'Banks lag in credit to weaker sections'

Although commercial banks of Gujarat have been performing better than expected as far as priority sector lending is concerned, they have been falling well short of the target as far as lending to weaker sections is concerned, said Vani Sharma, regional director of the Reserve Bank of India.

Speaking at the inaugural function of the State Credit Seminar organised by the National Bank for Agriculture and Rural Development (Nabard) in Ahmedabad on Thursday, Sharma said there is a need for a more concerted effort for lending to weaker sections of the society.

According to the Reserve Bank of India guidelines, commercial banks are expected to reserve 40 per cent of all credit for priority sector lending and ten per cent of the priority sector lending must be reserved for economically and socially weaker sections.

"Commercial banks of Gujarat have been doing far better than required on the overall priority sector lending. Even lending to agriculture and farming sector has been higher than required. But the banks have been lending lesser than the required 10 per cent to the weaker sections under priority sector lending," Sharma said.

She said although this phenomenon is prevalent nationwide, there is no reason why Gujarat's commercial banks should not adhere to the requirement.

"Despite functioning in a land where organisations like SEWA and SEWA Bank are working, Gujarat's banks have not met the requirement. Banks should not look at these loans as those which cannot be recovered. "In fact, the recovery rate in such loans is high," she said while speaking on priority sector lending.

She said the government of Gujarat needs to introduce schemes where members of the weaker sections can avail of loans from commercial banks.

The reach of self-help groups (SHP), instrumental in getting credit for members of the weaker sections, is also low in Gujarat, she said.

Sharma said while the governments of Kerala, Andhra Pradesh, Tamil Nadu and other states have announced a series of schemes for weaker sections, there are not many such schemes in Gujarat for these sections.

Principal secretary, finance, Sudha Anchalia said the state government will pursue whatever extra efforts will be required to strengthen priority sector lending and ensure that efforts in priority sector lending are achieved.

She listed down the schemes that the government was implementing under the Rural Infrastructure Development Fund (RIDF) in association with Nabard.