PCBs and their rural branches

The Bangladesh Bank (BB) has put in place a revised provision under which the private commercial banks (PCBs) will have to open an equal number of new branches in both urban and rural areas. This means that, from now on, if a PCB wants to open a branch in any urban area, it will have to open a rural branch. The objective of the fresh move, according to the central bank officials, is to bring more rural people under the formal banking network. On the face of it, the new provision is well-intended but it gives rise to a few questions. What has been the outcome of the earlier provision that had asked the PCBs to open one rural branch for every four set of urban branches? Did the PCBs follow the provision strictly? If not, is it feasible to introduce even a stricter provision? There is no denying that a vast majority of the rural population has remained beyond the formal banking coverage despite the fact that the state-owned commercial banks (SCBs) have large presence in rural areas. The PCBs, despite repeated pleadings by the central bank, have been shy of expanding their branches in rural areas. A good number of PCBs, however, have gone beyond major cities and towns. But their branches are located at some important trading centres that are in most cases located within municipal areas. Under the BB's new provision, any PCB branch opened within a municipal area would be considered as an urban one. The main reason behind the PCBs not opening their branches in rural areas is economic. Operational viability, in terms of profit earning, has discouraged the PCBs from opening rural branches. Why are then the SCBs have a large network of rural branches? It is assumed that a good number of rural branches of the SCBs are not profitable. In recent years, SCBs have either merged a good number of unviable branches with nearby ones or closed down a number of them under economic considerations. Though the BB is indirectly creating pressure on the PCBs to open more rural branches, the latest move is unlikely to meet its expectations. In the process, the opening of urban branches by the PCBs is likely to be slowed down, if the BB decides to religiously stick to its latest provision. Notwithstanding the fact that economic activities have intensified in rural areas than before and a large part of the remittance money coming from abroad has rural recipients, the PCBs might find those factors are not adequate enough to support a large number of rural branches. Ideally speaking, the rural people must have access to formal banking institutions. In the absence of the same, they have to travel a long distance to reach bank branches at nearby urban centres, which consumes both time and money. But banks are supposed to be guided purely by economic considerations as far as their operational network is concerned. It will not be fair to thrust upon them anything that would hurt their profit earning in a fair manner. It would not be out of place to mention here the involvement of the PCBs in agricultural credit distribution. Despite requests from the central bank and policymakers, these banks have, deliberately or otherwise, are still maintaining a safe distance from large-scale involvement in farm credit distribution. Statistics might show some improvement but, in real terms, the PCBs are not anyway involved in the disbursement of crop loans to farmers. They have been offering loans to agro-processing industries and farm-related commercial activities or providing some funds to non-government organizations for doing their job. The presence of a substantial amount of non-performing agricultural loans disbursed by the Bangladesh Krishi Unnyan Bank (BKB), the Rajshahi Krishi Unnyan Bank (RAKUB) and the SCBs remain as a major discouraging factor for the PCBs. In fact, the central bank would not have to force the PCBs to open their branches in rural areas, had the country's policymakers paid the due attention to the economic growth centering the upazilas across the country. Allocation of funds by the central government under test relief, vulnerable group feeding and for construction of a few roads, culverts, schools and colleges does not anyway ensure economic growth of rural areas. What is missing here is the lack of adherence to the Articles 59 and 60 of the country's Constitution that empower the elected local government bodies including the Upazila and Union Parishads to impose taxes for local purposes, prepare their budgets, maintain funds, prepare and implement plans relating to public services and economic development. In reality, the lower-level tiers of local government institutions have been used to create a band of cronies of the political parties in power for decades. The upazila headquarters could have emerged as centres of economic growth, had the successive governments allowed the Upazila Parishads to function independently and made available adequate resources for the development of infrastructural facilities and small and medium enterprises. In such a scenario, the central bank would not be required to issue directives to the PCBs to open their rural branches. The banks themselves would rush to cash in on the situation. Zahidmar10@gmail.com