RBI asks state to examine its debt recovery act

Reserve Bank of India`s deputy governor H R Khan said this while attending a meeting of State Level Bankers` Committee (SLBC) here. "The provisions of the Orissa Public Debt Recovery Act need to be examined," Khan said.

Stating that recovery under government schemes was "far from satisfactory", Khan said that bad recovery of loans occurred mostly due to under financing and excess interest rates.

The state government need to analyse why the rate of recovery was so low, he said adding that banks too have to ensure that the rate of interest should be within the payable limit of the loanee.

Raising concern over the stagnant growth in bank accounts of farmers, Khan urged the sector to include more farmers into the ambit of banking.

Lending to farmers adds to increase in productivity, he said suggesting the state government to set up a sub-committee under the SLBC to look into the areas of extension support for agriculture sector, he said.

About 84 per cent of the farmers in the state come under the small or marginal category, Khan said that though the crop loan ratio had increased, term financing rate was low. "The state government need to create facility so that term loan rate can increase," he said.

"Twenty-five per cent of all new bank branchess would now be opened in rural areas," he said adding that financial closure was not an obligation but an opportunity for the banks.