Chief Minister Neiphiu Rio has said that banks must set targets to raise Credit Deposit ratio in Nagaland to at least the national average. The Credit Deposit ratio is 55-57% in the state compared to 75% national average.
The Chief Minister said this in his keynote address at the Nagaland Credit Empowerment Summit held on 20th September 2024 at Noune Resort, Chümoukedima where he launched the Annual Credit Plan for FY 2024-25, Loan Tracking and Monitoring Website and State Sponsored Collateral Free Loans for Entrepreneurs.
CM Rio noted that the banking sector plays a critical role in driving financial inclusion and urged banks to focus on increasing lending to marginalized sectors such as agriculture, small businesses and entrepreneurship. He also stressed that skill and education loans must be made more accessible and highlighted that the State Government has set ambitious targets for 1,000 education loans and 2,000 skills development loans for this year.
The Chief Minister highlighted that Nagaland’s economy is steadily improving with GDP growth aligning with national recovery trends and that the government is focused on boosting internal resources for financial resilience and independence. He mentioned that the SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act was recently implemented to build a healthier credit ecosystem in Nagaland. This will allow banks to recover Non-Performing Assets without court intervention, thus, reducing their lending risks, he added.
Rio said that to support MSMEs, the government is offering collateral-free loans up to ₹50 lakh under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and covering the first-year guarantee fee on new MSME loans to ease the burden on banks.
He noted that digital banking and mobile-based financial services can be a game-changer in the State’s remote areas and suggested that banks design tailored loans that reflect Nagaland’s strengths like piggery, floriculture, and homestay tourism citing the Nagaland Tourism Connect Scheme as an example.
Earlier in the program, Chief Secretary Dr. J Alam, IAS, highlighted that the banking sector in the state has been performing much below the national average in almost all the parameters and that has been the constant worry for the State because very important channel of funds is stranded in the state. The Chief Secretary also mentioned that the average household coverage in the banking sector in the state is only 55% whereas the national average is about 80% and Credit Deposit ratio is 55-57% in the state compared to 75% national average, and so he urged the bankers present to come up with the credible plan to ensure these gaps are bridged.
Launch of Annual Credit Plan for FY 2024-25
Prepared by the State Level Bankers’ Committee, Nagaland, the Annual Credit Plan outlines the targeted credit disbursements across various sectors.
The Government has increase in credit flow to Priority Sectors (Agriculture, Entrepreneurship, Education, Skill Development, Renewable Energy, etc.) from Rs 1058 Crore to Rs 2003 Crore with the intention to ensure that critical sectors, such as agriculture and small enterprises, receive the necessary financial support to drive development. These measures were taken as a course correction measure to ensure flow of credit to priority sectors and to bound banks to provide these priority sector loans to the public in the state in commensurate with the deposits they are receiving from within the State. The latest reports states that around Rs18000 Crore as total deposits in banks functioning in Nagaland.
Promoting Entrepreneurship
The Government has enhanced the credit flow target for entrepreneurship (MSME) from Rs 340 Crore to Rs 1137 Crore for the current financial year. This target demonstrates State’s commitment to expanding financial resources and stimulating economic growth across various sectors.
Collateral-Free Loans for Entrepreneurs
To address concerns related to Non-Performing Assets (NPA) and the hesitation of banks to extend loans to deserving entrepreneurs in the State, the Government will provide collateral-free coverage for loans up to ₹50 Lakh per beneficiary through Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This initiative reduces financial risks for banks and eliminates the need for third-party collateral for entrepreneurs, encouraging more lending.
CGTMSE stands as guarantor for MSME/Business Loans against payment of a nominal annual guarantee fee. Once the loan is covered under CGTMSE, and in case an entrepreneur is not able to pay back the loan due to genuine reasons/business failure, except for the case of ‘fraud and wilful default’, CGTMSE will make the payment to the banks upto 85% of the pending loan amount.
Revised Chief Minister’s Micro Finance Initiative (CMMFI)
The Government has made revisions to streamline fund flow, improve accessibility, and ensure equitable distribution of resources. Currently, 929 entrepreneurs have benefited under the Scheme and there are nearly another 980 applications approved by District Level Monitoring and Implementation Committee, 18.6 crore has been released as subsidy, with a total loan portfolio of Rs 52 Crore.
The revised policy provides:
– unified guidelines for evaluation of applications
– online portal for application and tracking of the application
– mandatory 6-month mortarium on EMI to ensure that the projects are becoming profitable before repayment starts,
– simplification of loan verification and approval process at District level, with specified 14-day time-period for project appraisal based on due diligence by banks
– sector-wise allocation of resources to ensure equitable distribution of resources
special provisions for Innovative projects, projects from Differently abled, widows and single mothers, unemployed youth etc.
Launch of Loan Tracking and Monitoring Website
A Loan Tracking and Monitoring website has been launched, enabling beneficiaries to apply for and track their loans online. This portal also features the provision for public to generate their Detailed Project Report (DPR) for submission to banks, designed in line with the basic framework for MUDRA loans, which provide financial support and credit to micro and small enterprises. This initiative is expected to reduce the turnaround time for loan processing for the beneficiaries and also to enable banks to process the loans within the mandated timelines.
Establishment of Finance Department Monitoring Cell
A dedicated cell within the Finance Department has been established for routine monitoring of credit flow and related initiatives. This cell will ensure that the implementation of these initiatives is closely tracked and any issues are promptly addressed.
Deployment of Credit Managers and Coordinators
It was informed at the Summit that Credit Managers and Coordinators have been deployed in each district under the Swavalamban Connect Kendras (SCK) in partnership with SIDBI. These professionals will provide end-to-end facilitation and credit support free of charge, ensuring that every district receives the necessary assistance for financial empowerment. The centres will be also providing necessary entrepreneurship orientation and development training for budding entrepreneurs.
Partnership with Private Vendors
It was informed that Tata Motors has committed to the entrepreneurship ecosystem building initiative in the State by way of offering a 12% discount on agri-marketing trucks procured under CMMFI. The Government invited more private players to support the development of a robust logistics network and promote entrepreneurship in the state.
