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High defaults slow down banks' expansion in the North East

Expansion of bank branches has slowed down in the North East. Deposits moblised from the region are being diverted to other parts of the country. Consequently, development activities have received a severe jolt in the area.

According to Dr V K Kaveri, director of the North East Institute of Bank Management, each branch has to cater to a large population in the region.

The pace of branch expansion of banks has come down due to concern about their viability and profitability, he said.

In a competitive environment, banks in the region experience low growth of deposits. Besides, deposits are mostly collected from small savers and the share of current deposits to total deposits has fallen sharply.

Worse, credit-deposit ratio is low and declining. At present, it stands at around 35 per cent. The ratio of credit plus investment/deposits has declined over the years, he added.

''Thus deposits mobilised from the region are being diverted to other regions. In the process, the developmental activities suffer,'' he said.

Recovery from advances is as low as 50 per cent. Relatively speaking, the position under the government sponsored schemes is very critical and stands at less than 20 per cent.

The working of the timber-based units has come to a standstill due to the Supreme Court ban on felling of trees, which has led to non-payment of advances in the region.

Also, the attitude of borrowers is to borrow from banks and financial institutions and not repay. The number of wilful defaulters is on the rise. They are mostly educated youths seeking finances under the Prime Minister's Rozgar Yojna. This has pushed up the non-performing assets or NPAs of banks.

The recovery Acts are amended only in Assam and Meghalaya and even in these states recovery officers are not placed in many districts. Stay on many debt recovery tribunal cases by the high court has also led to low recovery.

He suggested that every potential entrepreneur should undergo an entrepreneurship development programme before availing of bank finances. Such programmes should have adequate input on loan repayment, he added.

UNI

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