‘Credit-deposit ratio of banks has declined by 1.50 percentage points'

Representatives of the State Government, the Reserve Bank of India and the National Bank for Agriculture and Rural Development (NABARD) raised serious concerns about the performance of banks in the State at a meeting here on Tuesday to review the performance of the banking sector.

Addressing the 121 meeting of the State Level Bankers' Committee (SLBC), Chief Secretary S.V. Ranganath observed that the credit-deposit ratio of banks in the State had declined by almost 1.50 percentage points in the last year.

Moreover, the share of loans advanced by banks to the priority sector, as a proportion of all advances, had declined by more than two percentage points in the last two years. “It is worrying that this proportion in 2011-12 was at its lowest in four years,” Mr. Ranganath observed. He noted that lending to the priority sector had not suffered as badly even during the worst years of the economic slowdown, 2008-09.

Mr. Ranganath said that the 12 per cent “contraction” of the annual credit plan for 2012-13 – from Rs. 55,231 crore in 2011-12 to Rs. 48,612 crore — “is not acceptable”. Only 8.7 lakh Kisan Credit Cards had been distributed in the State, compared to the target of 15 lakh cards, he noted. “The SLBC needs to be more effective,” Mr. Ranganath said.

The RBI Regional Director Uma Shankar said that to make financial inclusion meaningful it is necessary for banks to actually lend to people who have been given new accounts. “Only a small portion of the villages with a population of more than 2,000 persons have been provided with credit facilities,” Ms. Uma Shankar noted.

She also urged banks to review and monitor the functioning of banking correspondents appointed by banks. “Banks need to ensure that the conduct of their correspondents does not affect their reputation,” she said.

Referring to the case of the Karnataka Rajya Vanija Cooperative Bank, which is the only licensed cooperative bank in the country, Ms. Uma Shankar asked the State Government to extend assistance to the institution. She observed that the bank had a risk-weighted capital adequacy of less than two per cent, which reflected poorly on its capital base. “The State should provide funds to it just as it did to the district cooperative banks in Kolar and Chikballapur,” she said.

Chief General Manager, NABARD, S.NA. Jinnah, expressed concern over the decline in the proportion of bank lending to the primary sector — agriculture and allied activities. Karnataka, Mr. Jinnah said, has a lower per capita credit off-take per hectare than States such as Kerala and Tamil Nadu. “The scale lending by cooperative institutions in the State also compares less favourably with other States in the region,” he remarked. Of the 68 lakh farmers in the State, only 39 lakh are being serviced by Kisan Credit Cards, he observed.

SLBC Chairman and Chairman and Managing Director, Syndicate Bank, M.G. Sanghvi said that the theme of the SLBC for 2012-13 is “Comprehensive Financial Inclusion”.

Keywords: Karnataka banks

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