Few weeks back at a credit seminar organised by NABARD (National Bank For Agriculture And Rural Development), which had all the bankers present, Chief Minister Manohar Parrikar had told the banks to increase the credit-to-deposit ratio (CD ratio).
However, the latest Economic Survey shows that the CD ratio of all the banks put together stood at a partly 29.58% in Goa on September 30, 2017. This clearly shows that banks are struggling to grow their loan books in the state.
Credit deposit ratio is arrived at by dividing loans given by banks with deposits of all banks. If banks pay interest on deposits, they have to earn interest on loans to make profit. However, in Goa, traditionally, banks struggle to give loans. And, their recent performance is no better.
Typically, in other parts of India, banks manage to clock a CD ratio of around 70%. In simple words, this means that they are able to lend Rs 70 out of every Rs 100 in their deposits. But, in Goa, a CD ratio of 29.58% means that banks are able to lend a meager Rs 29.58 out of every Rs 100 in their deposits.
Goa is a small state and therefore a low CD ratio is not a huge problem because excess deposits can be given as loans in other states. However, if Goa were a big state, such low CD ratio would have been a huge crisis.
One must also realize that Prime Minister Narendra Modi has announced a number of schemes like Pradhan Mantri Mudra Yojana (PMMY) and Stand-Up India so that needy sections of society get loans easily. Despite such measures, banks in Goa are not able to give a strong push to credit.
For the sake of comparison, consider these facts. The CD ratio of banks was 33% as on March 31, 2011. The fact that it has fallen to 29.58% as on September 30, 2017 shows that banks have not been able to grow their loan-books in Goa despite several schemes of PM Modi.
Moreover, the state government also keeps on announcing a number of subsidies and schemes for agriculture, horticulture and animal husbandry. Thanks to these subsidies, farmers or anyone else in the business knows that there will be some sort of financial support from the state government. This means that they do have certain credit-worthiness.
Despite this, often, such borrowers find it difficult to get loans from the banks. It’s advisable that the subsidy account is linked with a loan. In that case, before giving loan to an account, banks will know that certain subsidy will be deposited in that account at regular intervals. However, banks and state government need to do this in a systematic and thorough manner. Or else, the CD ratio will not improve.
