Banking and monetary regulator, Reserve Bank of India had set up a viability gap funding scheme in the north eastern region so as to aid banks to increase their branch network there.

But the scheme seems to have received serious setback with meager response coming out of the pilot project in the north east.

Had the scheme been a success in the NE region, the apex bank would have given the project national stature. But the project seems to be a big failure with not even a single branch being set up by using the money given by the apex bank.

"It's an embarrassment for us. There is not much progress under this scheme," an RBI official in Mumbai said.

The NE states bear a major chunk of unbanked areas in the country, and the failure of the project also comes as a setback to the financial inclusion plan of RBI.

The RBI has prepared a list of as many as 35 under-banked areas across Arunachal Pradesh, Manipur, Meghalaya, Nagaland and Tripura for the pilot run of the scheme.

According to a senior SBI official, "Under this scheme, the state government has to provide security and basic infrastructure like electricity and water. But despite repeated reminders, it is difficult to get these facilities from them."

The only exception seems to be Meghalaya where SBI, Punjab National Bank and United Bank of India are planning to open branches in the next month.

"Other governments are not as forthcoming as Meghalaya in promising security arrangements. We are in talks with them," the RBI official in Mumbai said.