Govt worried over poor flow of funds for welfare schemes

The continued reluctance of scheduled commercial banks to ensure adequate flow of funds to  government-sponsored programmes has become a serious cause of concern for the BJP government in Karnataka.

The Assembly elections expected to be held early next year, the ruling party might find it extremely difficult to effectively implement several of its crucial welfare and beneficiary-oriented schemes in the current fiscal.

The flow of funds from banks has been on the decline over the last five years, upsetting the targets set by the State government for implementing its schemes.

The worst hit are schemes aimed at helping farmers, underprivileged sections, women and micro, small and medium enterprise (MSME) in the State, as per the proceedings of 122 State-level bankers’ committee meeting.

The credit-deposit (CD) ratio — loan amount against the deposit received — has fallen from the peak of 115 per cent in 2007-08 to 74.15 per cent in June 2012. And the banks are reluctant to lend, despite the State registering a steady increase in deposits during this period. There are about 7,932 branches of scheduled commercial banks in Karnataka.

More interesting is the fact that Karnataka now has the lowest CD ratio in the entire southern region, though it continues to be on top as far as deposits are concerned.

The total deposits as on June 2012 were Rs 4,03,153 crore, while the total advances were only Rs 2,98,958 crore. At the same time, the CD ratio of the neighbouring Tamil Nadu and Andhra Pradesh was 115 per cent and 110 per cent, respectively.

Official sources said the glaring disparity and its possible effect on the next elections had forced Chief Minister Jagadish Shettar to vent his ire in the recently held zonal conference on credit flow chaired by Union Finance Minister P Chidambaram.

Shettar  openly objected to Chidambaram’s remarks that the credit of the southern states was satisfactory.

“We are concerned about the declining fund flow. Increasing deposits show that Karnataka is a vibrant economy. Adequate funds should be provided to spur the State’s growth. We have been raising the issue with both the Centre and the banks at all available forums,” Additional Chief Secretary to Finance department L V Nagarajan said.

As per statistics of sector-wise advances made by the banks till June this year, fund flow has been negative for the priority sector and Differential Rate of Interest (DRI) schemes compared with the last year’s.

It may be advances to MSME (-0.82 per cent), women (-0.27 per cent),  SCs&STs (-0.32) and DRI (-3), lending from the banks was inadequate to achieve the target. Advances for agriculture and weaker sections, however, have recorded a marginal increase in the last one year.

For instance, of the 42,000 applications approved and recommended by the government for Rs 50,000 under a housing scheme for urban poor in 2011-12, the banks sanctioned loans only in 11,000 cases.

The government, for its part, gives an upfront subsidy of Rs 75,000 under the scheme. As a result, the remaining 31,000 applicants could not avail of the scheme. Similarly, several self-employment schemes for women, SCs/ STs and self-help groups, and subsidised educational loans for students pursuing professional courses, have been hit due to poor lending by the banks, officials said.

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