Press Information Bureau

Government of India

Ministry of Finance

15-March-2012 12:41 IST

Public Sector Banks Show 19 Per Cent Growth in Priority Sector Lending

Credit Disbursement to Agri Sector Exceed Target by 19 Per Cent; Over 127 Lakh New Farmers Benefitted

98 Per Cent Public Sector Bank Branches Fully Computerised

Despite the demanding operational environment, the Indian banking sector demonstrated continued revival from the peripheral spill over effects of the recent global financial turmoil. The banking sector—both public and private—showed impressive increase in priority sector lending during 2010-11. The flow of agricultural credit headed north, with close to 12.5 million new farmers brought under the banking system. As of today, save 2 per cent, the rest of the Public Sector Bank branches stand fully computerized. The Self Help Group- bank linkage programme has emerged as the major micro finance programme in the country. These are some of the highlights of the Economic Survey 2011-12 presented by the Finance Minister, Shri Pranab Mukherjee in Lok Sabha today.

Capital is a key measure of bank’s capacity for generating loan assets and is essential for balance sheet expansion. The Economic Survey says Rs 12,000 crore has been provided in the Revised Estimates 2011-12, under Plan, for capital infusion in Public Sector Banks (PSBs) to enable them to maintain a minimum Tier 1 CRAR at 8 per cent on 31st March 2012, and also to increase shareholding of the Government of India in the PSBs to 58 per cent. During Financial Year 2011-12 growth in bank credit extended by Scheduled Commercial Banks (SCBs) stood at 8.2 per cent as on 16 December 2011, with year-on-year growth at 17.1 per cent. The outstanding priority sector advances of PSBs rose by almost 19 per cent between March 2010 to March 2011. The increase was from Rs 8,63,777 crore to Rs 10,28,614 crore. The advances of Private Sector Banks showed a growth of 15.9 per cent during the same period.

The Economic Survey 2011-12 underlines the fact that flow of agricultural credit has been impressive. The Indian banking system disbursed credit of Rs 4,46,779 crore to the agricultural sector as against a target of Rs 3,75,000 crore in-2010-11, thereby exceeding the target by around 19 per cent. The extension of credit has taken the total number of new farmers brought under the banking system to 127.26 lakhs.

The Self Help Group-bank linkage programme is being implemented by Commercial Banks, Regional Rural Banks (RRBs) and Cooperative Banks. Under this, as on 31 March 2011, over 74 lakh SHGs held bank accounts with total savings of nearly Rs.7,000 crores as against 69.5 lakh SHGs with savings of Rs 6,200 crores as on 31 March 2010.

Thanks to computerization and adoption of core banking solutions, 98 per cent of Public Sector Bank branches are today fully computerized. In 2010-11, the number of ATMs witnessed a growth of 24 per cent over the previous year.

¬ According to the Survey, to facilitate flow of funds into infrastructure projects, broad guidelines were issued on September 23, 2011 for setting up of Infrastructure Debt Funds. Further, guidelines on credit default swaps for corporate bonds were also issued on May 23, 2011. The agenda of Financial Inclusion has been actively pursued by the Government. Detailed strategy and guidelines on Financial Inclusion have been issued on 21 October 2011. The Survey notes that resource mobilization through the primary market witnessed a sharp decline over the year 2010-11, with equity public issue mobilization standing at Rs 9,683 crore as compared to Rs 48,654 crore. Upto 31 December 2011, 30 new companies (IPOs) were listed at the National Stock Exchange and Bombay Stock Exchange.

The development of the financial sector is critically dependent on financial inclusion, which is seen as an important determinant of economic growth. Banks need to take into account various behavioural and motivational attributes of potential consumers for a financial inclusion strategy to succeed. Besides, access to financial products is constrained by lack of awareness, unaffordable products, high transaction costs, and products which are not customized and are of low quality. A major challenge in the times ahead would be to meet financing requirements, particularly of the unorganized sector and the self-employed in the micro and small business sector.

DSM/RM/BK/ska

Priority sector lending expansion increased agricultural credit and farmer inclusion, alongside improved bank digitization and SHG linkages. Priority sector lending by public sector banks expanded substantially, with agricultural credit disbursements exceeding targets and bringing a large number of new farmers into the formal banking system. Policy measures cited to support this expansion include capital infusion to maintain minimum Tier 1 capital adequacy and steps to increase government shareholding in public sector banks. Operational reforms-near universal branch computerization, core banking adoption, ATM growth, and Self Help Group bank linkage-are identified as principal mechanisms enabling broader financial inclusion.