Loans to agriculture, MSME sectors on slow lane

The sanction of loan to priority sectors like agriculture and allied services and MSME (Micro, Small and Medium Enterprises) units failed to gather momentum in the July-September period as banks struggled to meet their annual credit plan (ACP) for 2011-12, achieving only 43 per cent by September end.

Of the total advances of Rs 80,284.39 crore till September, agriculture advances stood at only Rs 17,710.71 crore with MSME advances being disappointingly low at Rs 12,555.85 crore.

“Credit for the agriculture sector is only 22 per cent of the total advances whereas nearly 70 per cent of the state's population is dependent on the sector. I urge the banks to step up lending to this sector. Besides, the percentage of MSME advances to total advances is only 15 per cent. This is far from satisfactory and is not in tune with the steps taken by the state government to promote such units,” said Prafulla Chandra Ghadai, state minister for finance and public enterprises at the 125th meeting of State Level Bankers' Committee (SLBC).

He also raised concern over the low CD (credit-deposit) ratio of certain commercial banks.

“The continued CD ratio of some banks is a cause of concern. There is some improvement but the CD ratio in the state is still below the national average. The CD ratio of the state cooperative bank is 116.5 per cent and there is no reason why the CD ratio of commercial banks should be low,” he added.

The CD ratio of banks stood at 70.32 after it was recalculated factoring in the recommendations of the Thorat committee. The committee had recommended that for computing the CD ratio, the credit utilized in the state has to be taken into account irrespective of the place of disbursement. While the CD ratio of rural branches stood at 100.36, that of semi-urban and urban branches was 48.60 and 79.94 respectively.

The PSU banks with very low CD ratio include Central Bank of India (42.23), Punjab & Sind Bank (11.42), State Bank of Hyderabad (10.57), Syndicate Bank (35.84) and Vijaya Bank (35.42). Their private sector counterparts with unimpressive CD ratios include ING Vysya Bank (20.29), South Indian Bank (1.51) and Laxmivilas Bank (15.47).

Apart from below par lending to agriculture and allied sector, banks' achievement under ACP was unusually low at 43 per cent by September-end. The target of ACP for 2011-12 was Rs 17,663.41 crore compared to which achievement was only Rs 7,649.94 crore by end of September.

Slow credit offtake was mainly due to two devastating floods that hit the state, said S K Dey Purkayastha, general manager (Orissa) of UCO Bank. Credit utilization in the non-farm sector was also affected by high input costs.

“Performance of banks under ACP is not up to the mark. Only five districts in the state have been able to achieve more than 50 per cent of the target. Banks have to ensure 100 per cent credit deployment,” said S Chandrasekharan, executive director, UCO Bank and chairman of SLBC. On the financial inclusion front, banks have been able to extending banking facilities to 1,160 out of 1,877 eligible villages in the state with population of over 2000.