Centre to ensure more credit for NE Spl correspondent NEW DELHI, Oct 4 – Admitting that the North Eastern Region (NER), is currently not getting its fair share of the credit, Union Finance Minister, P. Chidambaram said that the Centre would ensure that more credit followed in the Region through not only conventional banking but also through non-conventional sources as well.
The Finance Minister was addressing a Special Summit on Banking, Industries and Credit Issues in the North Eastern Region organised by the Ministry of Development of North Eastern Region (DoNER) at Vigyan Bhavan here.
In attendance were Minister DoNER, Mani Shankar Aiyar, Chief Minister of Sikkim, Pawan Singh Chamling, deputy Governor of Reserve Bank of India, Usha Thorat, Chairman of State Bank of India, O.P.Bhatt, host of State Finance Ministers of the North Eastern States, besides top officials of line ministries and representatives of financial institutions.
The daylong conference that was spread over three-sessions, saw Thorat and the chairman of the SBI making two critical presentations on banking services in the North-east. Thorat had headed the Committee on Financial Sector Development for the NER set up by the RBI. The committee had submitted its report in 2006, where it gave a series of recommendations to make the banking sector in the region ‘more inclusive’.
However, it was the key note address of the Union Finance Minister that every body was waiting for and Chidambaram, in a way, did disappoint a few, because he did some plain speaking. At the outset he clarified that banks cannot be substitute for governance. It can at times have a pioneering role to play, while in some cases it can play the role of felicitator, he pointed out.
The Finance Minister took pains to clarify point by point the problems concerning the banking sectors and financial services in the North-east.
But first the good news, the Union Finance Minister said that the long-pending demand for a currency-chest in the North Eastern States has been resolved and the Union Home Ministry is required to clear it within the next three months. “If the clearance doesn’t come within that period, we will deem it to have been provided. It would be set up in the NES provided the State Government’s ensures security,” he added.
Chidambaram further hinted that the Sardesai Committee’s recommendations expected within 10 days, is likely to be cleared soon. Sardesai sub-committee, part of the Vaidhyanathan Committee on Cooperative Credit Structure, was asked to specifically look into the NER.
However, it was in the area of credit flow that the Union finance Minister held out hope, he said that though the NES is not getting it, it is going to start getting it. “We will ensure that more credit follows into the North-east, not only through convention but unconventional sources also.
The Finance Minister, who sat through the three-hour-long inaugural session, stressed on identifying the intermediaries, who could bridge the gap between the banks and the borrowers. The money is not a problem, we will be lending more, but the problem is of finding the intermediaries.
“You identify the intermediary agencies, we will ensure that steady credit flows into the economy. If credit flows into the economy, there will be economic growth and rise in economic activities,” he said.
The Finance Minister agreed with the suggestion that the civil society groups, NGOs, self-help groups (SHGs), micro finance agencies and even the church could play the vital role of intermediary agency.
Referring to the problems connected with the banking sector in the North-east, he said the low credit-deposit ratio was primarily due to poor rate of recovery. He said that the money lent by the bank must come back to the bank. In this connection, he referred to melt down of the US banking system.
The Non-Performing loans in the North-east were as high as 17 per cent. Further, he argued that the CDR in the Region low for quite long, and though it has improved in the last four years to 25 per cent, it cannot grow to 100 per cent in such short period of time.
About the demands for more funds from the NES to meet the hike in salaries of the government employees, Chidambaram said the salaries could not be paid by borrowing money from the banks. The State Governments must decide before announcing the hike in salaries, as per recommendation of the Sixth Pay Commission, which is for the central government employees.
Earlier, addressing the meeting, Aiyar also stressed on the banks operating in the Region to look for non-conventional banking routes. “We must take advantage of the local system of governance,” he underlined.
The SHG movement in the plains could not be compared with the hill areas of the North-east. However, he held that the NES held tremendous growth potential. Assam, which had a growth rate of 2.4 per cent in ninth plan, boosts of growth rate of 6.1 per cent in 10th Plan. Nagaland’s agriculture growth of 15 per cent in 2006-2007 was even higher than that of the national growth rate, he added.
The Minister said that if the required Rs 14 lakh crore as projected in the 2020 Vision Document t is made available then extra-ordinary targets could be achieved.
Meanwhile, some of the concern areas, included lack of infrastructure, road, land and building, security among others.
