Inequality among states in credit disbursement

02 November, 2012

RBI is not able to ensure justified flow of credits among states and Scheduled commercial banks (SCBs) are not fair in allowing people of different states to use their savings because Credit Deposit Ratio varies among different states.

SCHEDULED COMMERCIAL banks (SCBs) have a vital role in economic disparities among various states. They provide credits to the enterprises and individuals required for economic growth. The Reserve Bank of India (RBI) as monetary regulator (howling for financial inclusion and inclusive growth) supposed to ensure justified flow of credits and utilization of savings for economic development in different states and Union Territories (UTs). But statistics shows that RBI is not able to ensure justified flow of credits among states and SCBs are not fair in allowing people of different states to use their savings because Credit Deposit Ratio varies among different states. This ultimately reflects on economic development of states.

Surprisingly, Chandigarh utilizes 149.2% of state savings as credits against Lakshadweep with utilization of only 9.3% of state people's savings as credit. The difference in Credit Deposit Ratio among states implies to difference in economic development of the states and UTs.

There is vast difference in per capita deposits in different states depending on per capita income and saving level of people in different states. While per capita deposit is Rs. 392,666 for Delhi, it is as low as Rs. 12,127 for Bihar, reported Economic Times. This level of disparity could be reduced if we could provide more credit to people of states with lower deposit rates.

It is important to ensure that there must be justice as far per capita credit among various states is concerned. But again RBI failed to see that SCBs do justice in disbursement of credits among the states. While at Chandigarh per capita credit is Rs. 5,07,516 against as low as Rs. 3,450 for Bihar. This has certainly impact on economic disparities and growth potentials among various states. Due to this high credit deposit ratio and availability of higher per capita credit (over Rs. 5 Lakhs) Chandigarh’s growth potential is much higher than states like Bihar, Uttar Pradesh, Assam, and Lakshadweep etc. where per capita credit is less than Rs. 10,000.

RBI as regulator of banking system is supposed to address this disparities in credit deposit ratio and unfair disbursement of credits among various states and UTs. This has serious concern on growth potential of states and UTs, thus RBI need to see that SCBs should be fair in disbursement of credits among various states and UTs. This may reduce economic disparities among various states and UTs.

As per Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks dated April 03, 2012 published at the RBI website and Census of India Provisional report 2011.

Considering the above facts and figures, it is interesting to see that Kerela is having credit deposit ratio of 74.4% equal to national average. Barring Kerela, all other states and UTs with better Muslim population share have poor credit deposit ratios. This reflects injustice in part of Indian Muslims to utilize their savings for economic growth because Lakshadweep with 95% Muslim population has just 9.3% credit deposit ration whereas Chandigarh with Muslim as 3.95% population has credit deposit ratio of 149.23%.

States such as Uttar Pradesh, Bihar, Assam and West Bengal, etc. (with considerable Muslim population) have credit deposit ratios much less than all India average for credit deposit ratio and people living in these states have much low per capita credits compared to national average per capita credits pushes the people of these states behind the national average in economic growth.

Will the members of Planning Commission and our Parliamentarians take note of the above facts and figures?