No Money? Have a Bank

In the last three years, an unnatural number of bank branches have opened in former Finance Minister Pranab Mukherjee’s constituency in West Bengal
Inclusion
ALWAYS AROUND In three years, about three dozen new branches were inaugurated in Jangipur; and most of them were marked by a speech made by Pranab Mukherjee
ABUNDANCE AND SCARCITY Jangipur has 77 bank branches
Bidi workers, a third of the region’s population, rarely have enough money to deposit in a bank

JANGIPUR, WEST BENGAL ~ What Pranab Mukherjee does is difficult to undo. That seems to be the popular belief in the Congress party. But as Mukherjee leaves the Indian Government to prepare for his presidential election, the big question in his Lok Sabha constituency Jangipur is whether the unusually large number of bank branches that have sprung up here will stay put or quietly down their shutters and move out. Without much business to attend to, they seem forlorn.

Jangipur, a subdivision of Murshidabad district of West Bengal, has elected Mukherjee to Parliament twice. But it was his second term, soon after he became Finance Minister, that saw a sudden proliferation in this poverty-ridden part of the country. Ever since he assumed charge of the Ministry, Jangipur has seen both private and public sector banks make a beeline to mark their presence here. With some three dozen branches having opened in the past three years, it has earned itself the nickname ‘Bankpur’.

Walk around the area, and you are confronted with a maze of billboards. State Bank of India, Uco Bank, Indian Overseas Bank, Punjab National Bank, Indian Bank, Union Bank, Syndicate Bank, United Bank of India, IDBI, Allahabad Bank, Dena Bank, Axis Bank, Oriental Bank, HDFC Bank, ICICI Bank, Bank of India, Bank of Baroda, Gramin Bank, they are all here, most of them in Raghunathganj—the urban core of Jangipur. Some banks even have two branches in the area.

“These are not symbols of development, nor do they symbolise prosperity in Jangipur, which remains as poor as it was when Pranabda took over as Finance Minister,” says Shamim Akhtar Hussain, who runs a garment shop at Phultala, the central market of Raghunathganj. “These are branches opened for political reasons and have nothing to do with the local economy of the area. Now that Pranabda is no longer FM and these banks have no reason to please him any further, they will soon start closing down or shifting to places where their existence might be more viable.”

distant spectators to the spree of bank openings set off by Mukherjee’s early-2009 assumption of power in North Block. According to records available with United Bank of India, which is the lead manager of public sector banks in the district, Jangipur currently has 77 bank branches, while Lalbagh has 46 branches, and Domkal, just 41.

The difference is glaring. It is not that the subdivisions adjacent to Jangipur have been entirely ignored by bankers. There have been sporadic instances of new branches coming up in these subdivisions over the past three years too. But there is reason to suspect that even these had political considerations as a motive. Take the example of United Bank of India’s Kantanagar branch, which opened in April 2011. Though it is located in the Lalbagh subdivision, it marks the southern tip of the Jangipur parliamentary constituency. “It was because of Pranab Babu’s direct intervention that this branch was opened,” contends Ata-ul Sheikh, a senior resident of this village. “Preparations were underway for Pranab Babu to inaugurate this branch,” he says, “We were told by the bank’s staff members that Pranab Babu himself would open this branch. But he could not do so because just before the inauguration, [the Election Commission] announced dates for the state’s Assembly polls and enforced [its] code of conduct.”

That the region’s bank boom has been lopsided is evident not only in its Jangipur fixation, it is also apparent in the fact that most branches in Mukherjee’s constituency are urban, far removed from its rural interiors that account for almost 80 per cent of its population. Of the 77 branches in the subdivision, 43 are located in Raghunathganj town and its semi-urban sprawl, which has fewer than 200,000 residents, while only 34 serve the rest—almost 1.6 million rural folk.

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Whatever the imbalance, perhaps the question worth asking is whether Mukherjee’s efforts have had any impact on the local economy. The answer is: very little, if any at all. “Opening of branches alone can’t serve the economy of a backward area,” says a manager at one of Jangipur’s new branches, “It has to be accompanied by a series of measures to help banks participate in the development of enterprise and acceleration of employment generation. That will happen only if proper plans for expanding economic activity in the region are implemented by the Government. Unfortunately, that is not happening at all. Merely getting some locals to open savings accounts won’t improve the economic condition of either the people or the branch concerned.”

The bank manager is not alone in levelling such criticism. “Pranab Mukherjee has turned Jangipur into Bankpur,” says Abul Hasnath Khan, a CPM leader who was once Jangipur’s elected Lok Sabha representative, “but has done nothing to make these banks create and expand the local market by financing economic activities. We have been expecting development, not just new branches—which are largely unused by locals. Just wait for a year. Many of these branches would be closed by then because they won’t incur losses forever.”

Indeed, there is hardly any business for most banks in Jangipur. More than a third of the population here rolls bidis. This is a low-wage job. Rolling a thousand bidis a day earns a worker only Rs 65. This is hardly enough to keep body and soul together, and leaves little if anything to deposit in a bank.

This has landed many new branches in a peculiar trap.

Punjab National Bank’s branch at Talai village in Jangipur, for example, has over a hundred account holders, most of them bidi rollers. About a year ago, when this branch began operations (equipped, in all its wisdom, with an ATM), bank officials ran an outreach programme aimed at getting Talai’s villagers to open accounts. Enthused, many of them signed up. But that was the end of it. “Talai village has nearly 500 bidi workers, and nearly 100 of them opened accounts when this branch was inaugurated. But our wages are so low that we are just not being able to maintain them,” says Rehana Bibi, a bidi worker of the village who has an account there. As a result, Punjab National Bank’s Talai branch remains deserted most of its working hours. Its ATM, meanwhile, stays shut all round the clock.

Apart from rolling bidis, another source of livelihood in Jangipur is agriculture, marred though it is by extreme uncertainty. Farmland in the area remains inundated for much of the year by canal water from the Ganga, which, given the region’s peculiar topography, flows at a higher level than vast tracts of cultivable land.

Harvests of paddy hardly ever go beyond subsistence levels. Jute, the region’s other prominent crop, fares no better. This keeps farmers acutely short of cash, which in turn renders the idea of banking meaningless to them. Then there is the handloom sector, which employs thousands of people in Jangipur, but faces a severe shortage of funds despite the presence of so many banks. For all the efforts of bankers, those most in need seldom get access to bank credit. Microcredit networks, which have their own problems, are not of much help either. As a result, Jangipur’s usurious moneylenders continue to thrive.

According to a senior Kolkata-based official of United Bank of India, for a new branch in a small town like Jangipur to be viable as a business unit, it would need to generate business of Rs 10-12 crore in its first year: the sum of all loans extended, that is, on a deposit base of an equivalent amount.

By that parameter, most new branches in Mukherjee’s parliamentary constituency are unviable. Of the seven new branches that United Bank of India has started here since 2009, three have almost no work and two are piling up losses. “Many of these branches would either be closed or relocated,” says the UBI official in Kolkata.

The financial figures of most branches present a grim story. For example, Central Bank of India’s Billbarrakobra branch, which opened in March 2011, could manage to attract deposits of just Rs 55 lakh in its first year, and extended advances of Rs 26 lakh. The same bank’s Morgram branch, which began in April 2010, had total deposits of Rs 4 crore as on 31 March 2012, but had made loans of only Rs 60 lakh. Other such instances abound.

Note that local advances are substantially less than deposits. This suggests a pattern of transfers. Are Jangipur’s funds being used for loans extended elsewhere? With branches across the country, banks are free to do this. However, the rate of interest that these banks charge on loans they make is typically at least twice as high as what they pay depositors (a rate less than inflation these past few years). This seems like financial repression rather than inclusion.

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To be sure, Jangipur’s is not an isolated story. Bankers in India have often shown themselves keen to act in favour of the Finance Minister’s whims instead of economic sense.

It is worth noting that Mukherjee’s predecessor P Chidambaram, too, had the pleasure of inaugurating a series of branches in Sivaganga, his Lok Sabha constituency in Tamil Nadu, before he moved to the Union Home Ministry in late 2008. In a span of two years uptil mid-2008, assorted banks had opened at least 30 branches in Sivaganga. Once Mukherjee took over the Finance Ministry, Jangipur became the favourite hotspot of bankers. Now, of course, circumstances have changed yet again.