Banks limp on minority loans | india | Hindustan Times
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Banks limp on minority loans

india Updated: Aug 25, 2010 21:20 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
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State-owned banks have fallen short of the lending target set for minority communities for the fiscal 2009-10 for the second consecutive year. While banks have been asked to step up lending to minority communities, usually a reference to Muslims, there is a dearth of takers. Besides, banks have to adhere to several conditions for lending to any borrower, even if he belongs to a minority community.

Though the government banks have registered a growth of 35 per cent in lending to the minority communities in 2009-10, they achieved 85.5 per cent of the target. R1,11,658.5 crore was lent to the minority communities at the end of the last fiscal. In 2008-09, the banks achieved 95 per cent of the target.

“There is inadequate awareness on the issue and there are few takers, apart from the fact that they have to fulfil the given conditions, which often become a cumbersome process,” said Allen C.A. Pereira, chairman and managing director, Bank of Maharashtra.

All borrowers, including those belonging to the minority communities, have to adhere to fulfil stringent criteria like the know-your-customer norms, a viable model for the project for which the loan is sought, a guarantor’s certificate apart from a letter of authorisation from the local authorities.

Imam Umer Ahmed Ilyasi, president, All India Imam Organisation, said that though the government’s intent cannot be questioned, on the ground level, a lot more needs to be done. “There are so many conditions which need to be fulfilled, that it is not practical and the final goal remains unfulfilled,” he said. Ilyasi too added that awareness is a major issue which has to be addressed.

A senior executive of a state- owned bank said that banks are looking at various ways to identify the potential borrowers under this particular scheme.

Lending to minority communities is part of the priority sector lending. All domestic scheduled commercial banks are statutorily required to lend 40 per cent of their total loans to priority sector, including agriculture, small scale industries, weaker sections, etc.

The government, in 2007, had asked the PSBs to step up lending to the minority communities to the extent of 15 per cent of their priority sector lending by the end of March 2010.