The Hindu Business Line : Enough of expert panels on loans to rural poor

AN Expert Group under Mr Y.S.P. Thorat, Managing Director, Nabard, studying the low Credit-Deposit ratio (CD ratio) has come up with a revised version of the critical indicator, which if accepted, will immediately lift CD ratios in the North-East, Bihar, Uttar Pradesh, Himachal Pradesh, Chattisgarh and Jharkhand.

A dissent note disputing the majority view has been submitted by Prof Hrishikes Bhattacharya. Low CD ratios mean low capital investments and the RBI, as an advisory, in 1980 suggested a reasonable CD ratio of 60 to correct the urban bias.

Set aside statistical quibbling and the fact is that a majority of the poor live in the northern and north-eastern States, with the south and west better off. The Group recommends "that while the existing indicator of credit as per sanction should continue to be used to monitor the CDR of banks in a district, it should give way to credit as per utilisation for the purpose of monitoring at state and bank levels. The CDR at State and bank levels should also factor in the investments made by banks in State Government securities, bonds of State Government agencies, local governments as also in the bonds and debentures and other commercial papers of corporates."

In addition RIDF funds, which are the banking system's shortfall in agriculture lending, should be taken note of while computing the CD ratio, avers the Expert Group. The Group explains "migration of credit" as loans which may, for instance, be sanctioned and disbursed at Chandigarh while the borrower is located in Bhatinda.

The CD ratio in Bhatinda does not reflect the actual lending in Bhatinda unless credit is defined by the place of utilisation, contends the Expert Group. But going by Government and banker talk one thought there were enough rural bank branches at Bhatinda giving loans.

Based on its new definitions, the Expert Group hops to the dramatic revelation that at the all-India level, the number of States and Union Territories (UTs) where the ratio is below 60 falls to 19 while the conventional ratio was below 60 for 29 of the 35 States and UTs in March 2003. This is where the dissent note of Bhattacharya comes in.

Investments in Government securities do not automatically turn capital and the Finance Secretary of a State Government has admitted "it could be just for paying salaries." Again one tends to agree with the dissenter who dubs contributions to RIDF by banks a "cover-up operation" with financial entities not keen on rural loans.

RIDF (Rural Infrastructure Development Fund) is the banking system's shortfall in lending to agriculture, says Bhattacharya and adds: "In other words, it is a kind of penalty imposed on a bank for not meeting the target for agricultural advance. If now the same RIDF is added back to the credit deployment to show an improvement in CDR it amounts to a "cover-up operation."

If the debate (not meant for amateurs like this writer) is put aside there is nothing else the Report offers to move credit to the poor.

For districts with CDR below 40, there is the suggestion to set up Sub-Committees styled as Special Sub-Committees (SSC) of the District Level Consultative Committee (DLCC) to draw up Monitorable Action Plans and the rest.

Is there any need to add still another layer to the mound of bureaucracy for giving loans to the poor? Can not the district level offices of Nabard do the job? Recently Ms Ranjana Kumar, Chairperson, Nabard, made a point about reaching funds to the landless or tenant farmers. For bankers, they have no collateral being nomads.

On Page 63, the Expert Group picks on the problem when it states: "In many of the less developed districts there are a large number of tenant farmers, share croppers and oral lessees. The concern is that taking a bank loan will confer tenurial status. In the long run land reform is the answer.However, in the "here and now", it is important that such farmers be financed. The via media is to use the consumption under KCC (Kisan Credit Card) in such cases. Where land holding certificates or certificates evidencing cultivation of land are not forthcoming, banks may actively promote the SHG and the Joint Liability Group models."

Why are not these being done? An entire hierarchy (mostly corrupt) exists in districts to bilk the poor. They never get to see anything beyond the babus.

Isn't it time the country stopped forever appointing expert committees to write expert reports and instead get on with the job? How many centuries more will the poor have to wait for?

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page