The government on Saturday said it would facilitate faster establishment of currency chests in the north eastern (NE) region of the country, but asked the NE states to ensure their security.
“We are willing to open more currency chests, which the ministry of home affairs is required to clear. We now promise that the clearance will be given within 3 months and if it does not happen, the currency chest would be deemed cleared. Therefore, more currency chests can be opened now, provided the states ensure the security,” finance minister P Chidambaram said at a meeting on financial inclusion.Chidambaram’s comment came after representatives of Sikkim, Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland and Tripura asked for more currency chests and foreign exchange outlets.
At the end of 2007-08, there were a total of 4,271 currency chests in the country, some of which were based in the NE region. State Bank Group had the largest share at 71.8% of currency chests, followed by other nationalised banks put together (25%). Currency chests are used to perform core-banking functions of note issue and currency management by the
Reserve Bank.
The Central bank has also facilitated the setting up of more chests by forming a special task force earlier this year with RBI deputy governor, Usha Thorat, as its chairperson. The task force was to obtain a list of centres for opening new currency chests and extension of foreign exchange facilities from state governments in the NE region. It would also work out a mechanism of cost sharing among banks, state governments and the RBI for setting up more facilities.
“We have identified Meghalaya for setting up currency chests and foreign exchange outlets and have had two meetings with the state government on this,” Thorat said at the meeting.Chidambram also asked NE states to facilitate the disbursement of more credit by identifying intermediaries between the borrowers and the lenders. “Banks are only facilitators of credit and cannot go to the far flung areas. You (NE states) should identify intermediation agencies like microfinance institutions, self help groups and civil societies for disbursement of higher credit,” he said in reply to the demand of increasing the credit-deposit ration in the NE region. State Bank of India, the country’s biggest bank, had a CD ratio of 45% in the north-east at the end of fiscal 2008.
Seeking to address the issue of non-payment of loans, he said fresh loans could be given only on the repayment of earlier credit. “Banks could not go on lending money. They could lend a limited amount, as per norms, and so borrowers have to repay the loan before banks could again lend. There is a limit to credit growth. In the western world today, the banking activities are totally frozen, despite the central banks pumping in billions of dollars, no one is lending to anyone.”
“Sometimes, the loans cannot be repaid due to legacy issues or natural calamities. Such issues could be addressed through measures such as farm debt waiver package, but such unconventional means could not be extended every rabi season or every kharif season,” Chidambaram said.
During the meeting, SBI chairman O P Bhatt said the bank will open 41 new branches in NE region this fiscal, taking the total in the region to 544. It is also recruiting 25,000 people, most of which will be placed in the NE states. “We have 42,000 smart card-based accounts in the region, this will be scaled up to 2 lakh this year,” Bhatt said.
On the sidelines, he told reporters there are no inducements for the RBI to raise rates in its forthcoming monetary policy review on October 24. “Inflation has come down (11.99% for the week ended September 20) and is not expected to go higher by a substantial margin, liquidity is tight. In this scenario, it is difficult for me to imagine that interest rates would go up in the monetary policy,” Bhatt said.
“We are willing to open more currency chests, which the ministry of home affairs is required to clear. We now promise that the clearance will be given within 3 months and if it does not happen, the currency chest would be deemed cleared. Therefore, more currency chests can be opened now, provided the states ensure the security,” finance minister P Chidambaram said at a meeting on financial inclusion.Chidambaram’s comment came after representatives of Sikkim, Arunachal Pradesh, Assam, Manipur, Mizoram, Nagaland and Tripura asked for more currency chests and foreign exchange outlets.
At the end of 2007-08, there were a total of 4,271 currency chests in the country, some of which were based in the NE region. State Bank Group had the largest share at 71.8% of currency chests, followed by other nationalised banks put together (25%). Currency chests are used to perform core-banking functions of note issue and currency management by the
Reserve Bank.
The Central bank has also facilitated the setting up of more chests by forming a special task force earlier this year with RBI deputy governor, Usha Thorat, as its chairperson. The task force was to obtain a list of centres for opening new currency chests and extension of foreign exchange facilities from state governments in the NE region. It would also work out a mechanism of cost sharing among banks, state governments and the RBI for setting up more facilities.
“We have identified Meghalaya for setting up currency chests and foreign exchange outlets and have had two meetings with the state government on this,” Thorat said at the meeting.Chidambram also asked NE states to facilitate the disbursement of more credit by identifying intermediaries between the borrowers and the lenders. “Banks are only facilitators of credit and cannot go to the far flung areas. You (NE states) should identify intermediation agencies like microfinance institutions, self help groups and civil societies for disbursement of higher credit,” he said in reply to the demand of increasing the credit-deposit ration in the NE region. State Bank of India, the country’s biggest bank, had a CD ratio of 45% in the north-east at the end of fiscal 2008.
Seeking to address the issue of non-payment of loans, he said fresh loans could be given only on the repayment of earlier credit. “Banks could not go on lending money. They could lend a limited amount, as per norms, and so borrowers have to repay the loan before banks could again lend. There is a limit to credit growth. In the western world today, the banking activities are totally frozen, despite the central banks pumping in billions of dollars, no one is lending to anyone.”
“Sometimes, the loans cannot be repaid due to legacy issues or natural calamities. Such issues could be addressed through measures such as farm debt waiver package, but such unconventional means could not be extended every rabi season or every kharif season,” Chidambaram said.
During the meeting, SBI chairman O P Bhatt said the bank will open 41 new branches in NE region this fiscal, taking the total in the region to 544. It is also recruiting 25,000 people, most of which will be placed in the NE states. “We have 42,000 smart card-based accounts in the region, this will be scaled up to 2 lakh this year,” Bhatt said.
On the sidelines, he told reporters there are no inducements for the RBI to raise rates in its forthcoming monetary policy review on October 24. “Inflation has come down (11.99% for the week ended September 20) and is not expected to go higher by a substantial margin, liquidity is tight. In this scenario, it is difficult for me to imagine that interest rates would go up in the monetary policy,” Bhatt said.
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