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Yogi govt flags low Credit Deposit Ratio, urges banks to hike MSME lending

Virendra Singh Rawat/Lucknow 12 Mar 18 | 05:22 PM

Banks, India banks

The Yogi Adityanath government has expressed concerns over the low Credit Deposit Ratio (CDR) of commercial banks in Uttar Pradesh and nudged them to increase lending to the Micro, Small and Medium Enterprises (MSME) sector.

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Currently, the CDR of banks stands at about 46% against the national average of about 70%. Chandigarh, Haryana, Punjab, Tamil Nadu, Delhi, Andhra Pradesh etc have higher CDR than the national average.

The domestic savings of a state with lower CDR flies to other more prosperous and industrialised state/economy. Low CDR indicates sluggish capital formation and investment capacity in an economy.

Now, the Adityanath government has asked the commercial banks to increase lending to industry, especially MSMEs in the state to arrest the flight of ‘money’ to other states.

“We have asked banks to increase lending to industry. The banks’ contention has been that UP has low credit absorption capacity. But, we have urged them to consider the investment proposals of over Rs 4 trillion received during the recent UP Investors Summit," state infrastructure and industrial development commissioner (IIDC) Anup Chandra Pandey said here today.

He informed the state was aiming to create a conducive industrial environment so that the savings of its people were invested in UP and did not fly out. Pandey said the government would support the private sector towards the creation of a strong financial services footprint so as to facilitate easy access to capital.

“We have signed an agreement with the Bombay Stock Exchange (BSE) for onboarding the SMEs for accessing the capital market and going public for growth and beating competition," he said addressing a CII event here.

Meanwhile, the Adityanath government is working towards developing Noida/Greater Noida as a financial services hub in North India by levering its location and superior infrastructure facilities.

At the same time, the state has tied up with the Indian Institute of Technology-Kanpur (IIT-K) to nurture the start-up and incubation ecosystem in Lucknow on the lines of Bengaluru, which is known for world-class innovation labs and supportive ecosystem.

The Adityanath government is also in the process of verifying the investment proposals. The state wants to rollout 25-30% of the investment proposals in April and follows up with the remaining in the coming months.

In the backdrop of alleged bank loan defaults and frauds by private companies making big headlines, the Adityanath government has also been checking the debt profile of companies, who had proposed investments during the Investors Summit 2018 on 21-22 February.

The Adityanath government had signed over 1,000 Memorandum of Understanding (MoU) worth Rs 4.68 trillion during the Summit. The government has identified nine priority sectors to speed up the proposed investments viz. housing, urban development, horticulture and food processing, IT and electronics, energy, solar energy, industrial development, tourism and information.

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