RURAL BANKING IN GUJARAT

Rural banking started since the establishment of banking sector in India. Rural Banks in those days mainly focused upon the agro sector. Regional rural banks penetrated every corner of the country and extended a helping hand in the growth process of the country. Today, branches are the primary delivery channel in rural areas. Though there are 32,000 commercial bank branches in India, they cover less than 7% of total villages. Opening more branches is not necessarily profitable as many pockets of rural areas do not have business enough to justify an expensive branch channel. Rural banking having committed 75% of their branches network to serving rural and semi-urban population, public sector banks have to adopt a financial emerging approach to rural banking.
Improve access in rural areas

To improve access in rural areas, banks need to modify existing channels, introduce new channels and identify innovative ways to integrate there are two ways---

1) Modify Existing Channels
Fortunately there are a variety of options available for banks looking to modify their existing channels. To reduce the costs imposed by branches, banks should consider the option of sharing their branch
Infrastructure. This would not be too dissimilar to the example of the
Telecom industry sharing network infrastructure or the fast food industry sharing food courts in urban areas.

2) Introduce New Channels
The RBI allows banks to appoint business correspondents and facilitators to be used as intermediaries in providing banking services. NGOs, MFIs, Societies, Section 25 companies, registered NBFCs not accepting public deposits, and Post Offices can be appointed as Business Correspondents. Business Correspondents can provide several services which are not currently offered by SHGs and MFIs, including:

(i) identification of borrowers and fitment of activities;
(ii) collection and preliminary processing of loan applications including verification of primary information/data;
(iii) creating awareness about savings and other products and education and advice on managing money and debt counseling;
(iv) processing and submission of applications to banks;
(v) promotion and nurturing Self Help Groups/Joint Liability Groups;
(vi) post-sanction monitoring;
(vii) monitoring and handholding of Self Help Groups/Joint Liability

SOME CHALLENGES BEFORE RURAL BANKING-
Challenges facing rural banking --The main challenges facing by banking are the role of financial instrumentation in different phases of the business cycle, the emerging compulsions of the new prudential norms and benchmarking the financial system against international standards and best practices. The need for introduction of new technology in the banking and the importance of skill building and intellectual capital formation in the banking industry are also equal important.
1) Financial intermediation Till recently the role of banks in the economy was perceived to be 'catalysts' of mobilizing resource requirement for growth. This view has undergone a change and banks are no longer viewed as passive mobilizer of funds, Efficiency in the financial intermediation is the ability of the financial institution to intermediate between savers and investors, to set economic prices for capital and allocate resources among completing demands is now emphasized. In the wake of the recent emphasized in the economy the intermediation role assumes even greater relevance. By virtue of their experience and superior credit assessment of the investment proposals banks should play a significant role in identifying nurturing growth impulse in the commodity and service producing sector in the economy.
2) Market discipline Transparency and disclosure norms are assuming greater importance in the emerging their notes to balance sheet. Efforts are on to set up a credit information bureau to collect and share information on borrowers and improve the credit appraisal of banks and financial institutions.
3) Adopting International Standards The fallout of Asian crisis and the impetus given to the strengthening of domestic financial systems has resulted in a more by the regulators to set up universally acceptable standards and codes for benchmarking financial systems. RBI has also set-up an advisory group to draw a road map for implementation of appropriate standards and codes in light of existing levels of compliance, cross country experience and the existing legal and institutional infrastructure. In view of the vast diversity in the size, an asset liability profiles of the banks it becomes very difficult for a few of them to meet the new benchmark of global standards. Each bank has to draw it own strategy to move towards this direction. 4)Technology Banking Innovation in technology and world-wide revolution in information and communication technology are perceived to be the catalyst of productivity growth. The relationship between IT and Banking is fundamentally symbiotic. It is expected to reduce costs, increase volumes and facilitate customized products. Technology adoption is a dire necessity for the public sector banks to complete with new generation private sector and foreign banks. It is a `compulsion' rather than a `choice'. Retention of existing customer is the primary concern of majority of the banks today.
The major challenge for banks is to fall in line with the emerging scenario and adopting the require technology to provide stake-of-the-art services to the customers. Introduction of on-line, inter-connected automatic teller machines (ATM), telephone banking, on-line bill payment and Internet banking are some of the high tech facilities. Banks have to provide in order to survive in the competitive scenario. Technology should ultimate results in better customer service, low cost and quick delivery.
The introduction of Business Correspondents may face some challenges from
* labor unions. However, Diamond believes that there may be some options to address the concerns of the current workforce while using Business Correspondents to capture more value from rural customers.
*. The lottery network and distributes government benefits. To increase the access of its services opened about 2.8 million new accounts and estimates that 40% of its banking transactions are handled through the banking correspondent channel.
* Satellite offices are a cost-effective alternative to branches. These
Offices can be established at fixed premises in villages and are controlled and operated from a base branch located at a block headquarters. All types of banking transactions may be conducted at these offices.
* Banks have, however, not used this channel actively, despite the argument that this channel is relatively less expensive, as it can draw personnel from the main branch and can remain open for just two days a week. This channel, therefore, is appropriate in blocks and districts which are densely populated. In the urban areas, most I banks opt for an extension counter where the business does not justify a full-fl edged branch.
* Similarly, satellite branches can cater to rural areas which do not justify a large branch. Where banks do not find it economical to open full-fl edged branches of satellite offices, mobile offices may be more appropriate. Mobile offices extend banking facilities through a well-protected truck or van. The mobile unit visits villages on specified days/ hours. The mobile office would be affiliated with a branch of the bank, and serve areas which have a large concentration of villages. This will not be dissimilar to the mobile ATMs implemented by some of the banks in the urban areas.
Determine the Combination of Channels
There is no one right channel or solution to improve access in rural
areas. Banks have to evaluate the trade-offs between those channels
Branches and Satellite Branches— In addition to providing regular
banking operations, providing backend support to manage and audit
the operations of business correspondents.
• A low-cost, custom-made ATM— Managed by a business
Correspondent to bring down the operating cost and scale the channel.
• An e-kiosk—Managed by a business correspondent with internet
banking, ATM and POS terminal in relatively large rural areas.
• A business correspondent—Using manual ledgers or POS/Palmtop to act as deposit collector and remitting agent in smaller rural areas
Financial System is the most important institutional and functional vehicle for economic transformation of any country. Banking sector is reckoned as a hub and barometer of the financial system. As a pillar of the economy, this sector plays a predominant role in the economic development of the country. The geographical pervasiveness of the bank coupled with the range and depth of their services make the system an indispensable medium in every day transactions. The virtual monopoly of banks in `Payment Mechanism' touches the lives of millions of people every day and every where. Thus the banking sector has been playing a significant role as growth facilitator.
The changing paradigm of Banking Change is the only constant factor in this dynamic world and banking is not an exception. The changes staring in the face of bankers relates to the fundamental way of banking-which is undergoing rapid transformation in the world of today, in response to the forces of completion productivity and efficiency of operations, reduced operating margins better asset/liability management, risk management, any time and any where banking. The major challenge faced by banks today is to protect the falling margins due to the impact of competition. Another significant impact of banks today is the technology issue. There is an imperative need for not mere technology up gradation but also its integration with the general way of functioning of banks to give them an edge in respect of services provided to optimizing the use of funds and building up MIS for decision making and better management of assets and liabilities and risk assumed which in turns have a direct impact on the balance sheet of banks as a whole. Word over, technology has demonstrated potential to change methods of selling marketing, advertising, designing, pricing and distributing financial products of an electronic, self-service product delivery channel. All these changes call for a new, more dynamic, aggressive and challenging work culture to meet the demands of customer relationships, product differentiation, brand values, reputation, corporate governance and regulatory prescriptions
Human resource development in banks --The core function of HRD in the banking industry is to facilitate performance improvement, measured not only in terms of certain financial indicators of operational efficiency but also in terms of quality of financial services provided. The skill level, attitude and knowledge of the personnel play an important role in determining the competitiveness of a bank. Banks have to understand that the capital and technology-considered to be the most important pillars of banking -are replicable, but not human capital, which needs to be viewed as a valuable resource for the achievement of competitive advantage. The primary concern of the bank should be to bring in proper integration of human resource management strategies with the business strategies. It should faster cohesive team work and create commitment to improve the efficiency of its human capital. More than operational skills today's banking call for these `soft skills' to attend the needs and requirement of the customers at the counter. The need to adopt global best practices to financial sector regulation and supervision and adopt them to the domestic environment, places a premium skills and expertise of the bank human resources.
Conclusions
The Indian banking industry is facing newer challenges in terms of narrowing spreads, new banking products and players and mergers and acquisitions. Adoption of risk management tools and new information technology is now no more a choice but a business compulsion. Technology product innovation, sophisticated risk management systems, generation of new income streams, Building business volumes and cost efficiency will be the key to success of the banks in the new era.

REFERENCES-
1)www.rediff.com Gujarat villages to bank on pocket-sized ATMs
2)www.emagister.in/banking_financial_services_courses
3) Dr. Sudhindra Bhat-Managing Challenges in Banking Industry