Improving credit disbursal

Low credit-deposit (CD) ratio has been a perpetual problem for entrepreneurial and industrial ventures in Assam.
Improving credit disbursal

Low credit-deposit (CD) ratio has been a perpetual problem for entrepreneurial and industrial ventures in Assam. The Reserve Bank of India set the target for the scheduled commercial banks to achieve 60 per cent CD ratio. For the quarter ending in June 2019 it was only 47.27 in the state against 42.6 in 2018.Reserve Bank of India data show that the scheduled commercial banks in Assam had aggregate deposits of Rs. 34659 Crores in rural branches, Rs 45410 crores in semi-urban branches and Rs 86201 crores at the end of fourth quarter in 2019-20. Aggregate deposit comprises of current deposits, savings bank deposits and term deposits. Against the aggregate deposits, credits in rural centres was to the tune of Rs 18702 crores, Rs 21536 in semi-urban centres and Rs 30419 crores in urban centres. The figures of deposits in the first quarter of 2017-18 were Rs 24817 Crores in rural centres, Rs. 33174 Crores in semi-urban centres and Rs 64069 in urban centres.Credits in the first quarter of 2017-18 were Rs. 12352 crores in rural centres, Rs 13426 in semi-urban centres and Rs. 23412 in urban centres. The figures of 2017-18 and 2019 evidently show significant increase in aggregate deposits in the scheduled commercial banks in the state while credit figures indicate CD ratio remaining much below the target set by the RBI. A meeting of the State Level Banker' Committee held in September 2019 also brought to light dismal scenario in agriculture credit disbursal in the state.

Against the 52 per cent achievement in agriculture sectorof the Annual Credit Plan, the achievement in crop loan is only 24.8 per cent. Cascading impact of COVID-19 pandemic and lockdown coupled with floods ravaged the agriculture sector. The farmers reeling under severe crisis will not only require moratorium on crop loans, they also need to be supported with sufficient crop loan to rebuild their lives and resume cultivation as soon as flood waters recede. In course of the deliberation as the SLBC meeting, the State Government expressed strong displeasure over the poor performance of Swami Vivekananda Assam Youth Empowerment (SVAYEM) scheme.It is a flagship programme of the State Government announced in the budget speech in 2017 to provide credit support to the youths of Assam to take up income generating activities in the manufacturing, processing, service Sector, trading, rural transport service like Auto Rickshaw, e-Rickshaw, tourism, shops, repairing Centres, handicraft, cottage industries etc. Against 1,06,280SVAYEM proposals sponsored by the State Government against the target of one lakh, only 17.28 per cent (17,289) proposals were sanctioned and the disbursement was only 3.8 per cent. Quantum of assistance under the scheme is up to Rs. 1 lakh in case of new entrepreneur and up to Rs 2 lakh in case of existing entrepreneur. Beneficiary contribution is maximum of 25 per cent and the subsidy provided by the State Government is 20 per cent. Thus, for an amountof Rs 1,00,000 sanctioned as loan for a total project cost, Rs 25,000 is beneficiary's own contribution, Rs 20,000 is the subsidy to be disbursedand Rs 55,000 is the loan amount from the banks. Removal of the beneficiary contribution will go a long way in loan disbursal. For, contributing the margin money Rs 25000 to avail the loan by many of the applicants may not be feasible due to prevailing pandemic situation, financial losses during lockdown and restrictions in unlockdown periods. Rise in number ofCOVID-19 positive cases, lockdown restrictions and floods have disrupted normal functioning of the banks. Prioritising credit disbursal by the bank in the prevailing situation will help the unemployed youth and existing entrepreneurs to explore new and innovative income generating activities. It will also help create new employment avenues. This will, however, require the banks to play pro-active roles. On its part, the State Government also cannot afford to wait till the next SLBC meeting to follow up. To ensure that not a single day is lost, the government needs to increase the coordination level with the banks to push for credit disbursal not just against the flagship programmes but also lending in all the priority sectors – agriculture, micro, small and medium enterprises, export credit, education, housing, social Infrastructure, renewable energy. In absence of formal banking and easy access to institutional credits from the commercial scheduled banks a vast majority of the rural poor households in the state have been forced to seek credit from informal credit market at much higher interest rates. Banks and the state government can create a safety net against the vulnerability of the poor households in the informal credit market. The vulnerability of such households has only increased in the prevailing pandemic situation. A pro-active role by 3700 bank branches and the state government in credit disbursal will bring smiles to many.  

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