Banks spurn ministry's 'minority' loan plan

Centre proposed 6% of total loans for minority communities.

Banks have debunked the government's proposal that 6 per cent of their total loans should be given to minority communities saying that there was no necessity for such a stipulation.

The Indian Banks' Association (IBA), after receiving views from banks, in a letter dated January 23, 2006, has conveyed to the finance ministry that its proposal to earmark 15 per cent of the 40 per cent priority sector loans for minority communities violates the banks' code of conduct.

The code specifically highlights that they do not discriminate on the basis of caste, creed or religion.

IBA, in turn, has suggested to the finance ministry that the government needs to address infrastrcuture needs of minorities such as education and healthcare, though credit requirement is a major input.

The consideration for lending, including to weaker sections, should be economic criteria and viability of the proposal, the IBA has told the ministry in its response.

The government had earlier asked the IBA to examine a proposal to extend 15 per cent of banks' priority sector lending in all categories to members of minority communities.

This in effect meant that 6 per cent of total loans disbursed by banks, would need to be earmarked for minorities. Banks' total credit outstanding is over Rs 17,57,000 crore and 6 per cent of this would translate into Rs 1,05,000 crore of credit flow to members of minority communities.

Indian banks are required to lend 40 per cent of their net credit to priority segments such as agriculture, small enterprises, other small business and service enterprises. Micro credit, education loans and housing loans up to a certain limit also constitute priority sector lending. /weaker sections.

While rejecting the need to earmark any specific percentage of loan disbursements for minorities, IBA has said that they would not deny any genuine credit needs specifically of the weaker sections including minorities.

In minority dominated districts, the IBA has said that bank branches in these areas attend to genuine needs of all sections including minorities.

The government's proposal for reservation in credit for minorities forms part of the Prime Minister's New 15-Point Programme for Welfare of Minorities.

To facilitate enhanced credit support for economic activities, the programme provides that an appropriate percentage of the priority sector lending in all categories should be targeted for minority communities.