Reserve Bank of India (RBI) Deputy Governor Swaminathan J on Monday said that although credit delivery to priority sectors has improved, India still confronts significant challenges in meeting the credit needs of micro, small, and medium enterprises (MSMEs).
According to the 2019 report of the internal working group to review agricultural credit, nearly 60% of small and marginal farmers were yet to be covered under bank credit. While speaking at the Conference of Convenors of State Level Bankers’ Committees (SLBC) in Pune, Swaminathan said: “Similarly, nearly half of Self-Help Groups (SHGs) remain to be credit linked while a considerable section of small and marginal farmers are yet to be covered under bank credit. Addressing these credit gaps demands a multi-pronged effort in which SLBCs have a crucial role.
Further, the Deputy Governor emphasised that SLBCs must enhance coordination with governmental and non-governmental organisations to form strong partnerships. This collaboration aims to align local area banking initiatives with developmental programmes. It involves working closely with local administrations to ensure banking services reach underserved regions, facilitating the implementation of government schemes, and addressing region-specific issues through collaborative efforts.
“There is a need for sensitising the District administration on the scope of the Lead Bank Scheme and the role of banks under it. Besides this, staff at the operational level for both banks and government agencies associated with the implementation of the Lead Bank Scheme must be aware of the latest developments and emerging opportunities,” he said.
SLBCs must also have a scientific approach to the preparation of annual credit plans. They must undertake detailed analyses to identify the root causes of the lack of growth in credit seen in certain jurisdictions using data analytics and field surveys to understand regional economic activities, local credit needs, and barriers to credit access. By pinpointing specific issues, whether they are related to infrastructure, borrower awareness, or banking processes, SLBCs can develop more targeted and effective credit plans.
They must also leverage technology to further financial inclusion and promote the use of fintech solutions to streamline banking operations and improve customer service. Technologies such as mobile banking, tech-driven customer support, and digital loan processing have significantly reduced turnaround times and increased accessibility and deploying advanced data analytics can help in better risk assessment and credit scoring, thus facilitating more informed lending decisions, the DG said.