This refers to the report “Do not hesitate to give loans to poor, says FM” (October 24). In his appeal to banks and financial institutions to lend to the poor, Finance Minister P Chidambaram has rightly said a small borrower goes after the bank but, if the borrower is big, the bank itself comes after him or her.
Banks provide easy credit to companies, since it helps them achieve their advances target. On the other hand, the bank would have to find many such cases of a poor in need of a loan and capable of repaying it, to achieve the target. But, in terms of the risk involved, a company defaulting on the payment can make a bank bludgeoning its non-performing assets (NPAs), whereas the NPA risk in financing the poor is not worrisome. In this context, the government’s “financial inclusion” initiatives like the “Swabhiman” campaign are significant. However, by merely providing bank accounts to the poor, the government cannot claim to have achieved the goal. Banks and financial institutions should be encouraged by the government to provide a range of other banking services to the poor, including credit, deposit and ATM (automated teller machine).
Sagar Soni Gandhinagar
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number