Bank’s advances growth in Goa is nowhere what it is in other states and still in the slow lane, reports Shoma Patnaik
A major problem confronting policy makers in the state is the low level of lending by banks. Banks in Goa are flush with fund but oddly unwilling to extend loans for development.
With the state having a high per capita income the propensity to save among citizens is high. Local branches receive robust deposits from residents and NRIs. Yet branch managers are miserly in sanctioning loans and most of the surpluses in savings accounts are channeled to other states.
Thanks to the poor track record of lending the average credit-deposit ratio (the percentage of deposits advanced as loans) of banks in the state is among the lowest. A state level bankers committee (SLBC) meeting on June 1 revealed average credit-deposit ratio of only 31 per cent in 2017-18 vis-à-vis the all-India average ratio of 75.6 per cent.
Further, the low credit-deposit ratio in the state is not just for the year. It is a permanent trend as revealed in a static credit-deposit ratio over the years. Interestingly the laggards in lending are not the urban co-operative banks or even the private banks. Urban co-operative banks are strong in local connect and are hands-on in lending. Reluctant to loan are the public sector banks which are rich repositories of peoples deposits.
As such the credit-deposit ratio in 2017-18 for lead bank SBI is merely 28 per cent, while for Canara Bank it is 27.7 per cent, Bank of India 20 per cent, Corporation Bank 18.3 per cent and Bank of Baroda 10.6 per cent.
According to bankers in Goa, the low level of advances is due to lack of entrepreneurship among residents and due to the absence of big industry. Bankers say that Goans are naturally prosperous and averse to doing business or taking loans. They claim that residents prefer to fund projects through family income rather than borrow. But reality is different. For most small unit owners, exporters, agriculturists, startups, consumers, obtaining bank finance is a major hurdle. The brunt of the lack of bank finance is felt by small and micro units, feels Goan industry.
Shekhar Sardesai, chairman, Kineco Group, Pilerne, says that, over the years banks have become steadily intolerant to small and tiny manufacturing units. He says that, the human element in banking is completely gone so there is no empathy for entrepreneurship. “Now it is only a transactional relationship between a banker and a borrower. The shift has happened for whatever reasons but it could be fallout of extensive regulations and scams,” he says.
Sardesai explains that, bankers have become very skeptical. So they tend to ask for more than required collateral from small borrowers which results in a situation where small units are not in position to provide the collateral and grow. “Because banks have become intolerant the journey of entrepreneurship has become very risky,” he feels, pointing out that, any problem in business results in the bank speedily moving in on the personal guarantee or collateral. “In the past banks used to be tolerant of business going through ups and downs. But now it is all about standard operating procedures. It is about 60 days, ninety days and going in for recovery or whatever measures,” says Sardesai.
According to Tirthaprasad Nagvekar, Adec Technologies, Corlim, “Banks are not willing to extend the starting capital needed for purchasing plant or machinery.” The attitude of branch managers towards new unit owners is also not improved as they look down upon the struggling manufacturer.”
Nagvekar believes that, bankers s are indulging in doublespeak. “On the face they are all out to promote entrepreneurship but in truth discourage units to borrow. The State Bank of India (SBI) is asking for a minimum turnover of Rs one crore to a new manufacturer which is difficult target.” He adds that, an investigation needs to be conducted as to how many manufacturing units have been actually funded by banks in recent years through the various popular schemes.
Similarly Damodar Kotchkar, Ultratech Automation, Verna, agrees that, on the whole it is very difficult for small units to get bank funding. “The collateral conditions of land, fixed assets are too stringent so that none can meet it and take bank loans,” he says. Kotchkar suggests that, banks need to work out a system wherein they can determine the credibility of a borrower without asking for his house or wife’s ornaments as security.
With all-round complains on the bank advances front, one is curious to find out where does the bank advances goes? It turns out that, retail segment is the first preference in extending loans where the target is to grab as many customers as possible for automobile loans, consumer durables, personal loans, housing loans and also to the service industry. The volume of Mudra loan is also increasing but most of it is targeted at vegetable vendors, traders, shopkeepers, etc.
In October 2017, officials from the Reserve Bank of India, Goa, stepped in to improve the credit-deposit ratio. Banks were given the responsibility of advancing loans to individual activities such as, dairy, water sports, cashew processing, etc., with individual areas of funding to each bank. RBI officials said that the progress in advances would be monitored.
More recently, viz. in January 2018 NABARD suggested that bank credit in the state could only be improved by legislation. The development credit institution in its state focus paper 2018-19, suggested legal support to induce banks to lend. Both the initiatives have not been taken up with the result that the credit-deposit ratio continues to remain stagnant.