BANKING TRADE AND COMMERCE

JOINT-STOCK BANKS

Till the middle of the 19th century there was not even a single bank in Sholapur district. The banking operations were undertaken by the banking houses. The following accounts gives an idea about the banking business at the time of publication of the old Gazetteer of Sholapur district in 1884:—

"Few houses confine themselves to strict banking business, and granting and cashing bills of exchange. In most cases moneylending and sometimes trade are joined with banking. Banking houses are found only in the largest towns, Sholapur, Barsi, Pandharpur, and perhaps Karmala. At Barsi out of fifteen bankers or shroffs only three confine themselves to banking, the others being also engaged in moneylending and general business. A branch of the Bank of Bombay was established at Sholapur in 1861-62, and was open about three years. It had a favourable influence on trade as it lent money at lower rates of interest than had been customary, and issued and accepted bills payable at sight, or at a fixed period. Ninety per cent of its transactions were with natives. Except in the case of some European servants of Government it was not resorted to by the public for deposit. The Sholapur branch was closed early in 1867. A branch of the New Bank of Bombay was opened in 1868-69, but was soon closed from want of business."

Table No. 38 gives the number of banks, reserve fund and working capital of banks in Sholapur district from 1916 to 1925.

Upto the middle of 20th century there was very meagre banking business in Sholapur district. The development of banking started after Independence. But for the first ten years after Independence the development of banking in the district was a bit slow. Since the nationalisation of the State Bank of India, the development of banking in the district took a rapid pace. There were 48 branches of scheduled banks in the district in 1970, the distribution of which is given below:—

The amount of deposits of commercial banks was Rs. 8,53 lakhs, Rs. 9,73 lakhs and Rs. 1,449 lakhs in 1966, 1967 and 1970 respectively. The bank credit advanced by the banks during 1966, 1967 and 1970 was Rs. 3,33 lakhs, Rs. 3,72 lakhs and Rs. 10,35 lakhs respectively.

After the nationalisation of 14 major commercial banks, a Committee of Bankers, appointed by the Reserve Bank of India, recommended that the branch office of the Bank of India at Sholapur was to be deemed as a lead bank in the district. Accordingly the lead bank, the Bank of India has to assume a major role in the development of banking and credit in Sholapur district, though it is not expected to have a monopoly in banking business in the district. It is required to act as the leader, and after identifying under-banked areas and those areas suffering from credit gaps, it should invoke co-operation of other banks operating in the district.

In pursuance to this policy the Bank of India carried out an impressionistic survey of Sholapur district which it did in October 1970. The study report of the bank published in February 1971 gives an analytical information about the general economy as also banking in the district. The relevant observations from the study are given below [Survey Report on Sholapur District, Lead Bank Scheme, Bank of India, 1971, pp. 53-54.]:—

"As on 30th October, 1970, there were 48 offices of commercial banks in the Sholapur district. In addition to State Bank of India which has 11 offices in the district, 10 of the 14 nationalised banks have offices in the district. In spite of this, it may be mentioned that these touched only a part of banking business potential in the district. The district offers considerable scope for increasing activities by commercial banks with a view to playing a crucial role in the economic development of the district.

From the number of commercial banks in the district and the number of their offices, it would appear at first that Sholapur is fairly well-banked. With 48 offices of commercial banks, the average coverage would work out to about 46,000 population per commercial bank office in the district as against about 45,000 average for Maharashtra State and about 55,000 per bank office for the country. Further analysis, however, shows that barring Sholapur, Barshi, Akluj and Pandharpur which are the main trading centres with a few industrial units, on an average there is one commercial bank office in the district for about 3 lakhs population. Banks have obviously followed economic development of these towns and financed industry and trade instead of initiating any development or preceding it.

Development of commercial banking and the spread of offices in this district shows to some extent that the branches were opened in the Sholapur town because it formed a link of trade with most of the commercial centres in the country and had a few textile mills. The spread of offices has been so unsatisfactorily planned that out of a total of 48 commercial bank offices, 18 are in the Sholapur city itself, most of them on the same street or within a radius of a mile or two. This has probably made the banks in the city vie with each other for business and tread on each other's toes rather than seeking fresh pastures and making it more convenient for their clientele to visit them.

These banks have concentrated in Sholapur city, ignoring the dynamic transformation that is taking place in the rural areas of the district which are developing fast in recent years and offer tremendous possibilities for prosperity through increased irrigation facilities and intensive farming—both of which require credit. Some centres where cash crops and fruits are grown substantially in recent years are actually starved of commercial banking facilities.

At the end of 1968 while the total deposits of the commercial banks in district were Rs. 11,57 lakhs, their advances amounted to Rs. 5,36 lakhs. The credit-deposit ratio for the district was less than 50 as against the Maharashtra State ratio of over 90 and about 75 for the country. The district ranked 114th with a credit-deposit ratio of 38.2 in the descending order of credit-deposit ratio of commercial banks at the end of 1967. Commercial banks, therefore, appear to have taken Sholapur district to be mainly a deposit centre in the past.

With social control and nationalisation of banks, however, the commercial banks in the district have followed a more liberal policy with regard to their advances particularly to the neglected sectors. This is evident from the fact that the advances of commercial banks in the district have almost doubled from Rs. 5,36 lakhs to over Rs. 10,00 lakhs at present (October 1970), taking up the credit-deposit ratio from 38.2 in 1967 to about 65. Further, that most of this additional credit disbursed in the two to three years has been diverted to agriculture and other neglected sectors is seen from the fact that commercial bank credit to centres other than Sholapur city, Barshi and Pandharpur is estimated to have gone up from Rs. 38 lakhs at the end of 1968 to over Rs. 255 lakhs at the end of October 1970. The per capita commercial bank credit for the district works out to about Rs. 45 as against Rs. 225 for Maharashtra State and about Rs.70 for the country. It must also be stated that even in the field of deposit mobilisation they leave much to be desired. Partly because of lack of proper personnel and planning, as also inadequate spread of offices, the commercial banks in the district have not been able to tap a substantial part of the deposit potential of the district. The per capita deposit in the district is Rs. 66, Rs. 250 for Maharashtra and about Rs. 90 for the country.

The commercial banks in this district which had confined their advances portfolio mainly to traders and large-scale organised industrial sector, have recently entered into the field of agricultural finance. Agricultural advances as at the end of October 1970 for the district are estimated to be about Rs. 2.5 crores, out of a total of over Rs. 10 crores. An important point that may be mentioned in this regard is that over Rs. 1 crore out of the agricultural advances are tied to co-operative sugar mills in this district.

The commercial banker is yet to stretch himself and peep into the countryside for picking up some really good agricultural proposals for direct financing. The main handicap for him, besides trained personnel to scrutinise and supervise these advances, is the distance from where he has to operate. The lop-sided branch expansion is another hurdle for him in taking up advances in the interior, his office being situated in the main city which is miles away.

Though some mobilisation of deposits would automatically take place with opening more and more offices, the importance of basic attitudes and approaches has to be underlined. There is need for continuous innovation and experimentation to adapt to local conditions. The need for the right type of personnel at the right places need not be over-emphasised. It is also necessary to establish some nexus between the saving and loaning operations. The fact that some of the primary credit societies, through periodic deductions for share-capital, have built up large share-capital holdings indicates that a scheme of compulsory deposit deductions may not be unacceptable to many groups of borrowers."

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