of rural borrowers had fallen to a 40th of the total, while the credit given to them had exceeded a 10th of the total. In other words, the average rural loan was at least four times the overall average loan! Again, maybe villagers had become rich; but more likely, banks concentrated on the rich fellows in villages who ran trucks and buses or did wholesale business.

Businessworld