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CPIM raps Kerala's banks for low credit disbursal

D Jose in Thiruvananthapuram

Bankers in Kerala are rattled by the revival of the decade-old campaign by the ruling Communist Party of India-Marxist over the low credit deposit ratio following a major spurt in the bank deposits this year.

The CPIM has picked up cudgels with the banks after the state-level bankers' committee released the latest banking statistics. The statistics up to the end of September 1999 showed the deposits peaking atRs 351 billion and CD ratio plummeting from 44 per cent to 40.42 per cent.

CPIM Politburo member V S Achutanandan has termed the scenario as a “daylight robbery” by the banks and has called on the government to bring the erring banks to the task.

The ruling party had earlier called for a withdrawal of government deposits from the banks in protest against the failure by the banks to increase the CD ratio.

The CPIM government, which had several discussions with top bank officials for increasing the CD ratio, is now in the process of strengthening the cooperative bank network in the state in order to enable them to take up commercial banking.

The government is likely to pull back its deposits from commercial banks and deposits in the cooperative banks if the former fail to show an improvement in the CD ratio, official sources said. They said that the cooperative banks have been vigorously pursuing computerisation in order to handle more deposits.

Bank statistics showed the gap between the deposits and advances growing by about 60 per cent. This means that the banks in the state advanced only 40 paise for every one rupee they collected as deposit. The balance is either tucked in the strong rooms of the banks or diverted to other states.

The CPIM, which heads the government in the state, believes that the banks have been diverting the money to the neighbouring states.

The bankers are obviously puzzled by the situation. Most of them say they are helpless as the inflow of money into the banks has been showing an abnormal growth in the past five years. The deposits, which were just Rs 60 billion in September 1994, grew to Rs 351 billion in September 1999. The growth in deposits during this period has been 500 per cent.

The banks obviously could not keep pace with the spurt in deposits. “We cannot be blamed for the phenomenon because the pattern of growth in deposits has not been steady. There have been ups and downs in the deposits,” a leading banker in Thiruvananthapuram said.

For example, the deposits were showing a negative trend till 1993. The deposits came down from Rs 41 billion in 1987 to Rs 32 billion in 1993.

A big leap forward in deposits was witnessed in 1995, when the deposits went up by Rs 12 billion.

The growth of deposits in the next two years was modest. It went up from Rs 182 billion in 1995 to Rs 201 billion in 1996 and Rs 233 billion in 1997. However, the deposits saw further surge in 1998 and 1999 when it went up to Rs 282 billion and Rs 351 billion respectively.

A notable feature in the growth of deposits has been the burgeoning share of NRI deposits. The NRI deposits grew by over 1600 per cent from Rs 10 billion in 1993 to Rs 168 billion in 1999. The share of NRI deposits in total deposits was only about 35 per cent in 1993. It went up to 48 per cent in 1999.

Bankers attribute the growth in NRI deposits to the change in the consumption pattern of the Keralites working abroad. The NRIs have stopped investing their hard-earned money on conspicuous items.

Consequently, there has been a sharp fall in construction activities and real estate transactions in Gulf pockets.

The crash in quick money ventures like teak plantation schemes and the government crackdown on financial institutions known as “blade companies” also have compelled the NRIs to lodge their money in the bank, despite a lowering of interests by the banks.

The NRIs seem to have realised that they need to save the money to take care of their future when they would be forced to return to the state jobless one day. Consequently, the NRIs think that the investment on construction of houses, property, lands and gold would not bring them much return in times of need.

The bankers are reluctant to lend money against NRI deposits, as they feel that the former is like a bubble that would burst any time in the event of any socio-economic and political convulsion in the Gulf just as it did during the Iraq-Kuwait war. The NRIs had made a beeline to the bank to withdraw their deposits in the thick of the raging war.

Bankers say that if they deploy the entire deposits in the state, they would not be able to meet such exigencies. The banks would not mind if money is advanced for sound business propositions. Unfortunately, not many viable projects were coming up for finance,” said a senior official of the Catholic Syrian Bank. He said that it was difficult to expect a high CD ratio in Kerala under the present credit absorption capacity of the economy.

However, the CPIM has rejected the bank refrain that there is lack of bankable projects in the state. He said that such excuses would not hold good particularly after the state government started implementing the People’s Campaign for Plan. “It has thrown up scores of projects sound for advances. Unfortunately, the banks have been ignoring the campaign for reasons best known to them,” Achutanandan said.

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Kerala