This piece originally appeared on Livemint.com
So far, the bank branch has been the nerve centre of the government’s demonetization drive. Branches in metro areas are struggling to cope with demand. For customers banking on branches in rural areas, it could be worse. About 93% of the 595,000-odd rural areas remain ‘unbanked’—they have no physical branch (see chart 1). And there are 629 million Indians, or about 81% of population in rural areas, residing in these 554,000-odd unbanked centres (see chart 2).
This unbanked number should be tempered by two new supply channels. The first is the 125,000 ‘bank mitras’—bank agents assigned to a fixed unbanked area under the Pradhan Mantri Jan-Dhan Yojana. The second is the 531,000 roving banking correspondents in rural areas, whose coverage details are unavailable. Both these sets, and the post office, need to come into play in rural areas. If they don’t, the yawning gap in branch coverage between rural areas and other areas (see chart 4) can greatly inconvenience rural Indians in this period of transition.