Inadequate infrastructure for commercial and industrial development restricts demand for bank credit

The State Level Bankers’ Committee (SLBC) has expressed concern over area-specific reasons bringing down the credit deposit ratio (CDR). It has set up a panel to look into the reasons for low CDR in Kutch and other districts.

Earlier, a sub-committee was formed to devise an action plan to improve CDR, but it did not work in Kutch. The reasons listed then included overall backwardness and lack of infrastructure required for development of commercial as well as industrial activities in the district. Such conditions restrict demand for bank credit even for agricultural activities, the committee said.

A large number of people from the area have migrated to foreign countries for employment or to set up businesses. The fund remittances from them constitute more than 40 per cent of the total deposits in the branches of the banks in the district. On the other hand, there is no offtake from this segment and substantial funds continue to accumulate in the banks in the district.

Even massive infrastructure growth following the 2001 earthquake failed to lift the credit uptake. Agricultural lands

were converted into non-agricultural lands to facilitate industrialisation. Moreover, sale proceeds of agricultural lands parked in banks resulted in the increase in bank deposits.

To improve the CDR, the district-level credit committee suggested that industries in the district must avail of the benefit of tax holidays from bank branches operating in Kutch district only. It was also suggested that the upcountry bank finance for units in Kutch must be parked in the banks located in the districts.

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