Banking and Finance

Finance is the key to investment and hence to the process of growth. Providing saved resources to others with more productive uses for them, raises the income of saver and borrower alike. Without an efficient financial system lending can be both costly and equally risky. Trade, specialisation of production, profesionalisation, savings, efficient use of resources and risk-taking which are cornerstones of a growing economy are duly stimulated and streamline with a well structured networking of financial institutions. In fact development of any economy demands a responsive financial system free from undue temptation for acting merely as "Profit Centre".

The first concern in any developing economy is lack of efficient mechanism of mediation between highly organised financial institutions and highly unorganised private savers whose savings constitute the foundation of the financial market. We have to monitor and review this linkage from time to time. The constraints and loopholes have to be dully addressed and plugged promptly.

The structure of banking in the State is naturally the same as at the national level. The structure basically contains the following three types:

Of the three components, the nationalized banks are the bigger player.

Now we can broadly visualize the possible concern of the "limited" performance of banking sector by having a reference to

Number of bank branches Population per Bank
Credit-Deposit Ratio(%)
Per Capita Credit
Direct Finance to Farmers
Finance to Small Scale
Recovery performance

The performance of the State Public Undertakings recorded a negative return on investment (ROI) of 34.38% in 1992-93. The compound annual growth rate of manufacturing sector in the state records a negative rate of 7.4% during the period from 1991-92 to 1996-97 (RBI). One finds lack of necessary optimum exercises including financial networking as one of the major factors. The Bank-Industry-Economy interaction needs a thorough review in the light of new imperatives of globalization.

The recovery-performance speaks of the efficiency and maturity of the financial sector. Because delay is costlier and interests amount over time. It is less than 20% as against 63% All India Average. The recovery performance of the Manipur State Co-operative Bank could be only 4%, the lowest in the country. Lack of incremental income accounted for 60%, lack of proper facility to repay 31% and willful default 9%. This speaks of the lack of "pre-investment appraisal" of the proposed unit of investment.

There are four other general reasons namely bad recovery climate, weak collateral's, Law and Order and low banking habit. The whole atmosphere has four other implications as well; a) larger providing b) low profitability and c) low eligibility and d) low ground level actual credit (leakages).

As a matter of practical necessity the "credit planning" should be prepared as part of the Development Planning of the area, otherwise it amounts to cart before the horse and the baby is already dead before it is born. The consistency and functional unity should be the principal article of faith. Therefore much remains to be done-right from the level of Village Development Plan.

The people-banking relationship is now undergoing a radical change in the State with both sides appreciating a new their respective roles, capacities and approaches. In the process, a new healthy atmosphere of viable financing and responsible entrepreneurs is slowly but surely taking shape.