On the eve of bank nationalisation, we had appx 8000 bank branches in the country. Out of the 6.5 lakh villages, only 5000 had bank branches, including cooperative bank branches. 617 towns out of 2700 towns then did not have commercial bank branches. CD ratio in towns with population of less than 10000 was less than 41 percent. The total deposits with banks were appx 4338 crores n total advances 3396 crores. We had one bank branch for every 65000 people then.
Then 14 major banks were nationalised 52 years back in July 1969. Subsequently in 1980, six more banks were nationalised. Mergers and acquisitions have taken place in the banking industry almost in every 05 years. While the first merger in PSBs took place in September 1993; New bank of India with PNB, the associate banks and BMB (Bharat Manila Bank) have been merged with SBI in October 2017.
A sort of regrouping has been done through another two mergers subsequently in 2018 and 2020 when some 08 small / medium PSBs have been merged with relatively larger banks and now there are 12 PSBs including SBI.
Much water has flown in river Ganges. Now (as on March 2021) we have over 150000 commercial bank branches, including RRBs and SFBs. The total amount of deposits at 154 trillion n advances at 110 trillion so a CD ratio of over 70 per cent. It also compares favourably with the GDP. Every 9 000 people have a bank branch on an average. Out of the 150000 odd branches over 52000 are in rural area and another over 42 000 branches are in SU area.
The remaining appx 56 000 are in Urban/ metro area. The total no of bank branches which was appx 8000 in July 1969 rose to 32419 in 1980 and again to 65412 in 2000 and now stands at 150000. Similarly, both deposits and advances have witnessed phenomenal growth with every passing decade. The private banks too have contributed towards the growth of number of bank branches, deposits n advances (during the last 25 year); but the main push has come from PSBs.
Now, after 52 years, we have a debate going on in the country whether we need PSBs at all! Banks can be better managed in private hands. This debate has started during the last 5/7 years following the deterioration of assts qualities in all banks and especially in PSBs. Then came the PCA and other restrictions. This period is also marked by huge capital infusion in the PSBs by the government. The tax payer’s money could have been admittedly put to some other productive use.
Even as there are issues with the banking eco system in terms of governance, quality of assets etc the fact remains that PSBs have played a great role in nation building. Be that green revolution of the 70s , the industrialisation, funding the SME sectors , infrastructure development; roads , ports , airports; housing, trade, education you name any sector and PSBs were there and are there. Starting from a small loan of 10000 for the street vendors to 50000 loans to a Mudra beneficiary to of crores to infrastructure PSBs were there. The private banks during the last 25 years have no doubt supplemented the efforts of PSBs. But there have been issues there also. Many of them have failed before and after nationalisation. But the feel-good factor especially for the small n marginal sectors are only there in PSBs.
Digitisation, digital penetration, BCs, payment banks, Fintech companies have helped in the speed, accuracy and inclusiveness of our payment system. Gone are the days of money order, bank draft, postal order, TPOs and other traditional payment methods. Now it’s real time and 24X7. It can be said a revolution in the payment system in country in terms of cost, speed, accuracy and security. The whole world looks at the transformation in our transfer / payment system with appreciation n jealousy! Lacs of crores of rupees have been transferred to millions of beneficiaries all over the country through various DBT schemes. Now there are many non-traditional players in banking space. True; does it suggest end of traditional banking and bankers.???
The answer is perhaps no! We are still a society in transition. The over 6.5 lacs villages don’t exist in the same socio economic and technological eco system. The traditional bank branch is still important there.
In the recent past at least on 03 occasions:-
i Jandhan campaign in 2014 when 40 crores new beneficiaries were added to the formal banking n insurance by opening their accounts and now there is a deposit of appx 1.5 lacs crores in these accounts
ii the demonisation process in November 2016 and the stupendous task of accepting n exchanging old notes running into thousands of crores , recalibrating the ATMs and mailing available the new notes which were in short supply in many states / centres
iii and of course during the very recent pandemic PSB bankers in general have risen to the occasion n shown their resilience n commitments to society; many of them (in thousands) including some very young bankers in their 20s n 30s lost their lives while serving the society during the pandemic
The banker is an advisor, a mentor, a guide to millions of villagers. In whom people see lots of trust. Like the postman, the village school teacher, the health worker. He / she is a link between the old generation and the new one. Banking is a kind of primary basic amenities like health and education. If we want to bank the unbanked, secure the unsecured and fund the unfunded we need people from the PSBs in villages, in mohallas , who will understand and speak their language , earn their trust n respect and develop banking habits in true sense .
For the complete success of JAM; Jandhan, Adhar and mobile we need more PSBs branches in the countryside. Still a substantial sections PF our society a especially in villages are illiterates; not to speak of financial literacy. They do get exploited by the money lenders and all sorts of middle men. While digitisation and disintermediation should and must go side by side in a big way we must prepare people, educate them to adopt the changes in financial eco system. Yes, the PSBs have become less productive in terms of their earnings; this needs introspection.
The ongoing EASE (Enhanced access and service Excellence) reforms n PSBs can bring about improvements and transformation. We are now in EASE 04. The last 03 EASE exercises have proved to be very rewarding. But the holy cow is tired and little sick it needs protection and care, for it will be always relevant in a transitional society like ours at all times.
(The author is Senior Advisor, IBA. Opinions expressed are his own and don’t reflect that of IBA in any manner)