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| Improve credit delivery in rural areas: RBI to pvt banks |
| Somasroy Chakraborty & Manojit Saha / Mumbai Dec 01, 2011, 00:45 IST |
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At a time when the government and regulators are emphasizing inclusion and increase in credit delivery to those without access to formal sources of finance, private sector banks are found to have low credit-deposit ratios in rural areas as compared to public sector counterparts.
In a recent interaction at the state-level bankers committee (SLBC) meeting, in which Reserve Bank of India governor D Subbarao was present, bankers brought this to the regulator’s notice. According to bank executives present, RBI asked private sector banks to boost credit expansion in rural areas.
The credit-deposit (C/D) ratio indicates the amount banks extend as loans for every Rs 100 of deposit. According to RBI data, the ratio in private sector banks was 42 per cent at the end of March 2011 in rural areas, a marginal improvement from December. For government-owned banks (State Bank of India excluded), it was 60 per cent. Countrywide, banks had a C/D ratio of 75 per cent for 2010-11.
“RBI has said it is imperative to have a C/D ratio of at least 50 per cent in rural areas,” said a senior official from a public sector bank who attended the SLBC meeting.
Public sector banks have accused their private counterparts of using branch presence in rural areas to collect low-cost deposits, and use those resources for credit expansion in urban areas. According to RBI data, private lenders have around 1,300 branches and offices in rural areas, while for nationalised banks (meaning, government banks, excluding SBI), the figure is 14,000.
Private sector banks admit lending is relatively low in rural areas but say this is due to lack of credible borrowers. "Yes, lending is relatively low in rural and semi-urban branches. These mostly lend to SME (small and medium enterprises) and farm sectors. But in rural centres, most companies do not present their accounts in an organised manner. The figures are not properly audited and, hence, it is difficult to lend to these firms,” said an Axis Bank official who wished not to be named.
Private sector lenders involved in vehicle finance in rural areas said they don’t face the problem of a lower C/D ratio. “We don't have this problem in our rural branches. Our model is different from other private banks. We do truck financing, which mostly happens in rural centres. But the accounts are maintained at the nearest hub branches, which may be a rural branch or a semi-urban branch,” said Sumant Kathpalia, head of consumer banking at IndusInd Bank.
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