Credit growth declines in Punjab

Vijay C Roy

Tribune News Service

Chandigarh, August 13

Banks in Punjab are sitting on huge amount of deposits, literally. This is evident from the fact that the credit-deposit (CD) ratio of the banking system in the state or the proportion of deposits deployed as loans, dropped by 9.33% to 62.5% in the past one year. It is worrisome that even the bankers are clueless about the reasons behind the decline. 

Country’s biggest public sector lender State Bank of India alone has reported a decline of Rs 23,795.58 crore in its advances during the period, which has pulled down the CD ratio of the state by 6.27%. Besides SBI, seven other banks showed decline in CD ratio by more than 10%. 

As on June 30, 2019, the total deposits of all scheduled commercial banks stood at Rs 3,79,646 crore  as compared to Rs 3,50,929 crore on June 30, 2018, a growth of 8%. On the other hand, the total advances declined from Rs 2,51,561 crore to Rs 2,37,323 crore in the same period, a decline of 5.65%. So, overall, the CD ratio went down from 71.84% to 62.51%, clearly showing slowdown in lending. 

Interestingly, industry-wise deployment of credit showed a decline of 5.65%, with the highest decline being witnessed in lending to weaker sections (16.28%), followed by agriculture (7.93%) and priority sector (2.13%). 

However, lending to the MSMEs increased by a whopping 15.65%. This was mainly because of the low base as during the corresponding period of the previous year, the credit offtake was negligible. 

The matter came to light during the State Level Bankers Committee meeting which was held here today. Perturbed over the situation, when Punjab’s Principal Secretary (Finance)  Anirudh Tewari asked the bankers reasons for the decline in the CD ratio, most of the bankers were clueless. They apprehend that slowdown may be one of the reasons for decline in the credit growth.

However, Punjab State Co-op Agricultural Development Bank’s DGM Jagdeep Ghai said it might be because of correction as for the past couple of years many banks were over-lending. As a result, many of the banks were decreasing scale of finance. ”Secondly, the loan waiver scheme announced by the state government has taken a toll on repayment by farmers. Many of the famers, in anticipation that their loan will be waived, stopped repaying their debt and became ineligible for fresh loans,” he added.

Bankers also hinted tightening of lending norms as one of the reasons behind decline in lending.