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HUGE SHORTFALL OF Rs1,80.000 crore IN LENDINGS TO AGRI, WEAKER SECTIONS AND SME SECTORS.
1*The data of incremental credit (y-o-y)as on Dec 08 shows that Banks have been providing in unduly large measure credit for credit cards (by 70%), all services sectors (28%), construction (57%), real estate (by 48%). Expansion of credit for agriculture and allied activities was 22% and for small-scale industries a megre 7%. RBI has to ask itself as to how its massive expansion of liquidity measures to the tune of Rs 3,80,000 Crore will correct these inequities in credit distribution and how their stimulus measures will increase employment and thereby income generation at individual level paving way for economic revival. Banks will not do it by themselves. Therefore, any liquidity expansion measures that the RBI initiates have to be linked to the end use of credit; in particular, more credit has to flow in favour of the unorganised sectors, which account for the purchasing power of large sections of the population. Otherwise, the stimulus measures that are taken up will not serve the end purpose in view, which is to provide a genuine stimulus to effective demand all along the line.
2*A target of 18% of net bank credit (NBC) is set for agriculture and 10% for weaker sections. RBI data have revealed that 14 out of 28 public sector banks and 17 out of 23 private sector banks have not achieved the 18% target as at the end of March 2008; likewise, as many as 15 public sector banks and all the 23 private sector banks have not achieved the 10% target of lendings to Weaker Sections. Taking these data into account, an estimate of the possible shortfalls in agricultural and weaker section loans is given in the table below:
Shortfalls in Agricultural and Weaker Section Loans: By Bank Groups (in Rs crore)
| 1.Agricultural Advances |
32,206 |
Public Sector Banks |
21,893 |
Private Sector Banks |
10,313 |
2.Weaker Section Loans |
45,335 |
Pub.Sector Banks |
19,981 |
Pvt. Sector Banks |
25,354 |
Aggregate Short Fall (1+2) |
77,541 |
Source: RBI (2008): Trend and |
Progress of Banking in India 2007-08 (EPW 240209) |
These estimated shortfalls of about Rs 77,500 crore pertain to only agriculture and weaker section loans.
3*Small and micro enterprises are neglected too in dispensing credit. The National Commission for Enterprises in the Unorganised Sector (NCEUS) has recommended that loans to Small and Micro Enterprises (SME) should be enhanced to 10%. Presently the actual achievement is a mere 4.5% of NBC. The shortfall works out to a huge amount of Rs 102,760 crore. These shortfalls in lendings to Agriculture, Weaker Sections and SME segment together add up to a whopping sum of about Rs 180,000 crore – roughly 8% of non-food credit outstanding as at the end of March 2008.
4* Recovery of Agri advances is excellent. The NPAs of Public Sector Banks in Agri segment declined from Rs 8,020 Crore as on March 2008 to Rs5,262Crore as on Dec 2008(-34%). Agri NPA component to total Agriloans has decreased from 3.2% to just 2% during the same period. Recovery of Weaker section loans is also excellent as overdues are just about 5%. So there is no earthly reason why there should be a huge shortfall in lending to these sectors.
5* This amount of bank credit disbursed amongst the labour intensive unorganised sectors will greatly help to widen the demand base of the economy as such sectors account for the employment and livelihood of over 80% of the country’s population. This can be achieved only if public policies are consciously directed towards it.
4*HIGH TIME FOR GOVERNMENT AND THE RBI TO MAKE BANKS DISBURSE THIS SHORTFALL IN LENDINGS OF Rs 1,80,000 CRORE TO PRIORITY PRODUCTIVE SECTORS WHICH WILL GENERATE GREATER EMPLOYMENT AND INCOME WHICH IN TURN WILL PROVIDE STIMULUS FOR ECONOMIC GROWTH. ADDITIONAL EMPLOYMENT GENERATION IS THE NEED OF THE HOUR. CREDIT OF Rs 1,80,000 CRORE EXTENDED TO LABOUR INTENSIVE PRODUCTIVE SECTORS GENERATES MORE EMPLOYMENT AND INCOME TO INDIVIDUALS THAN THE SAME AMOUNT GIVEN FOR CREDIT CARDS, REAL ESTATE , SERVICE SEGMENTS AND CAPITAL INTENSIVE BIG INDUSTIES.
LET THE PRIORITIES FOR CREDIT DISPENSATION BE RIGHT.
RIGHT PRIORITY IS GIVING CREDIT TO PRIORITY SECTORS. |
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