Banks in Sikkim: Contributing to the development of State’s economy:

PARTHAPRATIMSEN Managing Director Citizens’ Urban Co-operative Bank Gangtok

Introduction: It is learned thatformal banking in the state of Sikkimstarted with the establishment of State Bank of Sikkim (SBS) in 1968 under the State Bank of Sikkim proclamation 1968. The SBS has 42 branches & 3 revenue counters all over the State of Sikkim with its headquarter located in the state capital city of Gangtok. It is an autonomous body under the Government of Sikkim. It is not regulated by the Reserve Bank of India. In addition to banking services, State Bank of Sikkim handles treasury functions of the Sikkim State Government. After Sikkim became part of India in 1975, Public & private sector banks started coming into the state from outside the state. But two other indigenous co-operative banks were born in the soil of Sikkim. They are 1) The Sikkim State Co-operative Bank (SISCO Bank) was established in 1998 & 2) Citizens’ Urban Co-operative Bank was established in 2003.

Network of bank branches: As on 31.12.2024, there are 27 banks in the state of Sikkim with 199 branches which comprise of Public sector Banks, Private Sector Banks and Co-operative Banks under the purview of State Level Bankers’ Committee and Reserve Bank of India. State Bank of India is the convenor of the State Level Bankers’ Committee in the state of Sikkim. State Bank of Sikkim & its branches are not included in the performance analysis of the banks in Sikkim as the data are not available. But the SBS has remarkable contribution to the economy of the State of Sikkim.

There are 12 Public Sector Banks with 109 branches in the state of Sikkim. The twelve public sector banks are named with their number of branches given in the bracket such as Bank of Baroda (6), Bank of India (3), Bank of Maharashtra (1), Canara Bank (11), Central Bank of India (16), Indian Bank (2), Indian Overseas Bank (3), Punjab & Sind Bank (2), Punjab National Bank (9), State Bank of India (40), UCO Bank (7)& Union Bank of India (9). It may be mentioned that at present at All India level, there are twelve public sector banks only which means all the public sector banks are present in the state of Sikkim for providing banking and financial services to the people of Sikkim including the Government of Sikkim.

There are 11 PrivateSector Banks with 61 branchesin the state of Sikkim such as Axis Bank (15), Bandhan Bank (8), HDFC Bank(13), ICICI Bank (7), IDBI Bank (6), IDFC First Bank (1), IndusInd Bank (6), Karnataka Bank(1), Kotak Mahindra Bank (2), South Indian Bank (1) & Yes Bank(1).

There are 2 Small Finance Banks with 8 branchesin the state of Sikkim such as Jana Small Finance Bank (1) and North East Small Finance Bank(7). It may be mentioned that another Small Finance Bank named as Utkarsh Small Finance Bank has opened its first branch in Gangtok on 23^rd of January 2025. So, the number of Banks in the state of Sikkim have become 28 & and number of branches have become 200.

There are two co-operative Banks in the state of Sikkim, 1) The Sikkim State Co-operative Bank Ltd ( SISCO Bank) having 14 branches  &  2) Citizens’ Urban Co-operative Bank having 7 branches. 

There are 6 districts in the state of Sikkim which are having bank branches such as Mangan district is having 16 branches, Gangtok district 90 branches, Pakyong district 26 branches, Namchi district 41 branches, Gyalshing district 16 branches and Soreng district is having 10 branches.

Network of ATMs in the state: As on 31.12.2024, there are a total of 243 Automated Teller Machines (ATMs) in the state. The district-wise presence of ATMs in the state is like such as Mangan district is having 17 ATMs, Gangtok district 125 ATMs, Pakyong district 35 ATMs, Namchi district 43 ATMs, Gyalshing district 17 ATMs and Soreng district is having only 6 ATMs. If we look into the bank-wise number of ATMs, we find that SBI is having the highest number of ATMs of 72. Then Axis Bank is having 31 ATMs. Next HDFC Bank is having 29 ATMs, SISCO Bank is having 18 ATMs, Union Bank is having 14 ATMs and Canara Bank is having 12 ATMs. Other Banks have less than 10 ATMs. North East Small Finace Bank, Jana Small Finance Bank, IDFC First Bank and Citizens’ Urban Co-operative Bank have no ATM at present. But, they are likely to open ATMs in near future on the demands from customers.

Business of the Banks in the State of Sikkim as on 31.12.2024: Banking is defined as the taking of deposits from the depositor customers and lending the same to the borrower customers and investing the surplus amount in Government securities, PSU bonds, Mutual funds, bank deposits etc. Bank’s business is calculated by adding deposits with loans & advances. Banks pay interest to the depositors and earn interest from borrowers and by this way, the banks make profit. Banks also earn interest & income from Government securities, PSU bonds, Bank deposits etc. Banks also earn profit from sale of securities when the value or price of securities in the market increases. Banks have other source of income from third party products like insurance etc. At present, in India, most of the banks are in profit and performing well. Banks, by extending credit to the different sectors of economy and for different economic activities, keep the economy moving by enhancing the GDP (Gross Domestic Product) of the nation. So, the banks’ roles in the economy are very important. In the State of Sikkim, banks are playing a very significant role in developing the economy of the State through the process of intermediation.

As on 31.12.2024, the Banks in Sikkim raised Rs16561.57Crore of deposits outstanding and disbursed loans with outstanding value of Rs8489.71Cr. As a result, the Credit – Deposit ratio (CD ratio) of the State is 51.26%, excluding deposits & loans of State Bank of Sikkim.When the credit amount coming from outside the State is utilisedin the State, total loans & advances amount given is increased to Rs10,997.10Crore and the CD ratio then becomes 66.40%.

Out of the total deposits of Rs16,561.57Cr, share of PSU Banks is Rs9726.73Crore, ie, 58.73%. The share of private Banks is Rs5508.66Croreie, 33.26%. The share of Small Finance Banks is Rs58.60Croreie, 0.35%. The share of two cooperative Banks (SISCO&CUCB) is Rs1267.58Croreie, 7.65%.

Out of the total loans & advances of Rs10,997.10Crore, the contribution from the PSU banks is Rs8459.82Croreie, 76.93%. The contribution from the Private Banks is Rs1835.38Croreie, 16.69%. The contribution from the Small Finance Banks is Rs16.13Croreie, 0.15%. The contribution of two Cooperative Banks (SISCO&CUCB) is Rs685.62Crie, 6.23%.

Analysis of business composition: Though the PSU Banks’ share of deposit is 58.73%, their contribution to the loans & advances is 76.93%. The CD ratio of PSU banks is also 86.98%. But, whereas the Private Banks’ share of deposits is 33.26%, their contribution to the loans & advances is 16.69% only. The CD ratio of Private Banks is 33.32%, much below the CD ratio PSU Banks. Again, whereas the Small Finance Banks’ share of deposits is 0.35%, their contribution to the loans & advances is 0.15% only. The CD ratio of Small Finance Banks is 27.53% only. Small Finance Banks are also private Banks. Two cooperative Banks’ share of deposit is 7.65%, their contribution to the loans & advances is 6.23%. The CD ratio of SISCO bank is 55.25% and the CD ratio of Citizens’ Urban Cooperative Bank (CUCB) is 39.47%. The SISCO&CUC Banks are two banks born in the soil of Sikkim and working within the state of Sikkim for the people of Sikkim only ie, those who are residing in the state of Sikkim as these two cooperative Banks have no branch outside the state of Sikkim. 

From the above data & information and analysis, it is clear that PSU banks are still forerunner in developing the economy of the state of Sikkim by ensuring much more credit flow to the different sectors of economy at affordable rate of interest as compared to Private Banks who lend much less with high rate of interest as compared to PSU Banks. Private Banks attract deposits from individuals, organisations, government departments offering 1-2% higher rate of interest from PSU banks. But, they invest more in the form of loans & advances outside the State of Sikkim which is evident from their low CD ratio.

Performance under Annual Credit Plan 2024-25 (both Priority & Non-priority Sector loans & advances) for 9 (nine) month’s period from April to December, 2024:  As against the annual target of Rs2327.09Crore, the achievement of PSU banks is Rs2405.73Crore, ie, 103.61% in nine months. In the same period, the achievement of Private Banks is Rs1190.24Crore as against the target of Rs1549.26croreie, 76.83%. Achievement of Small Finance Banks is Rs5.97Crore

(37.29%). The achievement of SISCO Bank is Rs85.71Crore (113.32%). Achievement of Citizens’ Urban Co-operative Bank (CUCB) is Rs25.31Crore (96.59%). The overall achievement by Banks for both priority and non-priority sector loans & advances was 92.96% during the first nine months period of Financial Year 2024-25.

Performance under Annual Credit Plan 2024-25 for Priority Sector loans & advances) for 9 (nine) month’s period from April to December, 2024:

As against the annual target of Rs947.09Crore, the achievement of PSU banks is Rs847.30Crore, ie, 89.96% in nine months. In the same period, the achievement of Private Banks is Rs203.92Crore as against the target of Rs373.26croreie, 54.63%. Achievement of Small Finance Banks is Rs5.32Crore (48.39%). The achievement of SISCO Bank is Rs26.65Crore (74.80%). Achievement of Citizens’ Urban Co-operative Bank (CUCB) is Rs16.66Crore (231.43%).  The overall achievement by Banks for priority sector loans & advances was 80.04% during the first nine months period of Financial Year 2024-25.

Performance under Annual Credit Plan 2024-25 for other Sector loans & advances) for 9 (nine) month’s period from April to December, 2024:

1)The overall achievement under the sector of Agriculture & Allied activities is Rs217.52Cr (45.57% of target). 2) The overall achievement under the MSME sector is Rs720.89Crore (92.42% of target). 3)The overall achievement under the other priority sector is Rs161.45Crore (138.19% of target). 4) The overall achievement under the non- priority sector is Rs2613.09Crore (99.74% of target).

Conclusion: The economy of Sikkim is considered to be mostly the agricultural economy. The GDP of the state is about 0.47 trillion (47,000 crore) rupees (2023-24 estimate). GDP per capita is Rs5,41,544 (2021-22 estimate). The population of the state is around 7 lakh. The state’s economy is shaped by agriculture, hydropower, tourism and pharmaceuticals supported by infrastructure policies and green policies. All categories of banks (Public, Private, Co-operative sector banks) are contributing to the development of the state’s economy by ensuring credit flow to all sectors of economy such as agriculture, manufacturing, service, MSME, infrastructure etc in varied proportions of deposits raised. The Government & the people of the state want that the banks must maintain &increase the credit flow to the deserving sectors of economy in a consistent manner along with other financial services such as insurance & pension to generate more & more self-employment in the state and improve the living condition of the people of the state. This is why the banks are branded as the backbone of economy. So, if the banks flourish, the country and its people will flourish.  Let the banks flourish by giving them money back.