Section 23 of Banking Regulation Act, 1949

There is also a regulatory constraint which is that according to Section 23 of Banking

Regulation Act, 1949, no person other than the security guard should be posted at Off-site

ATM Centre. Most individual in rural areas require some personal support as they might not

possess the required knowledge to operate and understand the Automated Teller Machine

(ATM). Thus, in rural areas, in ATMs usually the security guard isn’t knowledgeable enough to

help other people in understanding the operation of the ATM. As a result, most banks view

rural market as a regulatory constraint rather than an economic opportunity.

Apart from the aforementioned access issues, the banks don’t view the rural market as

profitable because of various reasons. Banks believe from past experiences that most of the

loans in rural areas become non-performing and thus increase the cost to the bank.

Moreover, because the transactions are small in size the transactional cost to the banks

increases and as result these banks require more customers per branch or channel to

breakeven. Additionally, the literacy rate and financial literacy is low in rural areas so the use

of technology is restricted which leads to high cost to serve for the banks as the rural people

don’t use the most cost-saving channels for the bank.

Strategies made by any institution, including banks, are based on past data and experiences,

as