FM Nirmala Sitharaman calls for expansion of banks in remote areas; more SBI-sized lenders

Union Finance Minister Nirmala Sitharaman on Sunday asserted that despite the huge thrust on financial inclusion and high commission activity, there are districts in the country that do not have a banking presence at all. The Finance Minister also stressed the need for the presence of at least four-five SBI-sized banks in the country to meet the increasing demands of the people.

The Finance Minister asked the banks to get their act together and open either a full-fledged brick-and-mortar branch or an outpost rendering banking services. She also questioned how banking services eluded those places with high economic activity. It should be noted here that policymakers had been emphasising financial inclusion for over a decade and had set a point to ensure banking presence in every village with a population of over 2000 people. A few years ago, the RBI had liberalised branch opening norms for banks.

FM Sitharaman rues lack of banks in remote areas

"Even today, there are very many districts in which even big panchayats don't have a physical bank. There are many districts in which not even a banking institution is physically present," Sitharaman said as she addressed the 74th annual general meeting (AGM) of the industry lobby group Indian Banks' Association (IBA).

"The country needs to expand the number of banks and more large-sized ones to satisfy the growing demand of the increasingly populated country while ensuring a smart recovery post the COVID pandemic," FM Nirmala Sitharaman said.

Nirmala Sitharaman presses need for more SBI-sized banks 

She made it clear that there was an immediate need to escalate the banking sector to meet the increasing demands of the industry while ensuring that all trade centres in the country are incorporated with at least a single physical or digital banking presence.

"We need to scale up banking. The need is for at least four to five more SBI sized banks. We need to scale up banking. The need is for at least four-five more SBI sized banks," she said, while reminding all that the amalgamation exercise among public sector banks has helped in moving ahead with the creation of large banks.

Notably, the central government in 2019 had planned to build a collaboration of six different, weak PSBs into one. Eventually, the Punjab National Bank (PNB) took over the Oriental Bank of Commerce and the United Bank of India. Meanwhile, Allahabad Bank collaborated with Indian Bank and Canara Bank merged with Syndicate bank. On the other hand, Andhra Bank and Corporation Banks merged with the Union Bank of India.

HDFC to reach 2 lakh villages, employ 2,500

Appreciating the efforts made by the Pradhan Mantri Jan Dhan Yojana, in which millions of new accounts were opened, Ms Nirmala Sitharaman reiterated her wish for a higher quantum of loans to be provided in Eastern India. 

In a statement released after the finance minister's speech, HDFC, one of India's largest private banks, claimed that it will be doubling its rural reach to 2 lakh villages in the next two years, while also providing employment to 2,500 individuals in the next six months.

Inputs: PTI

Image: PTI