Industrialization key for credit growth in the east, say bankers

MUMBAI: There is an effort from the government to push credit in India’s eastern states, but the lack of lending opportunities and unhealthy credit culture need to change before any headway can be made, according to bankers.

This and a few other points were raised at an August 25 meeting between Union finance minister Nirmala Sitharaman and heads of public sector banks, according to two people aware of the development.

Sitharaman highlighted the need for improving the creditdeposit (CD) ratio in states such as Bihar, Jharkhand, Odisha and West Bengal.

Senior bankers now plan to visit the states more often and meet political leaders and local administration to discuss credit opportunities. “Public sector banks will soon decide on how to push more credit in these regions. However, it must be kept in mind that credit is also a function of lending avenues and repayment culture. We have witnessed that in some states of this region, local political leaders threaten bank employees when recovery action is initiated against defaulters,” said one of the people mentioned above.

A credit push will not yield satisfactory results unless there is also a push for industrialization in eastern India, he said.

“The savings of these states (in the eastern region) are used for providing loans in other states where the demand is greater. Eastern states also have to build the credit absorption capacity and this cannot be done by bankers,” said the second person.

Banks have recognized that in eastern states such as Odisha, Bihar, Jharkhand and even West Bengal, current and savings account deposits are piling up without a proportional rise in providing credit, the finance minister told reporters on August 25.