To the long list of 28 public sector banks in India, one more was added with the inauguration of the Bharatiya Mahila Bank (BMB) on Tuesday by Prime Minister Manmohan Singh. The bank is unique in more ways than one. It will focus predominantly on women, apart from being staffed largely by them. To the BMB will go the distinction of being the first-ever public sector bank to have been set up by the government, as the others came into being through nationalisation of existing private banks. Women, who constitute about half the country’s population, account for 80 per cent lower per capita credit compared to men. This is largely because they are unable to offer collateral for borrowings given that property is invariably held in the name of the father, husband or son. That there is a gender bias in banking services is clear. It was precisely this that led to the creation of women's cooperative banks such as the Shri Mahila Sewa Sahakari Bank Ltd. which extended financial support to self-employed women in the unorganised sector. Yet, it is not clear if an all-new, full-service bank is the way to get more women into the financial system. Could not the same objective have been achieved through the existing public sector banks that have an extensive network in rural areas, where financial exclusion of women is the most acute?

The BMB will face the same issues as other public sector banks; if anything, it will be handicapped even more by the fact that it is a start-up operation. For example, if the bank is to be commercially viable, it needs an extensive network in the cities where it can attract deposits, but its lending focus has to be in the rural areas where women are marginalised. How does it solve this network dilemma? In the first year of operations at least, the bank will be opening branches only in the cities. The initial year or two will largely determine if the concept of the BMB will be a success. The bank will have to conceive and devise innovative products that will encourage women to bank with it. The bank has already indicated that it will offer higher deposit rates to attract savings bank customers, but this should not result in pushing up lending rates. It will have to tailor products for the unorganised sector where lending is largely without collateral. The bank is likely to be hamstrung in recruiting experienced staff; public sector banks are reported to be facing a staff shortage. Even assuming that staff from other banks can be attracted by means of promotions and higher salaries, it is doubtful if they will agree to move to rural branches. How well the BMB handles these challenges is what will decide if the idea will be a success — or if the BMB will turn out to be just another public sector bank.

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