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Blanket banking: Mitra sets mid-2015 target

Mitra at the meeting. Picture by Biswanath Banik

Calcutta, Dec. 23: Finance minister Amit Mitra today said the government would bring all gram panchayats under the banking network in the next one-and-a-half years.

According to government data, the state would have to take banking services to 839 gram panchayats if all 3,354 of them have to be covered under the system.

Mitra’s announcement came after the monthly state level bankers’ committee meeting today.

“We have taken initiatives to set up at least one bank in each of the gram panchayats in Bengal…. Banks have agreed to come forward to make the plan successful. We hope that we can achieve the target by the next one-and-a-half years,” he said.

When the Saradha scam erupted earlier this year, several sections had said bank penetration in Bengal’s villages was poor, because of which many people had chosen to invest in sham funds companies such as Saradha.

Senior government officials said the finance minister was hopeful of achieving the target as the state’s initiative to allot 300 to 400sqft to nationalised banks in gram panchayat offices against a monthly rent of Re 1 had got a good response.

“In the past two months, the UBI has opened 50 such branches. Now, Canara Bank has come forward. We hope that another 89 branches will be ready in the next few months,” Mitra today said.

The decision to help banks set up branches in rural areas is a welcome step, economists said, as rural people end up depending on moneylenders who charge exorbitant rates of interest in the absence of a proper credit delivery system.

The erstwhile Left Front government had also tried to address the issue by offering space to banks, but the initiative failed to deliver desired results.

Mitra, however, was confident that the initiatives of the Trinamul government would result in financial inclusion of rural Bengal and give village people access to various banking facilities, which would result in growth.

Although the finance minister said that all major banks would join the effort soon, senior state officials said the government would have to provide proper infrastructure in gram panchayats to achieve the target in time.

“The majority of gram panchayats outside the banking network are in areas with poor infrastructure such as lack of good roads, electricity and Internet coverage. This is the reason why no bank has shown interest in setting up branches there. The government has to develop the required infrastructure to attract major banks,” said a senior finance department official.

Mitra today set another target — of achieving a credit-deposit ratio (CDR) of 70 per cent by March 2014. At today’s meeting, he also set the March 2015 target at 73 per cent, said a source familiar with the proceedings of the state level bankers’ committee meeting.

The CDR of a state is a measure of how much a bank is able to mobilise its deposits into credit channels within the state in a stipulated period (normally a year). The ratio is 75 per cent nationally, while it is 66 per cent in Bengal.

Some bankers said the government would have to play a proactive role for the target to be met.

“For improving the CDR, the government has to play a key role in generating credit absorption capacity. For that, it has to increase the pace at which projects are sanctioned so that credit can be channelled into various sectors such as agriculture, infrastructure and industry,” a senior banker said.

According to him, if projects such national highways, Metro rail projects and others are getting delayed, achieving a higher CDR would not be easy.

“The government is asking banks to increase lending through Kisan Credit Cards to self-help groups and small and medium enterprises. But at a time the economy is passing through a challenging period, reflected in the low growth rates, banks are more focussed on improving recovery of doubtful debts. Many banks are now focussing on small-ticket retail lending (home loan, car loan) where the risk is lower,” said another official of a city-based public sector bank.

He added that the requisite support from the administration for recovery of bad debts was often delayed, which makes it difficult for banks to lend out more.

In the bankers’ committee meeting, poor credit linkage to self-help groups was also discussed. Mitra admitted it was an area of concern for the state government.

Another focus area for the state government is agricultural credit, where the off-take has been low in comparison to some other states. Mitra said the state government was making all efforts to reach out to more people with farm loans.