NIWARI District of Madhya Pradesh Study on Challenges Being Faced in Maintaining Required Credit Deposit Ratio by Banks in NIWARI District of Madhya Pradesh
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Study on Challenges being faced in maintaining required Credit Deposit Ratio by Banks in NIWARI District of Madhya Pradesh Study on Challenges being faced in maintaining required Credit Deposit Ratio by Banks in NIWARI District of Madhya Pradesh Submitt ed To DIRECTORATE OF INSTITUTIONAL FINANCE, GoMP Submitted By NABCONS, BHOPAL 2 Report on Low CD Ratio Study-NIWARI, MP ACKNOWLEDGEMENT NABARD Consultancy Services Pvt Ltd (NABCONS) is grateful to the Directorate of Institutional Finance (DIF) GoMP for awarding the assignment “Study on Challenges being faced in maintaining required Credit Deposit Ratio by Banks in Nine Districts of Madhya Pradesh”. Our sincere thanks to Shri Anurag Jain (IAS), ACS Finance, GoMP, Shri Manoj Govil (IAS), Principal Secretary Finance, GoMP, Shri. Ganesh Shankar Mishra (IAS), Commissioner, DIF, Shri Satish Gupta, Joint Director, DIF, Shri S. D. Mahurkar FGM, Central Bank of India and Shri Vinayak Tembhurne FGM UBI, Convener of State Level Sub Committee on Low CD Ratio for the continuous encouragement, guidance and their support during the conduct of the study, providing valuable insights and inputs during the study. The team sincerely acknowledges the kind cooperation received during eld study from the Lead District Managers (LDM) and District Development Managers, (DDM) NABARD in coordinating the district ofcials’ meetings and collection of necessary data. We also thank Smt. T. S. Raji Gain, Principal Consultant NABCONS/CGM NABARD and Shri. S.K. Bansal, Former Principal Consultant, NABCONS/ Former CGM, NABARD, Bhopal and team NABCONS from Regional Ofce, Bhopal who provided needed infrastructure and support for the timely completion of study. TEAM NABCONS 3 Report on Low CD Ratio Study-NIWARI, MP Table of Contents 1. BACKGROUND 5 2. APPROACH AND METHODOLOGY 7 3. EXECUTIVE SUMMARY 8 4. OVERVIEW OF DISTRICT 13 5. DISTRICT AGRICULTURE PROFILE 15 6. INFRASTRUCTURE STATUS 17 7. DISTRICT BANKING PROFILE 18 8. HIGHLIGHTS OF PERFORMANCE OF BANKS 20 9. CREDIT DEPOSIT RATIO ANALYSIS 24 10. GOVERNMENT SCHEME PERFORMANCE: 26 11. STATUS OF SRLM FINANCING IN THE DISTRICT 27 12. CURRENT CREDIT GAP & POTENTIAL CREDIT DEPLOYMENT IN DISTRICT 28 13. FUNCTIONING OF SUB COMMITTEE ON LOW CD RATIO 30 14. INSTITUTIONAL MONITORING MECHANISM IN BANKS 31 15. PRESENCE OF NBFC/MFIS IN REGION 32 16. SUGGESTIONS FOR IMPROVING CD RATIO IN THE DISTRICT 33 17. ISSUES AND CHALLENGES 35 18. SUGGESTIVE POLICY CHANGES 37 19. ANNEXURES Ÿ LIST OF PEOPLE INTERACTED Ÿ BRANCH VISIT REPORT Ÿ ADVANCES & DEPOSIT STATUS Ÿ PLP V/S ACP ACHIEVEMEN Ÿ PERFORMANCE OF GOVERNMENT SHCEME Ÿ FPO/SHG FINANCING Ÿ STAFFING PATTERN Ÿ BRANCH NETWORK Ÿ NPA STATEMENT 4 Report on Low CD Ratio Study-NIWARI, MP 1. BACKGROUN D For economic development of a region it is essential to have comprehensive nancial intermediaries and commercial banking sector that efciently collect the savings accessible from the public and disburse credit to the productive and demanding sectors in a well-organized manner. The role of nancial intermediaries and banking sector in mobilizing deposits and paying credits to various sectors of an economy leads to sustaining growth of the economy. Hence, the quality of functioning of the banking sector in turn marks the performance and productivity of other sectors of the economy. The banking system in India has evolved to deliver a diversied, efcient and competitive nancial system with primary objective of improving the allocation of resources with better operational exibility. The Reserve Bank of India (RBI) has time and again stimulated the banking sector to expand its nancial coverage in the country. The matter of poor C D ratio rst came in the eyes of RBI in 1980, that the most of the backward regions of the India have yet not attained the national average of C D ratio. RBI rst advised PSBs to achieve a CDR of 60 percent in their rural and semi urban branches on a continuing basis. This was done in order to encourage reduction in inter-regional imbalance in credit delivery and to persuade banks to lend in the same areas where they mobilized deposits. In both, in concept and origin this target was provided as advisory to banks in order to correct the „known ignorance in their lending portfolio. The CD ratio is not meant as a yardstick to evaluate the performance of PSBs at the regional, state, or district levels. But, to all intent and purposes, the credit deposit ratio is now quoted as a yardstick to assess the commitment of SCBs. Credit is an engine of growth. It plays vital role in creating additional purchasing power in the hands of the mass of the economy. Purchasing power in the form of credit is one important aspect of credit while its real signicance arises when it utilize to invest in the productive purposes. By investment, it helps in capital formation and therefore income, employment and output. In an economy the penetration of credit could be measured in terms of credit deployed against the deposit received, technically C D Ratio denotes it. Credit- 5 Report on Low CD Ratio Study-NIWARI, MP deposit ratio is the proportion of loan-assets created by banks from the deposits received. The higher the ratio, the higher the loan-assets created from deposits and vice-versa. Fairly, it is straightforward indicator of the performance of Banking Sector. But in its own way, it sheds a lot of light on the type of society and economy we live in. The importance of disbursing credit out of mobilized deposits for productive purpose is well documented in various studies of Finance, and Economic Growth. Historically, the issue of C D ratio has considered as most debated monetary matter for regional growth and development due to unequal deployment of bank credit among the various states/districts of the country. Some of the states of our country especially from central region, northeastern, and eastern India has witnessed poor C D ratio since the nationalization of banks. In the state of Madhya Pradesh too this regional disparity in credit deployment/off take and consequently low Credit Deposit ratio has been persistent in select districts (Eastern Belt). Nine districts in Madhya Pradesh have been consistently facing the chronic issue of low CD ratio below 40%. The matter was discussed in the SLBC meeting held on 6th July 2019, and it was decided that Directorate of Institutional Finance (DIF) may arrange a study on Challenges being faced in maintaining required Credit Deposit ratio by banks in nine districts of Madhya Pradesh through NABCONS. 1.1 OBJECTIVE OF STUDY In the light of the above stated background, the Directorate of Institutional Finance (DIF) GoMP commissioned a study to examine the reasons for low CD ratio in the nine districts of Madhya Pradesh. The study aims to analyze the deposit and credit data of nine districts, understand functioning of banks, potential in districts, reasons for low credit deployment/off take and recommendation for improvement of CD ratio in the nine districts. 6 Report on Low CD Ratio Study-NIWARI, MP 2. APPROACH AND METHODOLOGY 2.1 APPROACH The study comprised of both primary and secondary research. The primary research was focused on collection of data from various stakeholders such as Lead District Manager (LDM), Banks, DIC, and Agriculture department, other line departments and SRLM ofcials. A minimum of four branches with three low CD ratio branch and one high CD ratio branch were visited during the eld visit along with concerned district ofcials. A Sub Committee meeting of low CD ratio was also conducted during the visit to the districts, with a view to interact with various banks and line departments. 2.2 METHODOLOGY 2.2.1 Secondary research Information related to Credit and Deposit, Sectoral Advances, Banking infrastructure, Potential linked plan, annual credit plan achievement, govt scheme achievements were sought from the Lead District Manager (LDM) & SLBC in a prescribed form for the district, developed in consultation with DIF ofcials.Trend analysis of this data was conducted to assess the gaps and issues related to CD ratio. 2.2.2 Primary research Two-day eld visit was designed to assess the ground challenges and understanding the viewpoints of district ofcials/bankers. During the primary research the data was collected from Bank Branches on processes, NPAs, credit growth plan etc. Information was also collected from district ofcials such as DIC, SRLM, Agriculture, Dairy and other line departments. 2.3 LIMITATIONS OF STUDY Data availability was one of the biggest challenge and limitation of the study. The data sought as per the prescribed format was not complete in all respect. Data of advances from outside district was not available with LDM, DIC or banks in the district; the same was also not available with SLBC. The ability of district ofcials to articulate their views of specics of low CD ratio also came to be a challenge. Niwari is the new district formed in October 2018, the data was not available for past few years and the analysis was done based on the available data of June and September 2019. 7 Report on Low CD Ratio Study-NIWARI, MP 3. EXECUTIVE SUMMARY Carved out of Tikamgarh, Niwari is the newly formed (52nd) district of Madhya Pradesh, formed in October 2018. Niwari district encompasses a geographical area of 1317sq kmwith 12% of area covered under forest. The district has population of 4.05 lakh. Niwari is smallest district of Madhya Pradesh in both area and population. The schedule caste population in the district is 24.4% and tribal population is 3%. Niwari has population density of 307 people per sq km. Main source of income in the district is from the agriculture and industries and per capita income is INR29656/- against INR 43426/- per capita income of Madhya Pradesh.