Banking efficiency in rural India - Strategies to make rural banking a profitable venture

Abstract

Institutional bodies like rural banks play an important role in economic growth and development of rural India. Commercial banks with their rural branches are aiming to provide better banking services to low-income rural population. The current study utilizes the bankers perspective to explore the impact of commercial banking services in rural area. Different aspects of commercial banking were taken into account to study the viability and performance of banking in rural area. Data was collected from 104 bank employees of commercial banks functioning in the rural areas of Karnataka through a structured questionnaire. Statistical analysis on credit generation, cost and return aspects of banking was performed. It was found that cost benefit issue such as high operational cost, accumulated NPAs, lack of alternate delivery channels had a significant impact on rural banking. Also, lack of an efficient recovery method impacts credit generation. Bankers emphasized on strategies to make these two areas profitable for the bank as well for the rural population. The study concludes that performance of commercial banks in rural areas can be significantly improved by adopting effective strategies on different areas such credit-deposit area, recovery effort, implementation of newest technologies.