FM asks rural banks to step up credit to leverage consumption boost from GST cuts

The rationalisation of GST rates has opened new opportunities in rural areas due to an increase in consumption, an indication of more bank funding, Sitharaman said, while chairing a meeting to review the business performance of the Karnataka Grameena Bank (KaGB) at Ballari on October 16.

“…the rural banks should leverage this opportunity to cater to the credit requirement in semi-urban and rural areas,” Sitharaman said during the meeting, where she also assessed key indicators including credit growth, non-performing assets, performance under financial inclusion and implementation of government-sponsored schemes of KaGB.

The meeting was also attended by M Nagaraju, secretary, department of financial services (DFS); Shaji K.V., chairman Nabard; executive director of Canara Bank and other senior officials from the DFS, ministry of finance.

Expanding credit

The finance minister advised KaGB to increase its share in ground-level agriculture credit disbursement with special focus on emerging areas of the economy.

Sitharaman also directed all stakeholders to take necessary steps to realise the potential of allied agriculture activities in the region. KaGB and its sponsor Canara Bank were specially directed to work with state government departments to increase credit disbursement to micro, small and medium enterprises and allied sectors.

Sitharaman said that development financial institutions and government departments meet the capital requirements of some farmer-producer organisations (FPOs), while banks should fulfil the working capital requirements.

She said rural banks should upgrade their products and services according to the convenience and demand of FPOs. This will enable both banks and FPOs to leverage their resources for mutual benefit and sustainable growth of the rural economy.

Many companies are moving their services like data centres from tier-1 to tier 2 & 3 cities, and rural banks should focus on such emerging areas to improve their financial health, she said. KaGB shall focus on its business operations to make the bank profitable and overcome the challenges faced by stressed assets, the minister said. KaGB was also advised to enhance operational efficiency by improving asset quality, adopting new technology and strengthening customer service delivery.

Strengthening outreach

Sitharaman advised KaGB and its sponsor bank to engage with respective committees at the panchayat and district levels to improve the screening process of applications received under government-sponsored schemes such as PM-Vishwakarma and Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME).

Sitharaman also urged KaGB to spread its presence in the Kalyan Karnataka region by opening new branches wherever the presence of banking outlets is inadequate.

During the meeting, Nagaraju highlighted that the integration of systems and processes has been completed post-amalgamation and suggested creating a medium-term business plan for KaGB and its review by the sponsor bank for long-term sustainability.

Citing the potential in agro processing and MSME in the region, he urged KaGB to partner with Nabard for value creation by farmers in agriculture and allied sectors. He appreciated KaGB for its remarkable progress in Atal Pension Yojana and suggested improving its performance under other financial inclusion schemes such as PMJJBY, PMSBY & PMJDY. He also suggested a future roadmap to partner withpublic sector banks by providing banking services in the areas which is unserved/underserved. He emphasized the need for staff integration and skill upgradation of employees post-amalgamation.