The Hindu Business Line : Credit policy must spur more lending by banks: Assocham

THE Associated Chambers of Commerce and Industry of India (Assocham) has suggested the Reserve Bank of India incorporate directives in its forthcoming Credit Policy for 2005-06 which would encourage commercial banks to diversify their credit deployment into agri-business, food processing units, rural housing and rural electricity schemes.

In addition, Assocham feels that banks should enlarge their focus for credit disbursement to include rural, semi-urban, SMEs, IT and software professionals in view of their growing sector-specific importance. The commercial banks should adopt a flexible and supportive attitude to finance the aforesaid sectors with a view to generating employment and growth of income as envisaged in the recent Budget.

In a note submitted to RBI Governor, the Assocham President, Mr Mahendra K. Sanghi, said that no collaterals and guarantees must be insisted on by banks and the finance be given with simple procedures based on viability of the projects.

The chamber pointed out that there has been growth in bank credit of late in non-food sectors (commercial sector) but still the banking system held SLR securities to the tune of 41 per cent as against the minimum statutory limits of 25 per cent by the end of March 2004.

This indicates that the banks still prefer Government paper for safety, liquidity and yield.

The chamber felt it was high time the commercial banks diversified their financial disbursement to new areas that deserve attention.

It is also expected that in view of the changing global scenario, banks should play an active role in new investments by providing seed capital and term finance which hitherto was done by the financial development institutions.

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