The Hindu Business Line : ‘Caste’ out by banking system

Bangalore, July 8 Despite the rise of dalits in the political sphere, their share in the total number of small borrowal accounts and total credit has fallen sharply over the last five years. According to the Reserve Bank of India’s Survey of Small Borrowal Accounts, 12.2 per cent of all small borrowal account holders (those whose credit limit extends up to Rs 2 lakh) were scheduled castes in March 2001, against just 5.4 per cent in March 2006. Schedules castes accounted for 7.1 per cent of all small account outstandings in March 2001, against 3.9 per cent in March 2006.

The number of small borrowal accounts held by SCs fell in absolute terms from 61.6 lakh in March 2001 to 42.2 lakh in March 2006. The total number of small borrowal accounts, however, increased from 50.4 million to 77.1 million. The amount outstanding against all SC accounts increased over this period, from Rs 7,547 crore to Rs 9,691 crore. The average outstanding per account, therefore, increased from Rs 12,234 in March 2001 to Rs 22,964 in March 2006.

Closure of accounts

According to an economist in a PSU bank, “Banks, on their own and according to the directions of the regulator, have been focusing on settlement of small value loans. A majority of the NPA accounts fall under the small and medium category. In many cases, write-offs have also been used to close the accounts. A good number of loans to SC/ST borrowers fall in this category. Closure of such accounts through write-offs or settlement has brought down the number of such accounts.”

A similar trend is noticeable in the case of scheduled tribes. They accounted for 6.1 per cent of small borrowal accounts and 3.8 per cent of total small account outstandings in March 2001; by March 2006, their share was down to 3 per cent and 2.1 per cent, respectively. The number of small accounts held by STs was down from 31 lakh in March 2001 to 23 lakh in March 2006. The amount outstanding per account held by an ST, however, increased from Rs 13,150 to Rs 22,101 over this period. Another PSU bank economist said, ”The proportion of small borrowers in total bank credit has been falling in all regions. Rising rates of interest and lack of collateral could have played a role. Bank profitability has come under pressure, with the loan waivers adding to it.”

Noticeable shift

While there has been a shift away from small borrowers as a whole, credit has been directed at the better-off within the small borrowers’ group. Credit to small borrowers increased at an average annual rate of 19 per cent between March 2001and March 2006. Credit to all borrowers increased at an average annual rate of 23 per cent. The cut-off for small borrowings was increased from Rs 25,000 to Rs 200,000 in March 1999; since then, the concentration of outstandings at the upper-income end of the small segment is noticeable. Outstandings up to Rs 25,000 accounted for 31 per cent of small borrowings in March 2001, against just 16 per cent in March 2006.

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