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`Lending should be a dharma for banks’

Saturday 2 July 2005

Special Correspondent

They can contribute more to GDP: Chidambaram

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REWARD FOR HARD WORK: Rajat Varna, a CET topper, receiving education loan from the Union Minister for Finance, P. Chidambaram, in Bangalore on Friday. The Chairman and Managing Director of Canara Bank, M.B.N. Rao, is seen. - Photo: K. Murali Kumar

BANGALORE: The Union Minister for Finance, P. Chidambaram, on Friday said that for banks "lending should be a dharma" hoping that bank finance would contribute much more to the country’s Gross Domestic Product (GDP). At present, bank finance accounts for 37 per cent of the GDP (nearly $ 700 billion), while in developed countries it is around 80 per cent, he said at a function to celebrate the centenary of Canara Bank here.

The Government’s focus is to make available capital for the priority sector, primarily the farming sector. The target this year is to lend Rs. 1,41,000 crores to farmers. Last year, the lending to the agriculture sector exceeded the target to touch Rs. 1,15,000 crores.

Similarly, the Government would give impetus to small and medium enterprises for which a special credit plan is being worked out, to be announced this month. The Government would also support self-help groups which had a good track record of repayment.

Mr. Chidambaram said there is a clear linkage between what banks can do and what India can do. The three key drivers for the banking industry to grow - competition, consolidation and converge - have to take place. Small banks have to come together or be taken over by big banks. "If consolidation of banks takes place, service to the customer would further improve," he said and added that India’s biggest bank, the State Bank of India, is ranked 82nd in the world, while it could do better.

Stating that there is no intention of privatising any public sector bank, he said, "We want them to compete with foreign banks. Competition helps improve service." In five years, banks would become financial powerhouses providing banking, insurance, pension and financial products.

For the Indian economy to grow at 8 per cent to 9 per cent, the banking industry has to provide more working capital to the agriculture and the industrial sectors. India has to grow at a rate faster than China and for such growth institutions would be the cornerstone.The Chief Minister, N. Dharam Singh, recalled the yeoman services provided by the bank in the development of the State.

The Chairman and Managing Director of the bank, M.B.N. Rao, said the bank has set a target of Rs. 1,80, 000 crores business this year and has outlined several activities during the year.

Loans disbursed

Earlier in the day, Mr. Chidambaram disbursed educational loans to 118 students, including Rajat Varna, who has bagged two ranks in the CET, amounting to Rs. 11 crores.

See online : The Hindu

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