Ernakulam is to be declared as the first district in the country to have meaningful financial inclusion on November 22, but there are areas which lack banking facilities in the district.

Kadamakkudy panchayat, comprising a group of islands, has no ATM, a facility which is available to most communities in the State.

“The new road from Vallarpadam to Kalamasserry passes through the panchayat, but there is no ATM anywhere along the route. Despite being a highly commercially viable route, no bank has set up ATMs along the road,” said Ebenezer, a resident of the panchayat.

As the population in the islands is scattered, the panchayat does not qualify under the RBI norms for setting up an ATM or a branch of a public sector bank.

The main banking facility available in the islands is provided by Korampadam Service & Cooperative Bank Limited. However, terms for operating service cooperative banks are different from those applicable for private sector scheduled banks or public sector banks. The service cooperative banks are not entitled to issue Magnetic Ink Character Recognition (MICR) compliant cheques. MICR cheques facilitate speedy clearance in banking channels. The handling non-MICR cheques, however, can involve a lengthy process for clearance and delay a monetary transaction.

“This apart, the existing banking facility does not provide the opportunity for people to avail themselves of the benefits offered by the general banking industry. For instance, the service cooperative bank does not offer agricultural loan at the rate at which it is offered by public sector banks. While the public sector banks offer farm loan at 7 per cent which could be effectively reduced further on prompt repayment within a year, the service cooperative bank offers loans at more than double that rate,” said Ebenezer.


Under the prevailing banking norms stipulated by the RBI, service cooperative banks are among the several entities which are not eligible to be called a bank, despite doing business in the financial sector.

Though the RBI had brought the issue to the notice of the authorities in the State, the opposition by the cooperative sector had forced the apex bank to withhold the move in the State, according to sources in the banking industry. Such banks could face the axe of the apex bank, as and when the existing waiver on nomenclature is reversed.

The Union Bank of India, the district lead bank under the RBI lead bank scheme, has set up an office to extend banking facilities under the Business Correspondent scheme in the panchayat, according to K.R. Jayaprakash, Lead District Manager.

The Business Correspondent, a banking service personnel on contract, is expected to provide banking services at the doorsteps of the customer.

Kadamakkudy does not qualify under RBI norms for setting up an ATM.