Poor are more trustworthy and bankable, says Chidambaram
Srinagar: Seeking to promote financial inclusion, Finance Minister P Chidambaram today called upon banks to focus on poor customers who are more trustworthy and "bankable" as compared to large borrowers.
"The poor of India are bankable, the poor of India can be trusted, the poor of India are good borrowers, the poor of India are honest borrowers and the poor of India are much better borrowers than the rich because of their repayment," Chidambaram said, while speaking at the 75th anniversary celebrations of the J&K Bank here.
"We have an explosion in banking wherein a bank's most trusted customers are not the rich but the poor," he said, adding that it is "completely wrong" on a bank's part to pursue only the rich.
He also exhorted banks to make tailor-made products designed keeping in mind the needs of the people, rather than pursuing a path of "innovation" that led to riskier products and caused the financial crisis of 2008, he said.
He, however, noted that we cannot escape the globalisation of finance, even though it poses its own perils.
"We have been witnessing an increasing number of poor accessing credit for diverse purposes like education, housing and starting a business," the Finance Minister said, adding that only two percent of the loans given to the self help groups turn bad.
He said over 27,000 students have benefited as a result of the banks' educational loan initiatives and the book currently stands at over Rs 55,000 crore.
The comments from Chidambaram come at a time when the non-performing asset ratios of the banks, especially the state-run ones, have deteriorated amid the ongoing economic gloom.
Chidambaram lauded the work done by J&K Bank in the aspect of stress management, saying its ratios like 1.62 percent gross non-performing assets ratio is an object of envy.
It can be noted that some state-run lenders like SBI and Central Bank of India have their gross NPA ratios above 5 percent.