Financial Daily from THE HINDU group of publications
Friday, Oct 22, 2004
Financial Daily from THE HINDU group of publications Friday, Oct 22, 2004 |
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Money & Banking
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Credit Market Study analyses poor credit-deposit ratio in Kerala C.J. Punnathara
Kochi , Oct. 21 THERE seems to be no end to the debate on the credit-deposit ratio of scheduled commercial banks in Kerala with the politicians blaming the banks for the poor credit disbursal and the banks maintaining that there are few bankable projects worth lending to in the State. After making an elaborate study on the causative factors behind the poor credit-deposit ratio in the state, Dr D. Narayana of the Centre for Development Studies has concluded that, "The facts of the case do not seem to suggest a negative attitude of banks." Poor CD ratio is not causative factor for the lack of industrial development of the State, but is its consequence. Analysing the causes behind the poor CD ratio he says that the State has almost 50 per cent higher number of bank deposit accounts opened against the national average. While Kerala has 646 deposit accounts opened for 1,000 of its population, the national average is 417 accounts. States such as Chattisgarh and Bihar have just half the national average. Even in the number of credit accounts opened, Kerala is far above the national average. While there were 51 credit accounts opened for every 1,000 population of the country, in Kerala 116 accounts were opened for a similar number of the population. Just Chandigarh and Delhi were above the State in the number of credit accounts opened. Chattisgarh and Bihar were at the bottom of the pile. Then why has the State fallen so far behind in the credit-deposit ratio? In the amount per credit account, Kerala reports one of the lowest amounts in the country, the study conducted by Dr Narayana has said. In the study titled, `Why is the credit-deposit ratio low in Kerala', he points out that the State has just 50 per cent of the national average in credit disbursal per account. The national average in credit amount per account is about Rs 100,000, while Kerala has around Rs 50,000 per account. In short, the low CD ratio of the State is not because of small number credit accounts opened, rather it is because the average amount in such accounts remains relatively small. The reasons for these small credit amounts are not far to seek. The maximum number of credit accounts opened in Kerala is to service agriculture and personal loan segments, senior bankers said. These constitute the small loan segment, where the total amounts disbursed often does not cross the one lakh mark. In loans to the mid-cap segment, which comprises transport sector, services, professional and trade loans, Kerala continues to score poorly: both in the number of loan accounts and in the amounts disbursed. Average loan amounts in this segment range between Rs 1 lakh and 2 lakh. But the worst performance of the State has been in the realm of large loans of over Rs 5 lakh. These loans are targeted at the financial and industrial sectors. Here again, both in the number of accounts as well as in the amounts disbursed, the State has scored very poorly. At the national level, only Orissa has reported lower disbursement of loans to industry after Kerala. Summing up, Dr Narayana says that the banks have been efficiently servicing Kerala. Servicing a large number of small accounts entails higher costs as against servicing few large loans, he argues. With the large disbursals to the housing and vehicle loans sector and stepped up credit limit to personal loans in the recent past, the bankers were optimistic that the poor CD ratio of the State could soon be a thing of the past.
More Stories on : Credit Market | Kerala
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