Role of Banks in Employment Generation

Anil Sharma

Commercial banks and more specifically public sector banks are playing an important role in employment generation in the country. Government of India has been implementing some of its important policies for employment generation, both in rural and urban population, with the help of banks.

For example, Prime Minister's Employment Generation Programme (PMEGP), a credit linked subsidy program is being implemented by Ministry of Micro, Small and Medium Enterprises through Khadi and Village Industries Commission (KVIC) at the national level and by KVIC directorates, Khadi and Village Industries Board and District Industries Centers at the State level. It aims at generating self-employment opportunities through establishment of micro enterprises by organizing traditional artisans and unemployed youth. The Government subsidy under the scheme is being distri-buted to the beneficiaries/ entrepreneurs through identi-fied banks.

Similarly, Swarnjayanti Gram Swarojgaar Yojana (SGSY), a major program for self-employment for the rural poor is being implemented by the District Rural Develop-ment Agencies (DRDAs) with the active involvement of Panchayati Raj Institutions and Banks by providing them income-generating assets through a mix of bank credit and governmental subsidy.

Micro Units Development and Refinance Agency Ltd (MUDRA) is engaged in extending financial assist-ance to micro enterprises. MUDRA provides support for inclusive finance through refinance to primary lending institutions, financing income generating micro enterprises loan upto Rs 10 Lakh under Pradhan Mantri Mudra Yojana (PMMY) and overdraft amount of Rs 5000/- sanctioned under Pradhan Mantri Jan Dhan Yojana (PMJDY).As on 31.3.2017, MUDRA has partnered with 27 PSBs, 18 Private Sector Banks, 31 RRBs, 13 State/Urban Cooperative banks and 73 MFIs and 31 NBFCS and has refinanced an amount of Rs. 3,525.94 crores in 2016-17 as compared to Rs. 3,783.20 crores in 2015-16.

Agriculture sector provides the maximum employment in the country and micro, small and medium sector is the second most employment generating sector. Commercial banks have played a key role of providing finances to both these sectors and thus helped in generating employment.The Reserve Bank of India has set targets and sub-targets under priority sector lending for all scheduled commercial banks operating in India. 40 percent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is required to be lend to the priority sector as indicated below:

(i) 18 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, is set for Agriculture. Within the 18 percent target for agriculture, a target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.

(ii) 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher to be achieved for Micro Enterprises.

(iii) 10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is to be given as Advances to Weaker Sections.

Bank credit to Micro Finance Institutions (MFIs) extended for on-lending to individuals and also to members of SHGs / JLGs is also categorised as priority sector advance under respective categories viz., Agriculture, Micro, Small and Medium Enterprises, and 'Others', as indirect finance subject to certain conditions.

Present Status of MSMEs*

*As per National Sample Survey (NSS) 73rd Round conducted during the period 2015-16.

It can be seen from the above charts that bank finance to MSE sector has played a significant role in nurturing MSEs where good employment opportunities are created.

Another effort on the part of the public sector banks for increasing employment in rural sector is their participation in Rural Self Employment Training Institutes (RSETI), an initiative of Ministry of Rural Development (MoRD) to have dedicated infrastructure in each district of the country to impart training and skill upgradation of rural youth geared towards entrepreneurship development. RSETIs are managed by banks with active co-operation from the Government of India and State Governments. The main objectives of RSETIs are:

1. To identify rural BPL youth and train them for self-employment,

2. To train them in specific areas after assessment their aptitude,

3. To provide hand holding support for assured credit linkage with banks and

4. To provide escort services for at least two years to ensure sustainability.

Some of the areas which are offered for training under RSETI are Horticulture, Sericulture , Dairy Farming ,Poultry, Piggery,Mushroom Cultivation, Sheep Rearing, Cultivation of Medicinal and Aromatic Plants,Bee Keeping, Electric Motor Rewinding and Pumpset Maintenance, Servicing of Digital Electronics, Tractor Servicing, Two Wheeler Servicing, Beauty Parlour Management ,Digital Designing and Publication (DTP), Sewing Machine Servicing and Repairs , Hand Embroidery, Food Processing & Bakery Products, Dress Designing ,Agarbatti Making, Jute Products Manufacturing, Paper Bag, Envelop & File Making, Computerized Financial Accounting Computer, Data Entry Operation  etc.

As on date, 587 RESTIs are operational and 35 banks are participating in the scheme. RESIs have trained 24,58,298 rural youth and out of them 16,12,310 have been gainfully employed. An amount of Rs. 342.75 crores has been disbursed to them.

Regional Rural Banks (RRBs) were set up as state-sponsored, regionally based and rural oriented institutions under the Regional Rural Banks Act, 1976. The RRBs are owned by the Central Government, the State Government and the Sponsor Bank (Any commercial bank can sponsor the regional rural banks) hold shares in the ratios of 50%,15% and 35% respectively.

The mandate of RRBs is to serve the credit needs of the small and marginal farmers, agricultural labourers, socio-economically weaker section of population for development of agriculture, trade, commerce, industry and other productive activities. The effective number of RRBs as on 31st March, 2014 stands at 57  and as on 31st March, 2014, these RRBs operated with a network of 19,082 branches (17,861 branches during previous year) covering 642 districts. 75 per cent of the branches of the RRBs were in the rural areas.

As on 31st March, 2014, an amount of Rs.2173.43 crore has been released to 38 RRBs in 20 States. The released amount includes GoI's contribution of Rs. 1086.70 crore, State Govt's contribution of Rs. 326.04 crore and Sponsor bank's contribution of Rs.760.69 crore.

As on 31st March, 2014, the outstanding advances of RRBs stood at Rs.1,59,302 crore and  the share of priority Sector advances of the total outstanding advances of RRBs as on 31st March, 2014 is 81.74 per cent and the share of agricultural loans is 56.68 per cent as on 31st March, 2014.

In addition to these common efforts being made by the public sector banks, individual banks are also taking initiatives in social banking especially generating self-employment opportunities in rural areas. For example; UCO Bank has two unique social cum financial upliftment schemes namely, UCO Uthan Scheme and UCO Samagra Gramin Vikas Yojana. Under the first scheme, villages having large number of BPL families are adopted through its nearest branch to bring the BPL families out of the clutches of poverty. The Bank has adopted 31 villages in 10 states and by these efforts 6,568 BPL families have been provided with credit assistance by Bank to uplift their livelihood in a better way during the last 4 years. Under UCO Samagra Gramin Vikas Yojana, the Bank has adopted 10 villages in 6 states for their all-round development. Under financial assistance, Bank has given General Credit Cards to small traders, Artisan Credit Cards to artisans and loans for animal husbandry to rural folks including women.