J&K Finance Minister was hitting the nail on its head while asking the banks to prevent flight of capital from Jammu and Kashmir. Over a period of time, the dwindling credit-deposit ratio in the state, which transforms as rightly put by the finance minister into flight of capital from the state, has been a major cause of concern both in the micro and macro-economic sense. Though government has been making repeated pleas to the banks to enhance their CD ratio in the state, no significant improvement has come across over the years in this regard. Interestingly, while the quantum of total deposits with the banks has increased sharply, the credit expansion has gone down steeply. In fact the bank credit expansion has recorded a negative growth of (-) 6.54 per cent ended March 31, 2011 although a year earlier it had clocked 18.13 per cent growth. At the end of March 2011 the aggregate deposits with the banks in J&K had been Rs 40377 crore, while as the credits stood at just Rs 15,000 crore. This amply suggests that major portion of the deposits mobilized in the state has gone into financing the trade and industry outside the state. Figures show that J&K over the years has evolved into a profitable market for the banks. No wonder then, on an average one bank is available to 12,000 people in J&K as against 14,000 people in the country. The year-on-year growth in the deposits as on March 2011 had been higher at 17.95 per cent as against 16.62 percent a year earlier. While the higher growth in the deposits should have transformed into higher growth in credit, but that has not happened. The sluggish credit growth has drastically reduced the CD ratio from 46.88 per cent in 2009-10 to 37.15 per cent in 2010.11. The CD ratio of all the bank groups has declined during 2010-2011, save regional rural banks. It is time the government sent a clear signal to the banks thriving on the deposits being mobilized in the state that they are duty bound to be generous in their credit expansion in J&K.

Lastupdate on : Tue, 31 Jul 2012 21:30:00 Makkah time
Lastupdate on : Tue, 31 Jul 2012 18:30:00 GMT
Lastupdate on : Wed, 1 Aug 2012 00:00:00 IST