Banks to open branches in area with population 5,000 by 2012

The Finance Ministry has asked all banks, including private sector lenders, to open branches in locations with population of more than 5,000 in the under-banked districts by September, 2012.

RBI has identified 296 districts, which are under-banked, spread across 18 states and union territories.

"Such branches could initially have lesser staff, say 2 persons, with ATM facilities," Finance Ministry said in its recent guideline on financial inclusion.

The staff strength could be increased as the business grows, it said. The new bank branch opened would also provide banking services in the adjoining areas.

"While planning for branch expansion, it may be seen that in the unbanked areas the branches are available within a radial distance of 5 km," it said.

As per the branch authorisation policy of RBI, prior approval of the central bank is not required to open branches in Tier-III to Tier-VI areas.

In fact, opening bank branches in the under banked districts of the under banked states would entitle the banks to seek branches in Tier-I

towns under their annual branch authorisation plan.

Such a branch would be assigned a service area by the State Level Bankers Committee covering one or more Gram Panchayats, it said.

In other districts, it said, the banks must try to open as many brick and mortar branches, in their service areas,  in habitations having population of 10,000 and above by September 2012.

It is to be noted that only about 5 per cent of the nearly six lakh villages in the country have bank branches. With the Financial Inclusion Plan under implementation, around 73,000 villages, having population of 2000 and above, would be provided facilities for banking services by March 2012.

As of June 2011, banks have opened banking outlets in 1.07 lakh villages up from just 54,258 as on March 2010. Out of these, 22,870 villages have been covered through brick and mortar branches, 84,274 through business correspondent outlets and 460 through other modes like mobile vans, etc.