The Hindu Business Line : Banking activity in Lakshadweep remains low, says RBI study

Kochi, May 22 Despite having one of the highest concentration of bank branches as against the population of the region, Lakshadweep continues to have one of the lowest per capita bank deposits and credit, as well as extremely low credit-deposit ratio in the country. While there was one bank branch for every 16,000 people in the country, the ratio for Lakshadweep was one bank branch for every 6,060 people, a recent study by the RBI has shown.

The credit-deposit ratio continues to be quite low although it has grown marginally from 8.5 per cent in 2001-02 to 10.19 per cent in 2006-07. There are nine branches of Syndicate Bank spread across the various islands of the Union Territory and one branch of State Bank of India at the Kavaratty island. There are no Regional Rural Banks, co-operative banks or representative offices of NABARD or SIDBI in the islands.

While the total bank deposits have grown from Rs 67.91 crore in 2001-02 to Rs 205.06 crore in 2006-07, the deposits continue to be mainly from the government, the report pointed out. Advances, however, remain paltry, having grown from Rs 5.47 crore to Rs 20.90 crore.

RBI for new branches

The absence of major industries in these islands, poor economic activity and religious constraints has been identified as some of the prime reasons for the poor banking activity. The RBI was of the opinion that setting up of new bank branches would kindle greater competition among the banks rather than extension of branches by the region’s traditional banks.

Some bankers don’t see scope for new branches. Others contend that the poor economic activity is the result of lack of competition of among banks.

Fishing

Over 90 per cent of the people of Lakshadweep depend on agriculture. Fishing is the second most important sector. Though the islands have a tuna potential of one lakh tonnes, only around 11,700 tonnes is caught annually. Backed by good credit extension, there is potential for launching more deep sea vessels and increasing deep sea catch, and setting up more ice plants and processing plants, the report noted.

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Banking activity in Lakshadweep remains low, says RBI study