The Hindu : Credit-deposit ratio improves in State

Online edition of India's National Newspaper
Friday, Apr 02, 2004

Kerala

Kerala

Credit-deposit ratio improves in State

By P. Venugopal

THIRUVANANTHAPURAM, APRIL 1. The statistics relating to credit disbursements by the commercial banks in the State over the last two-and-a-half years bring out the changing priorities of the banks.

The biggest complaint in Kerala has been their low credit-deposit (CD) ratio of the banks here. With the CD ratio dipping to around 42 per cent, the accusation was that the banks were using Kerala `to extract deposits for being deployed outside the State profitably'.

From the details presented at the latest meeting of the State Level Bankers' Committee (SLBC), it would appear that the banks have been making an earnest effort to tackle this criticism. The CD ratio climbed from 42.77 per cent to 46.35 per cent between March 31, 2001 and December 31, 2003.

Similarly, priority sector lending, as a proportion of the total credit disbursement, too went up from 46.36 per cent to 49.50 per cent during the above two-and-a-half-year period.

However, a closer look at the data would reveal that the increase in CD ratio has been mainly due to some very substantial credit disbursement made by the banks in the housing sector. Housing credit went up by nearly 300 per cent over the two-and-a-half-year period from Rs. 1,239 crores to Rs. 3,688 crores.

Earlier, housing finance was not considered as a lending made to the priority sector. Under the present norms of the Reserve Bank of India, housing loans up to Rs. 5 lakhs in the rural areas and Rs. 10 lakhs in the urban areas too can be counted by the banks as priority sector lending.

The boom in lending in the housing sector has clearly helped the banks in the State to come up with a handsome figure under the head of priority sector lending. Housing finance during the period under discussion was so substantial that it could even mask the banks' poor contribution to development of other more important priority sectors such as agriculture, small-scale industries and Scheduled Castes/Scheduled Tribes. In fact, the data shows that the advances made to the weakest section of the society, the Scheduled Castes and Scheduled Tribes, have even come down in absolute terms. On March 31, 2001, a sum of Rs. 503 crores, constituting 2.6 per cent of the total advances on that date, had gone to this section. On December 31, 2003, it came to Rs. 430 crores and this amount was equivalent to just 1.5 per cent of the total advances on that particular date.

As a share of the total advances, the lending to agriculture sector came down from 14.33 per cent to 12.9 per cent and small scale industries from 11.18 per cent to 8.78 per cent during the period under discussion. Advances to weaker sections as a whole, however, showed an increase from 10.16 per cent to 11.35 per cent.

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