February 19, 2002

    The Government has resolved that the Public Sector banks (PSBs) will have to meet the target of 5 percent of net bank credit for delivering micro credit. Centre has also decided that loans upto Rs.25,000 would be made available to poor on a large scale. This was stated by the Social Justice & Empowerment Minister Dr. Satyanarayan Jatiya while inaugurating the National Conference on "Micro-Credit Impact on Lifeworld" here today. He said the government has decided to streamline micro-credit delivery system. He proposed that appointment of agents, Self-Help Groups and NGOs to improve the delivery system. Dr. Jatiya disclosed that National Scheduled Castes Finance and Development Corporation has decided to conduct a district-wise survey of socially and economically marginalised persons to ensure availability of micro-credit to them. He said that Rs.32 crore were made available to National Scheduled Castes Finance and Development Corporation for advancing micro-credit during the last one and a half-year. Dr. Jatiya urged the two-day conference to analyze utility and positive impact of the micro-credit delivery system. The Minister said that during the last decade the rate of micro-credit lending to weaker sections declined from 9.7 percent in 1991 to 7.2 percent in 2000. He said that it has become necessary to review the credit lending facilities from the view point of social justice.

    As per RBI guidelines the PSBs have to provide 40 percent of net bank credit to priority sectors, which include agriculture, small industries, retail trade and self employed. Within this overall target 18 percent of net bank credit has to be in the agricultural sector and another 10 percent to weaker sections. The conference noted that the PSBs defaulted on it for most of the years during 1990s. Despite the effort made in the union budget for 1996-97 to correct the situation regarding rural credit, the sub-targets of credit to agriculture and weaker sections continue to remain unattained.

    Recognising the positive impact of micro financing on the living conditions of the poor, the conference says that evolution of a new rural credit delivery system is required which will address the two main problems facing the existing system, namely, high transaction costs and poor repayment performance. It says linking of Self-Help groups and NGOs with mainstream financial institutions is one such innovative modality, which merits serious consideration as there is, enough empirical evidence that such linkages reduce transaction costs and ensure better repayment performance. The conference also emphasized that while re-designing the rural credit delivery system not only the quantum of credit should be taken into account but also the nature of the credit demand, which would be more diversified and widely dispersed. It expressed satisfaction over considerable progress in decentralization regarding rural credit made in Kerala and West Bengal. The conference also urged the PSBs and financial institutions to help through liberal financing in the spread of high-tech segments like floriculture, aquaculture, tissue culture and vermiculture, which have recently merged as important growth centres in rural sector in some parts of the country. Other such areas include biotechnology like popularisation of greenhouse technology as in Haryana and exploitation of renewable sources of energy as in Tamil Nadu. All these areas have a substantial non-farm employment potential.

    The Conference has been organised by the National Scheduled Castes Finance Developing Corporation. The representative and national and international donors are participating.