Asking Banks to give away money

Modi asks private banks to disburse loan, or pack up and go

Patna,(BiharTimes): Deputy chief minister Sushil Kumar Modi has warned the private banks to help the state achieve 40 per cent CD ratio in the next financial year, lest they would be asked to pack up and go.

He said that the government may be forced to close ICICI and HDFC banks if they continued to neglect their credit disbursal in the state. The ICICI Bank and HDFC Bank, which were given target of disbursing Rs 371 crore and Rs 180 crore respectively have failed to make any headway in the direction

The ICICI has not entertained a single loan application in Bihar in the first half of the current financial year.

Modi said that if the banks can not disburse loan to the farmers or poor they should at least give loans to others, but they are not doing so. This would compel the state government to ask them to close down their branches in the state.

Chairing the 30th State Level Bankers Committee meeting in Patna on Friday Modi, who also holds the finance portfolio, said that of the annual credit plan (ACP) of Rs 21,107 crores during this financial year, the public sector banks have been able to disburse credit worth Rs 7,788 crore in first half of the fiscal year 2009-10. It could have registered much more had the commercial banks and private sector banks made more efforts.

Modi lamented the indifferent attitudeof the private sector banks in extending credit in the state while they were mobilizing huge deposits. The deputy chief minister asked as to how long can this continue. The government has already stopped public funds from being deposited with the private sector banks


Mr Modi fails to realize that Private banks are not government properties that he can ask them to give away loans to whomsoever he pleases.
The banks are answerable to their shareholders through the Board of Directors.
We have seen what has happened in the USA when it created Fannie Mae and Freddie Mac
to give sub-prime loans to persons who would never repay.
The government can ask the nationalised banks to take on the burden and if these banks failed, the government could always print money and shore them up. The government is already doing that when every five years it gives whopping wage increases to its employees under the "Pay Commission Awards"
Alternately, the government could take recource to nationalisation. Indira Gandhi did it once. They could do it again and face the consequences of an inefficient banking system.
As long as they are private, the government cannot force them to give bad loans.
The government cannot ask them to finance mad schemes like providing free TV sets or giving away rice at Rs 1/- per Kg which many state governments announce on the eve of elections.
Yes, the government is perfectly within its rights if it does not do any business through them or keep its monies with them.