A leverage for growth

The Jharkhand government is set to present the budget for FY 2022-23 on March 3, during the budget session which is scheduled to start from February 25, 2022. People have many expectations from the budget. In particular, they are expecting an improved outlay for banking facilities because absence of such facilities could create problems for citizens as well as for the government.

To understand the current status of banking facilities in the state, it would be pertinent to have a look at the basics. Jharkhand became an independent state after separating from Bihar in 2000. Being rich in mineral resources, it was believed that the state would develop rapidly but, so far, a large part of that potential remains to be capitalised.

The total population of Jharkhand is 3.29 crore, out of which the Scheduled Tribes account for 28 per cent and Scheduled Castes constitute 12 per cent. The geographical area of the state is 80 lakh hectares, in which the cultivable land is 38 lakh hectares. In practice, however, only 18 lakh hectares of land is being cultivated. Furthermore, the irrigated land in the state is merely 1.57 lakh hectares, which can easily be increased with the help of improved bank credit.

There are 24 districts, 32,620 villages, 33 sub-divisions and 259 blocks in the state. Per capita income in the state is Rs 4,161. According to the 2011 census, the literacy rate of Jharkhand is 67.63 per cent. The male literacy rate in the state is 78.45 per cent and the female literacy rate is 56.21 per cent. Of the total population, 15 per cent people work in the agriculture sector, while six per cent are agricultural laborers, about five per cent are employed in industries and mining, two per cent in business and three per cent in other services. It is clear from the data that there is a lot of scope for development in Jharkhand which can be achieved through expansion of banking services.

According to data from State Level Bankers Committee (SLBC) Portal, till September 2021, banks in Jharkhand had disbursed only 29.55 per cent of the loan target to the farmers while in the case of crop loan, only 21.08 per cent of the targeted loan could be disbursed. At the same time, banks had disbursed only 1.63 per cent of the loan of the set target by September 2021 towards strengthening rural infrastructure.

Today, Micro, Small and Medium Enterprises (MSMEs) are playing the most important role in the development of any sector. Along with making every sector self-reliant, MSMEs also serve as a huge source of employment generation. At present, there are 6.33 crore MSME units in the country, which contribute 29 per cent to the national GDP and employ more than 11 crore people. Considering the importance of this sector, banks should give credit to MSME units on a priority basis. A lot can be done on this front as the banks in Jharkhand had disbursed only 57.17 per cent of the loan target by September 2021 to MSME units under the priority sector.

Till September 2021, under the priority sector, 0 per cent of loan of the set target had been disbursed in the export sector while in the case of education, 10.63 per cent of loan of the set target was disbursed. In the context of home loans, this was 12.89 per cent. In totality, under the priority sector, 41.92 per cent of the loan target had been disbursed till September 21 while 65.96 per cent of loan of set target had been disbursed in the non-priority sector till the same deadline.

The credit being given by banks to agriculture, industry and service sector in Jharkhand can also be estimated from the CD ratio of banks. As of September 2021, the CD ratio of banks operating in Jharkhand was only 39.67 per cent. CD ratio is the ratio of the loan amount given to the needy people, industry & service sector out of the total deposit amount. The basic function of the bank is to take deposits from customers and earn interest by giving loans to the needy out of the deposits, but banks are lending less in Jharkhand.

All banks had 3,215 branches in Jharkhand as of September 2021, out of which State Bank of India alone had 567 branches. Also, out of the total 3,285 ATMs, the State Bank of India alone had 1,206 ATMs. At the same time, as of September 2021, the number of Banking Correspondents (BCs) in Jharkhand was 4,197. BCs are also called mini banks and they basically work in the villages. 13,656 micro-ATMs have also been provided to BCs, so that villagers can easily withdraw their deposits.

If the ratio of bank branches available in the state to the total population of the state is taken out, then in Jharkhand there is 1 bank branch for the population of 10,000. Similarly, the number of ATMs is 1 for a population of 10,000, while the number of BCs is 1 for a population of 7,838.

Today, banks are playing an important role in the development of any state or country. These are said to be the base of the economy, but Jharkhand is still striving towards having a sufficient number of bank branches, ATMs and BCs. Also, the banks are failing to provide loans to the people, businessmen and industries of Jharkhand as per the requirement.

The population of Scheduled Tribes and Scheduled Castes in Jharkhand is 40 per cent of the total population. So, it is more important to make them financially literate, so that people can take advantage of banking facilities.

The government needs to increase the presence of banks in the state in the upcoming budget to accelerate the pace of development in the state. The CD ratio of banks in the state is low. If this ratio is improved then the economic activities in the state can accelerate. In the above perspective, banks should give loans to the common people, business, industry, service etc. and the government should also provide help to the banks in the recovery of Non-Performing Assets (NPAs). If banks, government and the people of the state help each other then surely the prospects of development in Jharkhand will be clearer.

Views expressed are personal