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Our Bureau

Bangalore , July 1

THE Finance Ministry is working on a special credit plan for small and medium sector enterprises and will announce the policy this month.

Speaking at the centenary celebrations of the public sector Canara Bank here on Friday, the Union Finance Minister, Mr P. Chidambaram, said this policy would be on the same lines as the special agriculture lending policy.

However, Mr Chidambaram said, to meet these large lending programmes, banks would need greater capitalisation. They would need to find the means for raising these large capital requirements. But Mr Chidambaram said, "This Government has no intention to privatise the public sector banks."

He reiterated that for banks to remain internationally competitive, they would have to consolidate and emerge as bigger institutions. "We need to have some international-sized banks," Mr Chidambaram said. This could be achieved if the smaller banks were acquired by large ones and with the eventual merger of the large-sized institutions.

This, he said, was essential to improve the services of the banking sector.

"When the banking sector consolidates, services will also improve," the Finance Minister said.

Mr Chidambaram said this year the Government's target for farm lending was Rs 1,41,000 crore. He was optimistic that this would be achieved, given the previous year's track, when the farm lending target of Rs 1,1500 crore was exceeded.

Along with farm lending, the Government, he said, was also focussing on advancing loans for higher education of students. Bank lending for education, he said, would lead to improving the skill levels in the country. At the same time, higher education would be within the reach of the common man and the rural sectors.

Mr Chidambaram said, despite nationalisation, bank finance penetration was just 37 per cent of the gross domestic product. "If we are to achieve higher rates of growth, this penetration has to improve," he said.

The Minister one of the major factors inhibiting growth was non-institutional credits to the farm and retail sectors. He said the banks should push the credit to GDP ratios to international levels of about 70 per cent.

"We can then achieve 8 or 9 per cent growth rates and even overtake China," Mr Chidambaram said.

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