Srinagar, May 28: In a dismaying scenario, the banking sector in Jammu and Kashmir seems to be unable to cash on the fast expanding economic activity in the state, if the credit deposit ratio figures were anything to go by. According to official figures, against deposits of Rs 55143 crore at the end of March 2012, the cumulative loan book stands at Rs 18948 crore, making a credit deposit ratio of 34.36 per cent - which is a net fall by 1.21 per cent in one year.
Ironically, the credit deposit ratio has plummeted from around 42 percent in 2008 to the lowest 34 percent in 2012 while the deposits have grown at a steady rate of around 21 percent in during this period. The national average of CDR is around 40 percent.
The figures seem to have taken even the Chief Minister Omar Abdullah by surprise. “It is flight of capital,” Omar told a bankers’ conference here.
The issue was also raised by the Finance Minister Abdur Rahim Rather, who told the bankers that “Questions are being asked and we are unable to explain.”
Rather asked banks to show the same growth in advances as they are showing in the deposits. “How can we explain? Last year was peaceful and still you did not work as the society expected,” he said.
Pertinently, during his visit to the state in March this year, Reserve Bank of India (RBI) governor, Dr D Subbarao had also slammed the banks for having dismal CDR in J&K. According to observers, the CDR should have increased in view of “peace in the state last year”, as compared to past three years when the Valley saw different agitations.
Official figures reveal that CDR started appreciating in 2004 when the CD ratio jumped to 34.96 from 31.49 per cent. The sector peaked in its exposure when by March 2008 it had advanced 41.92 percent of their deposit in the state.
The CD ratio fell to 45.85 per cent in March 2009 and to 44.76 per cent in March 2010 and eventually tumbled to 35.57 per cent in March 2011. Now it is at 34.36.
At the Bankers Meet, Omar also came down heavily on the bank’s operating in the state for declining Credit Deposit Ratio. “It is very disheartening that our CDR is declining while benchmark for it in other parts of the country is 40 per cent.,” Omar said. “At the same time our deposit ratio is showing upward trend, but is very unfortunate that banks are receiving deposits but are not able to disburse them off among the priority and non priority sectors.”
Chief Minister said that the growth registered in the deposits should necessarily reflect its positive impact on the credit flow to ensure benefits to the people especially in the priority sector.
“When there will be gap between deposits accumulation and credit flow then an important question arises for bankers to explain. It is also difficult for the government and the people to understand this break in the process of normal banking procedure and practice,” Omar said, adding “the flight of economy needs to be checked by ensuring investment of deposits within the State itself in consonance with the targets fixed at SLBC for lending of money to people in the State.”
Official figures say as against the annual target of Rs 419.91 crore in Housing sector, banks have disbursed Rs 1,151.65 crores by the end of March 2012. “Banks in housing sector have surpassed their set target, but it does not mean banks will not achieve their targets in other important sectors,” Omar said.
“Agriculture and its allied sector are backbone of state’s economy, but on this front performance of banks is not up to the mark. The housing sector  alone won’t benefit our economy,” ,” Omar said. “The banks should give more advances in the tourism sector.”
“We have shortage of tourist vehicles, banks should provide advances on purchase of vehicles as it can prove beneficial for tourism sector,” he said.
 “There is need to penalize banks who fall short of set targets. The banks in these meetings set one target and their other target is set by their corporate offices. It is natural that these banks will try to fulfill their own target set by their managements. If they wont fulfill it, they will be penalized. I feel there is need that RBI should also penalize banks falling short of their set targets,” Omar said.
He asked the banks to constitute sub-committees to monitor “this aspect and the aspect of lending loans to the priority sectors in a hassle-free manner.”
Omar called for identifying zonal level nodal banks for ensuring issuance of Kisan Credit Cards to the farmers.
The Finance Minister said “Decline in  CDRs is very unfortunate , we have to  improve our Credit Deposit ratio and for that government alone cannot solve all the problems  and banks have to play pivotal role in bringing CDR’s up by increasing credit flow to priority sectors.”
He said state government is committed to provide all help to the bankers for their growth, development and security of assets, but government at the same time expects the banks to deliver on the front of credit flow.
“We have observed remarkable growth of deposits in the banks but the flow of credit has shown decline,” he said. “This is the area of concern and bankers have to focus on this issue.”
Rather said in a State like Jammu and Kashmir “where resources are meager and dependence of credit flow is mostly on banks, the bankers have to rise to the occasion and help give necessary fillip to the economy especially in agriculture and allied sectors identified as priority area in credit flow.”
He also urged bankers to work for achieving the national benchmark of 18 per cent of the total credit for agriculture sector.

Lastupdate on : Mon, 28 May 2012 21:30:00 Makkah time
Lastupdate on : Mon, 28 May 2012 18:30:00 GMT
Lastupdate on : Tue, 29 May 2012 00:00:00 IST