Recommendations of the State Development Reports of NER on Tourism and Banking 14

Most of the State development reports of NE States (Assam, Tripura, Sikkim and Manipur) recognize tourism as an important sector of the NER economy, and the need to develop it for greater income generation. More emphasis on sustainable eco-tourism, adventure tourism, village tourism and rural tourism would bring in high-value tourism. All the States understand the importance of Government and private sector participation in the development of the sector in their respective States. Assam gives importance to the involvement of local people in the development of tourism and rural tourism in particular. The role of NGOs in the development of rural tourism has been highlighted in Sikkim. The Assam Development Report recommended providing fiscal incentives to private entrepreneurs for marketing of potential tourist places. All NE States lay emphasis on the improvement of tourism-related infrastructure and relaxation of the permit system in the region.

The Sikkim State Development Report recommends opening up the Nathu La pass to boost tourism in the region. Assam and Tripura give importance to improving the security scenario of the region to attract more tourists. Most of the States lay emphasis on the formulation of policies for the promotion of environmentally sustainable tourism in the region.

Regarding development of the banking sector, almost all States consides the low CD ratio a matter of concern. So steps should be taken to attract more deposits: low-interest rate credit should be provided for the priority sector to improve the CD ratio of the region. In order to attract more deposits, the Tripura State Development Report recommends initiating lucrative schemes in the

14 Based on Assam, Tripura, Sikkim and Manipur State Development Reports

State. The State development reports also recommend introducing e-banking and tele-banking in the region.

6.6 The Way Forward

The vision for this sector will take off from the recommendations of earlier committees that have worked on development strategies for NER. There is no doubt that easing Restricted Area Permits and Inner Line Permits will greatly improve tourist flows to the region. Domestic tourism is a function not just of air connectivity but also road and rail links, and the development of the latter two are particularly important due to cost factors and their larger carrying capacity. In contrast, the plan to develop Guwahati as an international airport has failed to take off because it was based on a supply-side approach (the assumption that the supply of a facility will create demand for it) rather than an analysis of the demand for various tourism services.

The various indicators for NER, which are commonly used for looking at banking development, show that despite improvement in the last five years, the level of financial outreach is low. The main factors that impede banking and financial development are the topography of the region, sparse settlements of population, infrastructural bottlenecks such as transport, communication and power, low level of commercialization, lack of entrepreneurship, law and order conditions in some parts land tenure system especially in hilly areas, a development strategy based on grants rather than loans, low network of branches, lack of simple customized and flexible financial products to suit the needs of the local population, poor loan recovery experience, lack of awareness of banking services and inadequate payment systems.

It is evident that a financial market exists in NER, although most of the financial requirements are small. Banks have hardly been able to penetrate this market given their thin spread of branches and inappropriate products. The region is rich in traditional institutions, some of which are involved in financing. Thus in order to access these markets, the formal banking industry has to undergo a radical overhaul of its systems. Primarily they need to change the character, structure and products designed for this region. Given the large scale diversity of the region it is imperative to build linkages with institutions which are more locally based and embedded within the community which not only includes micro-financing institutions but also traditional institutions.

The recommendations for banking are based on the low spread of banking and NEDFI’s inability to service small loans, which are particularly important for small agricultural producers.

The extension of NEDFi activities to remote areas via non-banking financial intermediaries or well-established NGOs in these areas would greatly ease credit availability to these groups. In banking, the immediate need is to expand the availability of credit to farmers and entrepreneurs.

Given the remoteness of hill areas this will require taking banking to the people. NEDFi can work with non-banking financial intermediaries (NBFIs) and NGOs to access people located in smaller villages and hamlets. NEDFi can provide refinance to these agencies.

6.7 Recommendations

• Banks should be induced to open branches in blocks where there are no branches. Where security is an issue, branches could be located near police establishments.

• Young staff be posted with a fixed tenure to ensure continuity. There should be enough incentives for postings in NER.

• For skill development, instead of following the traditional training modules, it is imperative that market driven skill requirements be identified and necessary courses and infrastructure created.

• Self-employment schemes should be worked out in consultation with banks to provide larger amounts of funds to the educated unemployed.

• Lending through SHGs should be increased where past experience has generally been satisfactory. Lenders should consider raising the quantum of loans through the SHG medium, for example with respect to groups of educated youth undertaking a cluster of entrepreneurial initiatives in the area of information technology. NABARD and NEDFi should be actively involved in formulating such proposals.

• The banks will have to shed traditional approaches and adopt an aggressive business model for increasing the number of deposit and loan accounts and volume of business. This will call for a ‘mission mode’ to be adopted with wide publicity among all stakeholders especially the State administration local community based organizations and local leaders who can act as facilitators.

• Although the loan policy for a bank is uniform for the entire country, banks operating in NER may review their loan policies and make necessary changes due to the peculiar conditions in the North East.

• In the North East lack of a proper land tenure system and issues of land ownership rights result in Banks facing problems of collaterals for granting loans. It is, therefore, necessary to explore ways of addressing the problem of collateral. Land Possession Certificate (LPC), where available, may be taken for establishing proof of right to cultivate the land. Where LPC is not available, a letter of comfort or certificate from the group/local tribal bodies/

farmers’ clubs/VDBs regarding the borrowers’ right to cultivate land may be taken. In those parts of the hills where there is no practice of issuing documents conferring transferable rights or where the procedure is cumbersome, the respective Governments (or autonomous councils) should expeditiously put in place a system of issuing land ownership or possession certificates based on a cadastral survey.

• SIDBI and NEDFi may prepare typical bankable projects in a variety of industries in the SME sector and disseminate the same as these could be used by potential entrepreneurs.

Such schemes should cover the handloom and handicraft sectors.

• Regional Rural Banks and State Cooperative Banks need to be strengthened in terms of manpower, capacity building and use of IT. RRBs may appoint staff on a contract basis with remuneration linked to achievement of certain targets. With the help of IT based systems, RRBs will be able to provide all services that a commercial bank does. State Cooperative Banks may also be similarly strengthened by the State Governments.

• A federated body of the NER States should identify sites that will form part of a tourist circuit which will be developed in coordination with tourist agencies.

• Infrastructure (accommodation, connectivity) related to tourist circuits and to other forms of tourism in NER will be developed appropriately.

• In the short run, States that have the natural resources could concentrate on developing their adventure and eco-tourism potential given the deficiency of infrastructure.