The Hindu Business Line : `Commercial banks' credit flow to rural, areas declining'

THE commercial banks' credit allocation was heavily tilted in favour of metropolitan areas rather than the semi-urban and rural areas where 70 per cent of total Indian population reside, the Associated Chamber of Commerce and Industry (Assocham) said on Tuesday.

Commercial banks' credit allocation towards metropolitan region was 44.84 per cent in 1990-91, which shot up to 61.5 per cent by the end of 2003-04, an Assocham analysis on commercial banks' deposits and credit mobilisation patterns from 1990-91 to 2003-04 revealed. In rural and semi-urban areas, the percentage of credit allocation was 15.4 per cent and 17.14 per cent respectively during 1990-91, which fell to 9.57 per cent and 11.38 per cent in 2003-04.

Sharing the analysis, the Assocham President, Mr M.K. Sanghi, said metropolitan deposits contributed 38.91 per cent of the total deposits in 1990 and it went up to 47.72 per cent in 2003-04.

The reasons for marginal increase in savings was due to increased flow of savings towards capital markets, purchase of properties and that people chose to put in their surpluses in the bullion market as they did not find banks attractive enough for adequate return on their investments.

Rural and semi-urban savings, which were 15.26 and 21.16 per cent respectively in 1990, slipped marginally by the end of last fiscal to 12.88 and 17.62 per cent, he said.

The reason for decline in savings was due to all-round development activities, which resulted in increase of per capita consumption of rural and semi-urban populace.

Mr Sanghi said the surplus funds also went towards agriculture sector whose contribution to the national economy has been declining.

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