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only which can transform the society and economy as Bankable" which is now a proven fact. Weaker section or
whole. It's a fact that sound banking system reflects the poor people are honest and have tremendous repaying
strength of economy. capacity.Can we think that how much interest they are
paying to money lender? It's incredible but it's a fact.
Compliance Lending Vs Business Lending
All the weaker section people in Metro/Urban/Semi-
The benchmark for the financing to priority sector has Urban/Rural areas like street vendor, vegetable vendor,
been fixed by Reserve Bank of India for the sole purpose fruit vendor, etc are borrowing money and paying a huge
of financial inclusion so that everyone will contribute in interest. They are borrowing Rs.100/- in the morning and
the economy. The compliance has to be met by all banks repaying Rs.110/- in the evening, it means the rate of
for achieving the same therefore priority sector lending is interest on such a borrowing is 10% per day which
treated as compliance lending rather a kind of business becomes 3650% per annum and if they are not repaying it
lending. in time, they will not get further loans.
Now it is an established fact that this sector is no more a Recently,when enquired with the rickshaw pullers in some
compliance lending which every bank is vying for including of the towns, they informed that they are paying Rs.60/-
private sector and foreign bank. They are targeting the per day to the rickshaw owner which means they are
rural areas where two-third of our population still depends paying Rs. 21900/- annually to the rickshaw owner which
on agriculture and allied activities and is the biggest is having a total cost of Rs.12000/- only without owning
market for all products. anyone.
Many bankers avoid lending to weaker section as there is An auto-rickshaw driver is paying Rs. 150/- per day to the
an apprehension that the loan account will turn into bad owner which is equal to total sum of Rs.54750/- paid by
and bank has to make provision. However the minimum them annually. The cost of Auto-rickshaw is approx.
lending to these sectors are being done by the banks to Rs.150000/- only, the repayment of installments of the
save their faces as they have to comply with the loan amount for owning the same can easily be made by
guidelines issued by the regulators. Banks are in the race the customer. The same is the case with taxi driver. If we
of increasing their size of balance sheet by financing to big compare the rate of interest charged by the bank, it's a
corporates which may not result into sustainable nominal interest of 10 to 12 per cent only which cost less
development of the bank as well as economy. than a rupee.
Tremendous Potential As they are not aware of the rate of interest paid by them
and also they are getting the financial assistance in time
According to Nobel Laureate Md. Yunus, "Poor are also without completing the cumbersome formalities of
nationalized banks, therefore the business of informal
money lenders are increasing day by day. They are getting
their employment and earning for livelihood from lenders
so they are more sentimentally and emotionally attached
with the money lenders and that is the reason why they
don't default in repaying the loan to them and therefore,
the numbers of money lenders are also on the rise.
Why Bank's Loan become NPA?
If there is a huge potential and having tremendous
repaying capacity,the question arises that why it happens
only to the bank that whatever we are financing to poor
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