Lending to priority sectors

State Level Bankers’ Committee (SLBC) meeting is an important platform where representatives of banks including the Lead Bank and the Reserve Bank of India as also a battery of officials from various departments of the state meet to dwell upon the annual credit plan and levels of achievements of targets there-under. Needless to add, such meetings are presided over by a top representative of the State Government usually the Chief Secretary with a purpose to lend the SLBC the requisite importance. Usually, banks are represented by very senior officers at regional and zonal levels. Having said so, the main focus being on how priority sectors could get maximum financial support in the form of various lending schemes usually sponsored by the Government where thrust is to help self employment programmes.
Agriculture, Micro, Small and Medium Enterprises (MSMEs), Education, Social Infrastructure, Renewable Energy and others coming under and comprising priority sectors are accorded preference in extending of advancers facilities by the banks. Why should there be not a gradual increase in the annual credit flow to the existing and the upcoming units should be a cause of concern but must be analysed in more than the apparent reasons and causes. The Chief Secretary has expressed concern over poor credit flow in the priority sector in Jammu division for obvious reasons . On the other hand , it is again a matter of concern that a panel of senior bureaucrats and other designated officers should not be in a position to submit actionable plan within the time frame fixed by the Government. Whatever the causes be, the fact of the matter is an actionable programme chalked out by the Government agencies need not casually to be analysed and compared on annual basis only and can necessarily be based on quarterly basis review meetings. In such review meetings, usually presided over by the District Development Commissioners, levels of achieving of targets and how the gaps, if any, could be achieved by the year end, are discussed and steps proposed to accelerate the process of lending .
On the other hand, the recoveries in loan accounts are miserably low especially in Government sponsored schemes with thrust on helping self employment ventures and enterprises even after availing subsidies from the Government and interest concessions etc from the Banks. Banks usually find the Government and its agencies more enthusiastic in ensuring more and more credit from the Banks but are least interested or helpful in effecting recoveries and ensuring adjusting of the loan accounts in full . Such a scenario leads to accumulation of huge NPAs with the banks straining their profits and healthy functioning. If poor credit inflow is due to any major cause, it is because of this fact. However, Credit Deposit Ratio or in other words, how much banks lent out of the deposits mobilised, needs to be there around 65 to 70 but in ideal situations only . That, however, does not mean that the system of recoveries in loan accounts should not see proper reforms and professional dedication backed by statutory and legal support. In any case, targets set for annual achievements ending in the process with meeting to the extent of 40 to 50 percent only were not a healthy sign either.
Since most of the priority sector lending sans any collateral tangible securities , not backed by even third party guarantees , and merely hypothecation of assets created from out of the loans sanctioned , recoveries in the sector were awfully poor. In most of the cases, end use of lent money is in violation of the terms and conditions of sanction even to the extent of creation of no assets at all. The other cause, as pointed out by the Chief Secretary towards unsatisfactory lending to the priority sector, was lackadaisical approach towards ‘freely’ lending by banks in the private sector. The major brunt of such lending was on the Public Sector Banks in addition to the Lead Bank and the State Bank of India. Unless bank lending was ensured to be repaid also, with minimum risk management and going much beyond the only olive branch of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SURFAESI) Act , overall credit inflow was not going to be increased considerably . Since in priority sector lending the limit of credit facilities was not much, the emphasis should be both on liberal lending and on strictly enforced repayments .