Credit deposit ratio on upward spiral in UP

This simply means quantum of credit percolating to state economy has been increasing relative to increase in banks' deposits

The Credit Deposit Ratio (CDR) of commercial banks in Uttar Pradesh has continued its upward spiral over the last three years.

This simply means the quantum of credit percolating to the state economy has been increasing relative to the increase in banks’ deposits. Bulk of the credit has been absorbed by the priority and agriculture sectors.

On March 31, 2013, the CDR stood at 56.14%. The corresponding CDR in 2011 and 2012 stood at 47.60% and 48% respectively. The CDR of UP shot past the 50% mark for the first time in the third quarter of 2012-13, when it climbed to 54.34% at the end of December 31, 2012.

The growing network of commercial banks in remote areas is one of the reasons for the spurt in CDR. The Centre had approved opening up 3,000 new bank branches in UP by March 2014 to reduce the per capita banks to population ratio from 16,000 to the national average of 13,000 to boost financial inclusion, deposit mobilisation and credit growth.

In 12 months, the commercial banks added 921 new branches to their combined network to reach 12,724 till March 2013.

“The scale of finance has been increased in UP and there has been growth in Kisan Credit Card (KCC) and agricultural crop loans. This has been reflected in higher CDR in UP,” National Bank for Agriculture and Rural Development (NABARD) chief general manager K K Gupta told Business Standard.

“A 10% growth in agricultural credit itself translates to 2-3% growth in aggregate credit off-take,” he noted.

He, however, cautioned there should be absolute increase in credit rather than mere rise in CDR to ascertain real credit growth. “The CDR may also rise if the growth in deposits has been sluggish against any significant increase in advances during a given period.”
 
At the end of fourth quarter of 2012-13, the bank deposits and advances stood at Rs 5,18,542 crore and Rs 2,91,095 crore respectively. They grew by Rs 97,099 crore and Rs 88,787 crore respectively year-on-year. This clearly shows that both deposits and advances had grown indicating real credit growth in the economy.

“The state has announced some incentive schemes in animal husbandry and poultry segments, which has helped credit growth. NABARD has also supported 392 rural godowns and cold storages with credit under a central scheme,” Gupta informed.