State-owned banks lead the way in rural financial inclusion

State-owned banks play a crucial role in providing essential banking services to low-income people living in rural areas of the country.

These banks have made it possible for individuals from all walks of life, including farmers, workers, and students, to access banking services by opening accounts with minimal deposits. As a result, state-owned banks have become the preferred choice for the majority of customers seeking such accounts.

Recognising the need for financial inclusion, the Bangladesh Bank took a commendable step by introducing bank accounts specifically designed for farmers and impoverished individuals. For a mere Tk10, farmers can open an account, while workers in the garment sector have been offered the opportunity to open an account for Tk100.

These initiatives have contributed significantly to the rapid increase in the number of previously unbanked individuals gaining access to essential banking services.

Md Obayed Ullah Al Masud, the former managing director of state-owned Rupali Bank, told TBS that the number of branches of state-owned banks at the rural level is high and if the number of branches is high, the number of customers will also be high. But now the branches of the private banks are close to the state-owned banks.

"Private banks open branches with commercial considerations, but for state-owned banks, banking services for marginal people are one of the considerations. Private banks have less manpower, but are digitalised.

He further said, "Rural people have a kind of 'digitalization inertia', for which they prefer to go to places where they can go and sit down and talk openly. Besides, the government's social welfare benefits are provided through state-owned banks, due to which the inclusion of low-income people in state-owned banks is high."

According to data from the central bank, state-owned commercial banks have emerged as leaders in opening Tk10, Tk50, and Tk100 accounts, surpassing other categories of banks. As of December 2022, these banks accounted for an impressive 54.80% of the total number of no-frill accounts, with 14,337,058 accounts opened.

No-frills bank accounts require zero or very low minimum balance, and other banking facilities such as withdrawals and ATM and debit card facilities at zero charges, to enable universal access to banking facilities. No-frills accounts are aimed at offering the most basic banking service to those from low-income backgrounds.

Bankers have noted that state-owned banks have a greater presence in rural areas compared to private and foreign banks which tend to concentrate in urban centers. Additionally, a significant proportion of the government's social security funds are channeled through state-owned banks. Consequently, individuals with low incomes residing in rural areas are able to access a broader range of services through state-owned banks.

Through these accounts, the government's social safety net funds are directly transferred into beneficiaries' bank accounts. Furthermore, many account holders are able to avail themselves of pension benefits.

To ensure access to the government's social security initiatives, the opening of bank accounts now requires the presentation of NID cards only. As a result, individuals with Tk10 accounts can benefit from various schemes such as old age allowances, widow allowances, and medical assistance for distressed and indigent patients.

During the reporting quarter, the total deposits in the scheduled banks' Tk10/50/100 accounts amounted to Tk3,565 crore, with state-owned commercial banks accounting for Tk2,367 crore or 66.41% of the total deposits.

Presently, there are 61 scheduled banks in the country with a total of 11,153 branches, out of which 5,413 branches are located in rural areas, constituting 48.53% of the total. State-owned banks, on the other hand, operate 3,823 branches, with 2,054 of them situated in rural areas, making up 54% of the total branches.

In terms of performance in Tk10/50/100 accounts, four state-owned banks are on the list of top five banks. These five banks have opened 80.88% of these accounts.

Among the state-owned banks, Sonali Bank alone accounts for 26.32% of the total accounts, while Agrani Bank and Janata Bank have opened 14.82% and 10.72%, respectively. Another significant contributor to financial inclusion through no-frills accounts is Bangladesh Krishi Bank, a specialised bank, which holds 17.02% of the total accounts.

Back in 2010, the Bangladesh Bank took a crucial step towards the financial inclusion of the general people by introducing bank accounts for farmers with a deposit requirement of only Tk10. This initiative has been recognised as an important milestone in the nation's efforts to alleviate poverty.

By the end of December 2022, the number of Tk10 accounts held by farmers had reached an impressive 9,906,824. The total amount deposited in these accounts by farmers amounted to Tk563 crore, reflecting a 10.18% increase compared to the previous year.

Poverty alleviation stands as one of the core objectives of the Bangladesh Bank. In line with this goal, banks have actively encouraged individuals from economically disadvantaged backgrounds to open Tk10 accounts. This initiative has yielded positive results, with 3,537,995 individuals from impoverished backgrounds now having access to banking services. Through these accounts, the government has been able to efficiently distribute financial assistance during the challenging times of the Covid-19 pandemic.

On the other hand, the number of Tk100 bank accounts held by readymade garment workers exceeded 800,000 by the end of December 2022. The total deposits in these accounts surpassed Tk260 crore last December, marking a notable increase of 37.59% compared to December 2021.