NRI-effect keeps CDR low in five Gujarat dists

Bankers are trying hard to increase the credit-deposit ratio (CDR) in Gujarat and have succeeded in maintaining a high CDR across the state, except five districts where it is below 40 per cent.

A major reason that keeps the CD ratio below 40 per cent are a large proportion of NRI deposits.

According to a banker, the chief culprit behind the low CD ratio is a higher NRI population in the five districts of Anand, Kheda, Kutch, Navsari and Porbandar.

According to the recently-published report of the State-Level Bankers' Committee (SLBC), the CD ratio of Anand and Kheda districts registered a negative growth over March 2007.

The CD ratio of Anand and Kheda stood at 25.30 per cent and 33.02 per cent on March 2007 respectively that further fell to 24.32 per cent and 28.58 per cent respectively on June 2007.

J M Patel, chief manager, SLBC, told Business Standard, "The major reason is the high NRI deposit and low credit outflow from the banks."

He further explained that due to the large number of NRI population in these five districts, the credit requirements of these districts are very low and results in the least flow of credit from the bank.

According to the bankers, investments in real estate, purchase of vehicle or gold ornaments by the people in these districts are met from their own funds as NRIs have huge savings of their own.

Similarly, the CDR of Kutch and Porbandar district stood at 28.14 per cent and 23.73 per cent as of June 2007, which was 26.40 per cent and 23.58 per cent respectively during March 2007.

The worst CD ratio was in Navsari district where it was below 20 per cent. The CDR of Navsari was at 17.18 per cent as on June 2007. However, another district, Dangs, has a CDR below 40 per cent in the state.

According to Patel, the major reason is that Dangs is a tribal area where the population is hardly 5 lakh and most of them live below the poverty level. Thereby, the demand for credit over here is limited. But agricultural credit falls under a separate domain.

To improve the CD ratio, a special sub-committee has been set up according to the RBI instruction for monitoring districts with a CDR below 40 per cent and draw up Monitorable Action Plans (MAPs) to increase the CDR.

In September 2005, there were eight districts where the CD ratio was below 40 per cent. However, two districts have shown signs of improvement and are now excluded from any monitoring.

"The CD ratio of Jamnagar and Patan have improved," adds Patel.

As per the SLBC report, it has been suggested that the lead district managers of the districts where the CD ratio has again shown a downward trend needed to initiate a concrete action plan as the prevalent economic scenario provides an opportunity to reach the stipulated benchmark of 40 per cent.

According to Patel, these situations might take longer time to be solved till there is a high flow of NRI money into these districts.