Karnataka > Agricultural Banks
In the year 1894, the Mysore Government had promoted a new breed of banks styled as Agricultural Banks, by adopting the principles of limited guarantee of joint-stock companies in their structure and co-operative principles in their modus operandi. These banks were mainly meant for extending agricultural credit to the poor farmers at a cheaper rate and to save the peasants from the ruinous interest rates and exploitation by the money lenders. By 1901, there were 64 such banks in the princely state. The credit facilities extended by these institutions at cheaper rate were misused by the big land holders. Many of these banks became defunct and by 1917 all these banks were closed. This was a unique experiment which failed due to lack of supervision and liberal financial assistance by the Government to these institutions.
In the former Bombay-Karnataka area, where the urban co-operative movement was strong enough, the ventures for promoting commercial banks by the local merchants were very much limited. However, some of the earliest efforts to promote local commercial banks in this region were: the Union Bank of Bijapur and Sholapur (1908), Bagalkot Commercial Bank (1922), Sri Lakshmi Bank, Hangal (1929) of Dharwad Dt, Hubli City Bank (1930), Belgaum Bank, Belgaum (1930) and the Bank of Citizens (1939) Belgaum. The earliest commercial bank to be founded for Uttara Kannada district was Bank of Rural India founded at Karwar in 1940. By 1930-40, the Bombay and Mangalore based banks specially Canara, Syndicate, Corporation Bank, Union Bank, S.B.I., Central Bank of India opened their branches in the commercial towns of Bombay-Karnataka.
In the former Hyderabad-Karnataka areas, till the establishment of the State-owned Hyderabad Bank in 1941, there were no conspicuous commercial banking ventures. However, from Gulbarga district, the Saraswati Bank (1922), Gulbarga Banking Co.(1930), Commercial Banking Company, Yadgiri (1938) were some of the earlier banking enterprises. Raichur had two banks i.e., Sri Sharada Banking Co.(1937) and Osmania Aziz Bank (1933). Bidar had no commercial banks till 1946. There have been remarkable changes in the banking in the country, specially after the nationalisation. Out of the 20 nationalised banks in the country, four are from Karnataka viz., Canara Bank (1906) and Vijaya Bank (1930) both originating from Mangalore, and Corporation Bank (1906) and Syndicate Bank (1925) both originating from Udupi. Among the private sector banks the Vysya bank Ltd., Bangalore (1930) and Karnataka Bank Ltd., Mangalore (1930) are the leading banks of the State, having branches outside the State also. Recognising the growing banking business in Karnataka the RBI opened its branch at Bangalore in 1953. The total number of employees working in the RBI Bangalore Branch office was 1695 as in September 1992. Since nationalisation, the concept of 'class banking' has been transformed into the concept of 'mass banking'. Now, Banks are considered as active instruments in bringing the socio-economic transformation at the grass-root level. They are playing vital role in the implementation of economic policies of the State and the Central Government according to plan priorities. In lending, the policy of credit-worthiness of the purpose has dominated over the credit-worthiness of the person. There is a remarkable change in the lending policy of banking institutions. Now, lending policy is target and priority sector oriented. Both public sector and private sector including co-operative banks in the State have actively responded continuously to the national policies of banking. In the popular loan mela programmes (1985-1987), the banks of Karnataka did not lag behind; so also in the promotion of Grameena Banks. The innovative banking policies like Lead Bank Scheme, loans under D.I.R., IRDP, 20 Point Programmes, Anthyodaya, adoption of villages by commercial banks and cooperatives for their all round development, and the service area approach to lending in rural area etc., have been fully implemented by the banks working in the State. Many commercial banks in the State have diversified their activities towards merchant banking, leasing, housing etc.
Since 1976-77, after the establishment of Grameena banks, better and intensive banking services are provided in the rural areas. Now, rural area is better served than before in 1969. All the districts of the State are covered by the Grameena Banks which has reduced the imbalanced economic growth between the urban and the rural areas to a certain extent.
In 1990, in terms of ratio of number of banks serving per lakh population, Karnataka stood fourth rank in the country having 9.5 number of bank offices per lakh population, as against 7.1 bank offices at the all-India level. The developed States in this regard other than Karnataka were Gujarat, Haryana, Maharashtra, Punjab and West Bengal. From among the list of developed states, the rank of Karnataka was 2nd. The spread of banking services in the rural areas was much better in Karnataka when compared to some other developed States. The spread of number of banks in rural segments per lakh population was 8 in the State, being next only to Punjab where it was 9. The Credit Deposit ratio of rural banks in the State was the highest among the States i.e., 107.4% in June 1990, as against all-India C.D.R. of 65.2%. The C.D. ratio of semi-urban branches also was the highest in Karnataka (76.9), compared to the national ratio of 50.5%. The geographical spread of rural branches in the State which was only 25% in June 1969 had increased to 55% in March 1989. This was mainly due to rapid expansion of Grameena Banks all over the State. The lending of commercial banks to priority sector including weaker section exceeded the stipulated target of 40% fixed by the R.B.I. In Karnataka, of the total lending, the share of priority sector was 45% (Rs. 3,487 crores) as in 1991. Karnataka was in the 8th rank among the major States in per capita deposit, which being Rs. 2,362. The per capita advance was Rs. 1,844 which was higher than the national average of Rs. 1,570, though it was lower than Maharashtra (Rs. 3,801), Punjab (Rs. 2,201), and Tamilnadu (Rs. 2,438). The deployment of credit was better in the State compared to all-India figures. The total investment made by commercial banks in Karnataka in the State/ Central Government loans floated during 1991-92 were as follows: Central Rs. 64 crores, State Development Loan Rs. 14.10 crores; other State Loans Rs. 4.50 crores (RBI Report). Some key indicators of commercial banks in the State as in March 1992 were as follows:- C.D.R,: 77.2%; Loans under D.I.R: Rs. 7167.3 lakhs; Loan under 20 point economic programme: Rs. 1,21,513 lakhs; Loans under IRDP: Rs. 26,174 lakhs; Priority sector advances: Rs.
3,47,005 lakhs; percentage of priority sector to total advances 42%; per branch deposit Rs. 251.75 lakhs; per branch advance Rs. 194.24 lakhs; rural deposits: Rs. 1,57,318 lakhs; rural advances: Rs. 1,24,724 lakhs.
Karnataka has a better banking network system than any other state in the country. Apart from the 19 nationalised banks, State Bank of India and its 7 associate banks are operating in Karnataka. There are also over 25 private sector banks besides 13 Regional Rural Banks operating in the State. There were 4,704 commercial bank branches (including 1,103 branches of 13 Regional Rural Banks) in the State as of March 2003 of which 3,180 were in rural areas. The share of rural branches was 46% against 25% at the time of nationalization. As in March 2003 the average per branch population for the state as a whole was 12,395. The aggregate outstanding deposits of commercial banks (including Regional Rural Banks) stood at Rs.63,840 crores and outstanding advances amounted to Rs.41,592crores at the end of March 2003. The credit deposit ratio of the state works out to 65% against the RBI stipulation of 60%. The priority sector advances amounted to Rs.19,436 crores as in March 2003, which works out to 46.73% of total advances against the RBI stipulation of 40%. The advances to agriculture and allied activities in the state stood at Rs.8,177 crores. The weaker section advances in the state stood at Rs.3,342 crores. While the per branch business for the state as a whole works out to Rs.22.41crores, that for rural branches it was significantly lower at around Rs.7.05crores. For the country as a whole it was Rs.30.52crores and for rural branches Rs.7.75 crores. In 2002-03, as many as 9,284 individual families were assisted under Swarnajayanthi Gram Swarojgar Yojana(SGSY) that came into effect from 1-4-1999. Apart from this 2,016 Self Help Groups(SHGS) were assisted to the extent of Rs.66.02crores in the same period.
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