Grassroot banking below par in Bengal

Kolkata | Updated: Jan 3 2005, 05:30am hrs
Deplorable, said Sukhbilas Barma, the West Bengal governments principal secretary for agriculture, at a recently-held state credit seminar. He was referring to the progress under the Kisan Credit Card (KCC) programme, a scheme launched in 1999-2000 to cater the short-term credit requirements of farmers.

Credit institutions here have managed to bring a shade over eight lakh farmers under the KCC scheme in the four years since it was begun. Compare this with the performance in Haryana,a smaller state: a total of 12 lakh cards were issued there as of March 31, 2003.

Overall rural credit in the state reflects a like picture. Commercial banks report a CD ratio the amount lent against deposits collected of 49% for the state as on March 31, 2003, with regional rural banks at 39% and cooperatives at 41%. CD ratio is something for which finance minister Asim Dasgupta berates bankers on a regular basis.

The CD ratio of credit agencies in West Bengal is lower than the national average, Ramseban Banerjee, the states principal secretary for irrigation, pointed out at the seminar.

Who is to be blamed for this in the supposedly poor-mans government in West Bengal Bankers, says Mr Barma, who has taken up this credit delivery issue with the Reserve Bank of India (RBI). The block committees are functioning quite well in the state. Bankers need to co-ordinate regularly with block committees for a better credit delivery, he suggests.

In the state, panchayats play a big role in credit delivery. Bankers, on the other hand, pointed out panchayats failure to bring in creditworthy cases on a regular basis.

The state focus paper of the National Bank for Agriculture & Rural Development (Nabard) cites a combination of factors like poor linkages and procedural delays by the banks, for the unsatisfactory access to institutional credit.

Co-operative societies, supposed to be a model for the betterment of the rural and poor population, have also suffered from the linkage problems. According to a government official dealing with the co-op sector, more than one structure of the co-operative bodies have failed here. The Maharashtra and Gujarat co-operative structures are more efficient because of their market linkages. And that is exactly where we have been facing problems, says the official, albeit, unofficially.

Cooperative banks and regional rural banks are, however, showing a better performance in issuing KCC, compared with their big brothers. Till March 31, 2003, about 6.17 lakh cards were issued, of which 3.18 lakh cards were issued by co-operative banks and 40,751 by the nine RRBs operating in the state. (The rest were by the commercial banks). The delays and frequent denials (from the organised sources) are understood to have further exacerbated their difficult conditions of sustenance, said the Nabard report.

The report indicates that farmers prefer informal sources of credit and depend on co-op societies, regional rural banks and commercial banks, strictly in that order.

Nabard, in its state focus paper, has projected a credit need of Rs 7,992 crore for West Bengals rural and agricultural population in the next fiscal. This annual plan is 47% higher than the the plan for 2004-05, at Rs 5,440 crore. Agriculture has been accorded the highest importance, with almost 50% of the said amount being earmarked for this sector.

Nabard officials are circumspect on the likelihood of credit flow, which is estimated at Rs 5,082 crore, leaving a resource gap of Rs 2,910 crore. Sectoral analysis shows the highest credit projection and resource gap has been estimated for corporate loans. Nabard expects a sizable resource gap in sectors like minor irrigation, farm mechanisation, animal husbandry, storage and market yards.

Commercial banks in the state have claimed an improved performance in the first half of the current fiscal, with disbursals to the agriculture sector adding to Rs 1,002 crore during the period, compared with Rs 526 crore in the corresponding period a year before. The rise in credit flow is 90.5% and bankers expect over 100% growth by March 2005.

We have to sell aspirations and increase demand for credit, says GL Tawte, officer in charge of Nabards regional office. The lack of demand for rural credit is due to low aspiration levels of farmers in the state. If demand increases, credit institutions are ready with funds, assures Mr Tawte.