Malappuram-based, Canara Bank-sponsored Kerala Gramin Bank is the country’s largest regional rural bank (RRB) in terms of business volume. With ₹17,800 crore of business and 535 branches, KGB is now set to launch Internet banking in September. It will be the first RRB to roll out Internet banking, Chairman, Shaji KV, told Business Line. Excerpts from an interview:
RRBs were set up in a different time period. But the Indian economy has since grown enormously and commercial banking has gone high-tech. Do RRBs still have relevance?
The relevance has, in fact, increased. More than half of the population still depends on agriculture for their livelihood and agricultural credit continues to be scarce. Thousands of villages are unbanked. Small low-interest loans to farmers and priority sectors make up about 80 per cent of the advances of most RRBs now. In many regions, gramin banks are the only option for villagers. The reasons for setting up a string of RRBs following the enactment of the RRB Act, 1976, are still valid. RRBs have regional character, better human interface, low cost of operations and offer low-interest loans.
But don’t they need to change with the times?
True. They need to adapt to the changing needs of the rural people and the economy. They need to be re-oriented and their operational base strengthened. Customer relations should be vastly improved. One advantage of RRBs over commercial banks is their local familiarity. RRBs should combine the professionalism of commercial banks with their local familiarity to provide better customer service. New banking technologies should be made available to RRBs, too. They should go in for ATMs and Internet banking. They should aim for gramin banking-plus.
RRBs are now in a process of re-structuring; do mergers help?
In my personal view, all RRBs could be merged into one. This single bank could have regional headquarters in each State which should be mandated to implement programmes tuned to the specific needs of the area. This way, the objective of gramin banks can be better served and new technologies deployed more economically.
Let’s talk about Kerala Gramin Bank…
KGB is just a year old. Within this time, we could stabilise the bank and sort out the issues following the merger. We opened 35 new branches and will launch Internet banking soon. We are going big on banking technology adoption. Kerala is a highly-banked State and hence competition is tough. In terms of offering services we compete with the State Bank of Travancore and Federal Bank; in terms of attracting deposits, we compete with the strong network of co-operative banks that offer higher rates of interest. We are now focusing on better customer relations.
How about NPAs?
At 2.5 per cent gross NPAs, our situation is fairly comfortable. The government’s declaration of moratorium on farm loan re-payment and poor re-payment of education loans are the major reasons for the NPA situation. What are KGB’s mid-term objectives?
Attracting NRI deposits in a big way is a major objective. In Kerala, more than a third of deposits of commercial banks are from NRIs. Ours is a paltry three per cent now and we aim to raise this to 10 per cent soon.
We also want to offer all commercial bank products, while focusing on our priority sector lending. We plan to take our branch network to 1,000 in a couple of years.
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