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Bengal heads for fiscal failure

Trend in credit off-take in the first 2 quarters indicates a very drastic decline

kolkata Updated: Oct 29, 2012 14:33 IST
Sumanta Ray Chaudhuri

West Bengal is probably heading for one of its historically lowest annual credit plan (ACP) achievement percentages by the end of financial year 2012-13, apprehend banking representatives in the State Level Bankers’ Committee (SLBC), West Bengal.

According to banking sources in the committee, going by the trend of credit off-take during the first two quarters of the current financial year, in all probability the ACP achievement percentage by fiscal end will come down much below 75% from 81% during the previous financial year of 2011-12.

Sources said that the percentage of ACP achievement after two quarters of the current financial year is roughly around 38%. “Forget drastic improvement in the figure in the next two quarters, the possibilities of further deterioration are high, since there is no evidence of supportive policy decisions of the state government that improve the figure,” said a banking representative in SLBC, West Bengal.

At the beginning of every financial year, the bankers set an annual credit plan target in consultation with the state government representatives in SLBC, West Bengal and by the end of the fiscal the percentage of target achievement is calculated.

A senior banker pointed out that lack of big-ticket investments, decline in agriculture credit and MSME credit due to faster and bigger accumulation of non-performing assets or bad loans in these two sectors during the ongoing fiscal would be the two principal factors that would factor the lower ACP achievement target.

On one hand, bankers complain that the land policy of the West Bengal government in completely negating state role in land procurement for industry has not only shied away new investments but also prompted exiting ones to shut shop here.

On the other hand, the state government’s announced stand against confiscation of attached property of the defaulters has encouraged many individuals from the farming and MSME segment to refrain from repaying loans. As reported by HT, although the bankers have repeatedly pointed out to state finance minister Amit Mitra that these two factors are the major bottlenecks towards improved credit off-take, there had been no assurance from the state government of any corrective step.

Sources from SLBC West Bengal pointed out that if the ACP achievement percentage figures of the state for the last four fiscals are studied properly it would be clear how bigticket investment results into better achievement figure. “So far the two best fiscals as regard ACP achievement target was 2008-09 and 2009-10, when the figures were 99% and 102% respectively. If you remember, industrial investment activities in the state were at its peak during these two fiscals,” he said.

In 2010-11, pointing out banking sources when the industrial climate was going through the most turbulent state, the ACP achievement target declined drastically to 87%, which further declined to 81% in 2011- 12.

Senior bankers recall that during the entire 70s and early 80s when West Bengal was going through its most turbulent phase both politically and economically, then the ACP achievement targets were extremely low and sometimes even coming down below 70%.