Asking banks to keep credit deployment in line with changes in structure of economy, Prime Minister Manmohan Singh on Saturday said banks must increase credit to agriculture, provide adequate long-term credit to small and medium enterprises and take steps to expand beyond Indian shores.
"The sectoral deployment of credit must keep pace with changes in structure of the economy. Banking industry needs to equip itself to be able to assess and meet the credit needs of the economy," Singh said in his inaugural address at the bi-centennial celebrations of the State Bank of India in Mumbai.
It's two centuries of business for SBI
There is a need for banks to provide adequate long-term finance to SMEs. "With gradual disappearance of development banks in the original form a gap in credit availability is emerging," he said.
Referring to bank finance for farm sector, he said while banks have achieved higher growth in providing credit to agriculture and allied activities last year (2004-05), the momentum must be carried further.
"Credit for agriculture and allied activities is not a single market. Provision of credit for hi-tech agriculture is no different from credit to industry," Singh said, at a function attended by chief executives of banks and leading industrialists.
Observing that first phase of banking reforms is coming to a close, Singh said Indian financial system would grow in size and complexity and banks need to focus on organizational effectiveness.
Singh said banks needed more autonomy in management of staff and determining organisational structure.
"Innovation and customer services are going to be the key drivers of success in the future and the growth cannot be achieved without a strong, stable and efficient financial system," he said adding, while there was no single model for consolidation, the system must consolidate itself.
Asserting that one of the most successful components of the economic reforms was in banking, he said India was ahead of China, in robustness and soundness of banking system.
There was need to develop an active debt market for long-term capital requirements of large and medium industries and expand credit portfolio to increase provision to small-scale industries.
He said special attention should be provided for credit to small and marginal farmers and there was need for re-look at the organisational structure of rural branches, which must go beyond providing credit and extend a helping hand in terms of advice on matters related to agriculture.
The prime minister urged State Bank of India to play a lead role since it has the size and scale to lead India's charge into a new world.
"You (SBI) have to leverage your strengths, develop new capabilities, and show enterprise and initiative to venture into uncharted territories so that you continue to be in the vanguard of India's growth in this century - a century which can very well be India's century, Singh said.
The prime minister said SBI should show the way forward to all banks in widening and deepening the market for rural credit, financing infrastructure development through innovative products and better risk management capabilities that can ignite a boom in public-private partnerships.
SBI is a mirror of Indian banking system and as a lead actor, needs to perform the role of a trend-setter for future.
As globalisation accelerates, the Indian financial system would get more closely integrated with the rest of the world which is apparent from the high degree of international interest in the banking system.
Union Finance Minister P Chidambaram said banks must change to become a multi-product financial centre and the workers multi-task workers to sell a range of products like insurance and pension schemes.
He said with proactive reforms, India would be able to achieve eight per cent growth for which bank credit must expand to fuel it.
Banks should have a presence, size and scale all over to finance India's international trade which has grown by 24 per cent last fiscal.
Lauding SBI for its contribution to Indian economy, he said the bank has necessary capacities and strengths to penetrate deep into rural India and grow internationally.
"I look foward to the day when I find the name of SBI and its logo in every capital of the world," he said.
SBI chairman A K Purwar said the bank has set a vision to provide world-class services at home and in the world to customers.
The prime minister presented awards to the self-help groups and artisans on the occasion of bi-centennial year of SBI.
The awards were presented to Santhoshi Maa SHG, Bilaspur, Chhattisgarh; Priyadarshini Mahila Udyog, Chandrapur, Maharashtra and Lakshmi Pallisiri, Guntur, Andhra Pradesh.
The artisans who were presented awards included Biswapati Moharana of Kalhandi, Orissa; Ng Bimolota of Manipur and D Radhakrishnan from Kumbakonam, Tamil Nadu.
SBI managing director Ashok Kini said the bank has set a target to extend credit of Rs 5,000 crore (Rs 50 billion) till March 2008 to the 1.5-2 crore SHG members in the country.
Out of 9,000 SBI branches in the country, 6,000 were in rural India, he added.
