Karnataka Govt ask RBI to increase Credit Deposit Ratio
By Neelima Shankar
May 18, 2009
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The Reserve Bank of India has received an appeal from the Karnataka state government to take measures to raise Credit Deposit Ratio (CDR) to the cooperative credit institutions in the state.

The proportion of loan to assets created by banks from the deposits received is known as the Credit Deposit Ratio or CDR. Over the past two years, cooperative banks in Karnataka have been facing a fall in this ratio by 5%.

During the meeting with the RBI Governor, Chief Minister and Finance Minister of Karnataka, B S Yeddyurappa asked the central bank to increase the credit flow to agriculture sector through higher refinance facility by NABARD to cooperatives. He insisted on increasing the refinance level to 50% from the present level of 40%.

Meanwhile Yeddyurappa also demanded for a fall in the interest rates of loans extended to micro and small industries. He said that interest rates for such loans should come down by 3% to 10% from the existing 13%. Such a move should be initiated to help these ailing sectors that have been hit hard by the economic downturn, he added.

Further the Chief Minister pointed that credit flow to agriculture sector and weaker sections of the state has fell down by 1-2% of the total advances.

At the same time he has also asked the banking regulator to ease education loans by allowing middle class, SC and ST students to avail loans without producing a security.

Yeddyurappa said that the meeting with RBI Governor was "cordial and fruitful".

Subbarao also appreciated the cautious approach to financial management and fiscal discipline adopted by the Karnataka state.


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