BIHAR: BANKING AND ALLIED SECTOR: FOR BPSC MAINS EXAM.

 

               PART-3

BIHAR ECONOMIC SURVEY- BANKING AND ALLIED SECTORS:

NOTE: THE SOURCE OF DISCUSSION IS BASED ON BIHAR ECONOMIC SURVEY AND BUDGET.

Banking is one of the pivots for all-inclusive development. it is observed that there is a need to improve banking infrastructure for a better credit facility to promote economic activities in the state. The banking infrastructure has increased in the semi-urban areas at a higher pace than the rural and urban areas in the state. The scheduled commercial banks have the largest presence in the state among all types of banking institutions. the credit to deposit ratio of the public sector in Bihar is the lowest among major states of the country. To achieve national credit to deposit ratio(CD) of 78.2%, need to provide a huge amount of credit in the state.

The performance of private banks, small finance banks, cooperative banks, and regional rural banks are better than public sector banks in Bihar, in the term of providing credit.

Given the credit need for economic activity in Bihar, small financial banks, regional rural banks and microfinance institutions will have to play a key role in providing much-needed capital support for the further economic development of Bihar.

It is often argued that the investment plus credit to deposit ratio is the better indicator of the total involvement of the banks in the economic activities in the state, as the banks assist the economy not simply by giving credit but also by investing in the state govt. securities and in share and bonds of state undertaking, quasi govt. body and joint-stock companies.

Lower CD based on credit utilization would indicate the migration of credit meant for investment in the state.

CD= how much a bank lends out of the deposit it has mobilized.

Credit means loans given out to borrowers by the banks. So; the credit-deposit ratio broadly means the ratio of assets and liabilities of the banks. If the Credit to deposit ratio is too low, banks may not be earning as much as they should and it also indicates that banks are not mobilizing their resources fully.

Private banks have limited presence compared to public sector banks in terms of banking infrastructure in the state. Hence, it is observed that there are need and scope for the public sector banks to improve their performance in term of providing credit in Bihar.

Small Financial Banks(SFB)- SFBs were given approval by RBI in Sept. 2015 with the objective of deepening financial inclusion by providing the banking services to the small and marginal farmers, migrants labourers, low-income households, small business and other unorganised entities. with 4 years of the activities, SFB has made significant progress in Bihar.

Microfinance Institutions(MFI)- MFI play an instrumental role in providing credit to low-income households, such credit is crucial for employment, economic development and overall empowerment of these households. it opens the credit market to the poor households with little or no collateral, which unleashes their productive capacity by ensuring the supply of necessary capital through small loans.

some schemes- Kisan credit card(launched 1998-99), pradhan Mantri mudra yojana (April 2015).