UP may formulate Action Plan for augmenting CD Ratio

Virendra Singh Rawat / New Delhi/ Lucknow June 29, 2011, 0:46 IST

Perturbed over low Credit Deposit Ratio (CDR) in Uttar Pradesh, especially in the Bundelkhand region, the state government may formulate an Action Plan in partnership with commercial banks.
This has to be seen in the backdrop of UP seeking private investment to the tune of Rs 2,00,000 crore across sectors to prop up its economy.
Although, UP is the second largest economy after Maharashtra, its CDR is around 48 per cent, much lower than the national average of around 70 per cent.

The issue of the low CDR in UP was discussed in the recent State Level Bankers’ Committee (SLBC) meeting in Lucknow.
“The SLBC decided to double credit flow to the agriculture and Micro, Small and Medium Enterprises (MSME) sectors in UP,” Reserve Bank of India (RBI) regional director Amarendra Sahoo told Business Standard .
The segments identified for emphasis are minor irrigation and rural road connectivity. He said the Action Plan would be laid down by the government in concert with banks.
“The banks have assured to increase credit flow commensurate with the credit absorption capacity created by the state government,” Sahoo added.
The government feels the CDR of UP should ideally be 60 per cent. The higher is the CDR, the higher is credit deployment to more credit-users.
Low CDR indicates low industrial and commercial activity, especially in eastern and Bundelkhand regions. It also indicates flight of domestic savings to other industrialised and more developed states to spur their development activities.
UP is a vast and populous state with rough geographical and climatic conditions in certain pockets. Almost 80 per cent of the population lives in rural areas with low literacy and high poverty. Thus, banks need to intensify their network with a sense of commitment, the government feels.
Sahoo, however, denied that there was flight of capital from UP. “In fact, several projects in UP receive funds from banks sanctioned in Delhi and other places.”
Earlier, a sub-committee had been formed to prepare a report on UP districts, where CDR was below 40 per cent. In short term, SLBC aims to increase their CDR beyond 40 per cent mark.