The recent visit of the Governor of Reserve Bank of India, Dr. D Subharao to the State and his suggestions on various financial aspects and banking policy should be considered a significant event in improving financial health of the State. The Act called Securitization and Reconstruction of Financial Assets and Environment of Security Interest (SARFAESI) is not applicable to J&K under Article 370. Among other things, the Act empowers the banks to put on sale/action the properties of bank loan defaulters. Maybe the State Government wanted to give relief to the people who had taken loans from the banks to re-start their business activity that had to be temporarily halted owing to the rise of insurgency. But now that conditions in the State have changed as per the claims of the Government, it is but natural that the deferment of repayment of loans has to come to an end.
The ground reality is that several people who have taken big loans and made investment in commercial enterprises have stabilized their business and are in sound position to return the loan along with interest. The number of loaners in this category is fairly large. It is in view of this ground situation that the Governor of the Reserve Bank invited the attention of the Chief Minister who has promised to bring in legislation either in the Assembly or through the instrumentality of ordinance by the Governor that would empower the banks to put on auction the properties of defaulters once the latter are identified.
Two aspects of the case can be highlighted simultaneously. One is that wherever the Government feels it is feasible to extend union laws to the State that go in the interests of the State, the legalities do not become a hindrance. A nod from the Legislative Assembly is good enough to arm the Government with authority to impose relevant clauses of the Act (in present case SARFAESI). This has been the practice in the past and no Central Law has been extended to the State without the consent of the State Legislative Assembly. The second point is that banking being the premier financial institution that has to play crucial role in improving financial health of the State, the Government cannot overlook the sources that are going to increase credit deposits of the banks. RBI Governor has rightly recommended that the State banks increase the credit deposits from 36.5 per cent to 40 per cent by the end of current financial year. He has also observed that owing to deficit in credit deposits, banks are unable to provide loans to seekers and to the extent they want. He categorically stated that enough credit avenues are not available to the people of this State. Another important suggestion that he has made in the context of increasing credit deposits is prompt and regular flow of credit from District Industries Centres. A new people-oriented programme conceptualized at decision making levels is the promotion of skills through the instrumentality of banks. In simpler words it means that banks should provide financial facility to the deserving applicants who want to acquire some skills that would help them in making independent earning and thus reduce unemployment. Acquisition of skills or to put it plainly, professionalism, is the key to self-generating economy and banks have to play their positive role. It will be reminded that this was actually conceived by Rangaranajan Committee constituted by the PMO to address the issue of educated unemployed in J&K State.
Financial inclusion policy states that a village with more than 2000 population should be brought under financial inclusion. Bringing bank branches to the villages is the primary concern of financial inclusion policy of the Government and RBI is closely monitoring it in J&K So far 786 villages have been covered under the scheme. But this is a very small number taking into consideration that there are 5,800 villages in the State with population above 2,000 souls. This means that financial inclusion policy has still to go a long way to meet its goal. One can imagine what a financial revolution it would be once all the villages are brought under the purview of financial inclusion policy in the State. The good news is that the RBI Governor reiterated that no collateral security by way of mortgage should be taken by the banks up to loans of 10 lakh.
In short, the Governor of RBI is concerned that banks in J&K should have the capacity to increase their credit deposits and to lend big money to various categories of applicants on various reasons. At the same time, he also wants that flow of loans to genuine persons should go on without a break. Our state is in financial crisis as usual. All means have to be put together to reinforce credit deposit position of our banks. More deposits mean more transactions. We strongly recommend that the State Government rightly understand the recommendations of the Governor of RBI and implement these without waiting for more time.
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