Meghalaya’s low credit-deposit ratio
At a meeting organised by the National Bank of Agriculture and Rural Development (NABARD), Meghalaya Regional office in March 2021, Deputy Chief Minister Prestone Tynsong had expressed his disappointment with the low credit-deposit ratio of Meghalaya which stood at 42.57 %. This means that about 60% of the deposits raised from Meghalaya are lent to borrowers from other states. An analysis of where the 43 % of loans are parked would also inform that it goes to big business houses and very little actually goes to the agricultural or the small and medium business sector. It must also be said that some banks, more than others, have been very circumspect about lending in Meghalaya. The crux of the matter is that those who really need financial assistance to scale up their agriculture/horticulture also don’t have collateral to offer. If they had collateral they might not need credit.
Interestingly, this crucial subject is never raised in the Assembly even when nearly 75% of the population of Meghalaya are rural farmers. One of the reasons why farmers find it difficult to access credit is their lack of collateral. Most are farming on lease held land and therefore own no land for mortgage. But even where loanees have mortgaged land, it becomes difficult for the banks to recover costs since according to the Meghalaya Land Transfer Act, land can only be auctioned off by banks to other tribals. It is said that some banks are holding land confiscated from defaulters and those have become non-performing asset (NPA) . Last year NABARD has estimated a credit potential of Rs 2,593.99 crore for Meghalaya under priority sector lending for the year 2021-22. The credit estimation for Agriculture, MSME and other priority sectors, including Housing Loan, Education Loan etc, have been pegged at Rs 1,333.86 crore (51 per cent) Rs 930.97 crore (36 per cent) and Rs 329.16 crore (13 per cent) respectively. But these are projected figures that hardly get translated into reality.
One area where Meghalaya is rather weak is the co-operative sector. There are not too many successfully run co-operatives. Even those that thrived for a while have winded up their businesses. Of late however, self-help groups, farmers and rural artisans have come up in a big way with state assistance and they can upscale their activities with adequate bank financing. In fact, banks are there to enable such small and medium enterprises to scale up their economic activities and in turn create employment. Overall the Report of the State Level Bankers’ Committee states that credit flows to the Agriculture sector is still very poor in spite of availability of a sizable number of Government recognized farmers under PM-Kisan. Banks have to scale up their activities and must have more outreach in rural Meghalaya.