This is vote ‘bank’ politics at its best

 MUMBAI: Men in pinstripes may find themselves at the wrong end of minority politics. Soon, a banker writing a loan cheque will have to take into account the borrower’s religious practice.

The government has asked the Indian Banks’ Association (IBA) to consider earmarking a slice of total loan disbursement for members of minority communities. This will work out to as high as 6% of the total loans given by the banking sector.

In a letter dated January 9, the banking division under the ministry of finance has told IBA to examine the proposal to set aside 15% of priority sector lending in all categories for minority communities. IBA, in turn, has asked member banks to furnish details of loans to minorities—the quantum of such credit compared to the total loan book. In the communication dated January 11, the association has also sought the views of bank managements on the proposal.

Banks in India are required to lend 40% of total disbursements to segments like farmers and small businessmen, who constitute, along with a few other categories, the priority sector. Even indirect farm credit and home loans below Rs 10 lakh are included in the priority sector. The latest proposal will entail giving 15% of the 40% priority sector loans—6% of total loans—to borrowers from minority communities.

Senior bankers, taken aback by the proposal, said unlike in the UK and US, there are no reports of institutional lenders in India discriminating against minorities, and the borrower is not required to disclose his religion in the loan application.

Moreover, there is already a mechanism of disbursal to minority community members. At present, banks extend loans to borrowers referred to them by the respective state development commissioners for minorities. These loans also carry an element of government subsidy.

However, such loans are unlikely to constitute even 1% of total bank loans. “There simply aren’t enough applications from the minority commissioner’s office. Giving loans outside this mechanism and identifying minority group borrowers with the right loan demand, risk appetite and repayment capability is not easy,” said the chairman of a PSU bank.

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