Ad Here  
Holy or unholy? Hesitancy in announcing year-end results Fund healthcare clinics in villages... What is the priority – mergers or NPA reduction? Drop in SLR- sparing lendable resources Cut in repo rate – lower than expected The collaboration suite of cyber criminals Cautious and considerate A bank for women, by women Needed a Banking Atlas Payment banks have arrived Drastic decline in asset quality Small is ‘more’ beautiful Banking overhauling or reorganisation? Banking on Risk Capital base of regional rural banks raised Ferrying digital banking to Lakshadweep Perhaps small is more beautiful than big! Small finance payment banks... A new development bank rising in the east… Two banks: their jubilees and performances Growing gainfully Ernakulam excels... It’s a war on black money, support it. Nothing much can happen…. Who is the real beneficiary? Monetary policy continues to adopt dis-inflationary path Reaching the Unreached… Mega merger is on New capitals of Migrant banks Too big to fail and too small to sail The paradox: clamour for the Goliath and David Rationalised Grows Bigger Greet Lakshmi the banking robot Anytime banking to anywhere banking Bottomlines shrink, bad loans rise... Lacklustre credit expansion Growing volume of stressed assets… Cradle of banks to a smart city... Thirty more cities seek to become SMART LVB- A supermarket of financial services Aadhaar, niraadhaar and banking Good, bad and ugly Just 660 days! Target over-ambitious... Smart banking in smart cities Small finance banks offer high interest rates New bank licences, at last... Stage set for Indian ‘avatar’ of foreign banks Emerging crisis Reaching out: is it slowing down? Well-lived... Managing NPAs... All that glitters is not gold... Governance in Reverse Gear? United India Insurance - Rs 110 crore losses have been claimed till now due to floods in Tamil Nadu Indian customers are tech savvy Insatiable appetite for credit How okay are new banks? Merger mania haunts banks Banking in Telangana Financial inclusion vs unclaimed deposits One down in private sector Bank deposits account for 46.3 per cent of household savings A development bank for BRICS How ‘secure’ are the secured loans? Why priority status? Targets continue to be ad hoc Another route for achieving financial inclusion From lazy banking to easy banking Big bank merger, bigger expectations Why any time money?
Why priority status?
Recently, the charismatic Governor of Reserve Bank of India, Raghuram G Rajan, raised an important question: “should a student loan for study abroad come under priority sector?”

Priority sectors have, over the years, become an omnibus carrying all types of passengers. Successive committees have widened the definition without bothering to fix uniform targets across banks.

Domestic educational loans do qualify to be included in the priority group. And happily no targets are fixed for such loans. The total amount lent as on March 2012 is Rs 52,004 crore. These loans have enabled thousands of young students to pursue higher studies. The number of borrowers is 26.47 lakh, of which about 55 per cent (15.48 lakh) are from rural and semi-urban areas.

Originally, education loans were extended for students from the middle-income groups to pursue higher studies. Taking advantage of the readily available schemes, parents from the richer sections also began availing such loans, especially for education abroad. There are now indications of defaults in repayment and that too after securing their plump jobs. Tracing defaulters in an alien country after a lapse of three to four years is difficult for bank mangers stationed in remote towns. The dollar-earning borrower, changes jobs like changing his shirt. There are also instances where the old parents, who stood as guarantors, are abandoned by the beneficiaries.

It is therefore desirable to confer the priority status only to domestic education loans and to treat foreign study loans as any other commercial loan. Incidentally, even in domestic education loans, there are problems of recovery.


When medicos refuse to service in rural areas

Since the implementation of the programme Health for All, more medical colleges have come. Banks have financed many of these colleges and have extended educational loans to students. It was expected that these medicos would spend at least two years in rural service. Unfortunately, most of them are looking for greener pastures. Atleast in one highly reputed medical college in the south, after completion of studies, the young doctors were insisting upon refunding the stipend obtained rather than serving the rural term!


Improving the efficiency of banks’ human capital

The banking sector in India has grown very large, functionally and geographically, during the last couple of decades. The size of bank personnel has also enlarged. The banking sector now trains the new recruits by out-sourcing. The Reserve Bank of India has appointed a Committee on Capacity Building in Banks and non-banks, under the chairmanship of Gopala-krishna, former Executive Director, Reserve Bank of India and currently Director, Centre for Advanced Financial Research and Learning.

The committee has made useful recommendations on improving the efficiency of the banking sector. “The recruitment process should not be sporadic or lumpy but ensure regular in-take so as to ensure growth in manpower in tandem with business needs. The recruitment process needs to be re-engineered to reduce the time lag between conduct of exams and issue of appointment letter.” Further it has argued for a transparent and comprehensive performance assessment exercise. The factors to be taken into consideration include clear Key Result Areas (KRA), a holistic performance evaluation framework which includes 360 degree feedback, ensuring adequate performance differentiation among employees and suitable reward and recognition. Creation of the position of Chief Learning Officer in banks is one of the other important recommendations made by the committee.

A minor omission is that no reference is made to the need for improving the skills of the lead district managers in the context of the accent on financial inclusion. When the lead bank scheme was introduced in 1970, there were less than 330 lead districts, whose number has gone beyond 630 at present. The recruitment, training and promotional prospects of this group of officers is grossly neglected in most of the banks. In order to make the Jan Dhan project a success, this cadre of managers has to be properly selected and trained.

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236