A Laudable Move

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Manipur government’s recent decision to bank with only those banks which increases credit flow in the state is commendable, in the light of the fact that it has long been a neglected sector by not only the centralised banks but also by the government itself. The Chief Minister had announced in the state assembly that only banks which have a good credit delivery record will be eligible for government deposits on Tuesday. Last year in December, Union Finance minister Pranab Mukherjee had asked banks and institutions to step up credit flow to the north-eastern states. The Union Minister was speaking to the Chief Ministers and Finance Ministers of East and Northeast states. He particularly mentioned Manipur as having lower credit record while Mizoram, Arunachal Pradesh and Tripura have shown an impressive growth in credit flow. With regard to the Credit Deposit (CD) Ratio, he has said that all East Zone States are having lower CD Ratio in comparison to 60 per cent benchmark set by the Reserve Bank of India (RBI).
The Union Finance Minister had asked the Chief Ministers of these states to use the forum of SLBC meetings effectively and take pro-active action to ensure that the CD Ratio in their States is improved. Be it in the agriculture sector or employment generation or Micro and Small Enterprises (MSE) , credit flow has been minimal in these states. RBI had even set separate targets for flow of credit to MSE Sector and for micro enterprises within this overall target for MSE Sector. In the Housing sector, while NE states like Arunachal Pradesh and Tripura had shown a remarkable growth of 62 per cent and 45 per cent the growth has been less than 20 percent in the states of Manipur, Assam, Meghalaya, Sikkim and Jharkhand. Credit flow covering all sectors in Manipur in the year 2010 was 46 percent only. The performance of many centralized banks with regard to credit flow was simply disappointing. The credit flow of Allahabad Bank, Bank of Baroda, Central Bank, Overseas Bank and Punjab & Sind Bank hovered around 22-25 percent, while it was 38 percent for Punjab National Bank. New entrants in the state like Axis Bank scored 2 percent and ICICI 14 percent. The most disappointing score comes from Vijaya Bank at a dismal 10 percent, despite its 3 decade old existence in the state. The wide gap between deposits and credit flow in Manipur had been an important issue which remained neglected until recently. In such a backdrop, Chief Minister Okram Ibobi Singh’s recent move should be appreciated. This perhaps is his most important gift to the state in his third term as the Chief Minister. Such a move will not only facilitate the increase of credit flow in the state, but it will also lead to increase in private investment.

Following in the steps of the Union government, the Ibobi government has in its radar financial inclusion of unbanked blocks. Out of 69 unbanked blocks in NE region, 27 blocks were covered with banking services by 30th November, 2011. The remaining 42 unbanked blocks are in the states of Arunachal Pradesh, Manipur and Nagaland. In his maiden budget speech at the first session of the 10th Manipur Assembly Chief Minister Okram Ibobi, he said plans are on the anvil to established 10 Hub-Banks in hill areas to cover 19 unbanked blocks. The Hub-Banks will be located at Tuibong, Singhat and Thanlon in Churachandpur district, Somsai and Kamjong in Ukhrul District, Tamenglong HQ and Noney in Tamenglong district, Tadubi and Saikul in Senapati District, and Tengnoupal in Chandel District. This is all good. But, the issue of lack of basic collateral in the hill areas of Manipur and individual property rights has also to be addressed for a meaningful banking in the hill areas.

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