Revitalisation of Rural Bank Branches C L Dadhich PLEASE refer to the piece titled 'Monkeying with Rural Credit' (EPW, September 18) expressing deep concern over recent decisions of the Reserve Bank of India to permit commercial banks to close down their loss-making rural branches and some innovative suggestions made in its Annual Report towards improving rural credit delivery system. In this connection, it is pertinent to note that commercial banks have been allowed to close down loss-making rural branches at rural centres served by two commercial bank branches (excluding RRBs) and not been permitted to close down loss-making branches at rural centres having a single commercial bank branch. Thus it is an attempt towards rationalisation of the branch network and elimination of unnecessary competition between two commercial banks operating at the same centre A recent review on implementation of the Service Area Approach did not reveal that deficiencies were on account of a large number of villages per branch. Rather, it was noticed that deficiencies were somewhat common to the states with coverage of small number of villages (Kerala with less than one village) and other states with large number of villages (the north-eastern states with more than 40 villages) in the service area of a branch. This suggests that quality of implementation was neutral to the size of the service area. Interestingly, as per the report of a Task Force on credit-deposit ratios in UP,I the incidence of non-viable branches in a service area has adversely affected the implementation of the credit pi an. Against this backdrop, the decision of the Reserve Bank to allow commercial banks to close down the loss-making branches in banked centres would not only improve the overall viability of rural branches through economies of scale but would also augment the flow of credit by strengthening the rural credit delivery system. As commercial banks are somewhat in a better position to serve the weaker sections of the society,2 it would be rather desirable to allow the Regional Rural Banks also to close down their loss-making branches at centres served by two commercial banks. Incidentally, the experience of co-operatives in our country reveals that a decline in the number of PACSs has not affected the flow of credit adversely; rather, the revitalisation of PACSs has improved the flow and quantum of credit pronouncedly.
