ACCORDING to RBI Goa General Manager S T Kannan, the credit deposit ratio in the state is the lowest among states at 28-30 per cent. Goa obviously would have to work hard to attract investments to improve the CD ratio. It is hard to disagree with Kannan when he says the state must focus on newer areas of investments in view of the fact that mining has been severely affected and the tourism sector was facing problems. Investments need to be diversified. The diversification has to come in the spread of the micro, small and medium enterprises as the state does not have much scope for large enterprises requiring large areas of land.
Banks’ Goa managers lament that the demand for credit is not rising in the state as large companies with their production here borrow from branches in Mumbai or other cities and the local demand is largely limited to big Goan companies. Goa has been lagging behind in CD ratio for the last five years and the situation is unlikely to improve in the near future unless the government is able to promote private investments and banks change their lending portfolio. Bank officials today have to make a hundred checks before advancing credit about the business plan of projects. In view of the rising volume of non-performing assets and flight of some big businessmen the RBI and bank managements have tightened their evaluation and monitoring criteria, so entrepreneurs need to meet the criteria to satisfy the lenders. The banks, particularly the public sector banks, have suffered big setbacks; their shares have plummeted in the stock markets; and measures taken by the Union finance ministry have not helped them to come out of the woods. The worst is not yet over for the PSU banks. So the banks would not take risk in granting loans unless they are fully satisfied.
However, only entrepreneurs can take credit to improve the CD ratio. Bank managers in the state have been trying to advance loans to enterprises but they are not being innovative enough. Even Kannan felt the banks are trying but they are not trying enough. They have to try harder and lend to entrepreneurs in new areas such as information technology, waste management, biotechnology, entertainment, food and beverage, handicrafts and light engineering. Bank officials today fear for their careers and future and have turned overcautious to avoid any action against them for the loans that might turn bad. The RBI should give them clear and foolproof guidelines. The Union government, which owns the banks, has to give the bank managers assurance that no one will face action as long as they follow the specified terms and criteria. On its part, the Goa government should set up a mechanism to facilitate availing of credit by entrepreneurs, especially those who desire to avail benefit under the start-up policy. It is only by promoting start-ups and investments in new areas that that the institutions can hope to improve the credit deposit ratio.
Goans have been known to save money in fixed deposits in banks. A very large number of Goans work and have worked abroad. They make considerable remittances and deposits. It is out of these small savings that banks lend to borrowers, but that can be true only when there is a large number of borrowers and there is large credit outflow. The reality is the inflow is much greater than the outflow. Much of the savings is lying idle in the banks, with few Goans taking risks to set up businesses and coming forward to seek loans. This has been true for Goa for decades. It is worth noting that the seminar organized by the RBI in collaboration with the State Bank of India and 20 other banks on the World Entrepreneurs Day in Panaji earlier this week was attended by only a third of 200 prospective Goan entrepreneurs invited. That shows that the RBI, the bank managements and the state government have a challenging task of motivating and developing entrepreneurship before them. They need to go deeper than seminars and workshops. They are up against social, psychological and economic odds. Goa has to compete with other states to attract investments. The state has certain clear advantages, but so far they have been not capitalized on. Information Technology is one area the state government is trying to capitalize on these advantages. The government must capitalize on them in other new areas too.