Setting up banks in the Finance Minister's home turf a sticky business?

KOLKATA: Amitava Guha recollects how he was once given some well-meaning advice by a fellow public sector bank chief over a decade ago. Guha at the time was managing director of State Bank of Hyderabad.
The advice went like this: "Boss, you are making a mistake. You should also open branches in Sivaganga." With P Chidambaram as finance minister at the time, most bank chiefs were rushing to open branches in his Lok Sabha constituency. Guha didn’t think it made any banking sense. "I didn’t find it necessary then to open an isolated branch in Sivaganga," he says.

Later, when Pranab Mukherjee took over as finance minister, the action switched to his Lok Sabha seat of Jangipur. Opening branches in the finance minister’s constituency has been regarded as one of the easiest ways of getting into the incumbent’s good books, although there’s nothing to verify this. Things may be changing, however, as the present occupant of the post, Arun Jaitley, is based in Delhi and stood for elections and lost in Amritsar.

Both cities are well represented by banks compared with Sivaganga or Jangipur. And, the early signs are encouraging — Jaitley inaugurated 108 ‘financial inclusion branches’, being set up by Canara Bank, on July 19.

What makes this a departure from the usual launch spree is that it actually seeks to make a dent in financial inclusion, i.e the initiative to bring the 42% that have no access to banking services within the ambit of the system.

A banking presence is the most visible institutional intervention and touches people’s lives, said PwC India associate director Robin Roy. "So, it’s not by serendipity or coincidence that politicians look to increase the banking presence in their constituencies. Of course, it is important to look at business economics also," he said.

Over the past decade, banks have opened as many as 200 branches in Sivaganga and 24 in Jangipur town alone. Bankers privately admit that most of these branches do not garner enough business to justify their presence and most loans delivered through credit camps to please FMs have turned sticky. Meanwhile, the agenda of financial inclusion has got stuck. "Despite efforts, the per capita branch or ATM is still not what is desired to achieve deeper penetration of banking services," Roy said.

Bankers aren’t planning any significant branch openings in the Punjab city. "Amritsar is sufficiently banked. We don’t have plans to open more branches in Amritsar at present," said Indian Overseas Bank CMD M Narendra. "The rural and semi-urban pockets of Amritsar are strong in agriculture and have a sizeable NRI base. We may explore these pockets in the future." All leading banks including non-state lenders such as Axis Bank, Kotak Mahindra Bank and Yes Bank are present in Amritsar.