Executive Summary

  • Lakshadweep, an archipelago of 36 small and tiny islands, located at 220 to 440 kms. away from the mainland in south western India, is the tiniest Union Territory of India with just 32 square kilometers in area and a population of 60,650 (2001 census) which is estimated to grow to 70,322 by 2011. Of the 36 islands, only 11 islands are inhabited. Nine islands (Androth, Amini, Agatti, Chetlat, Kadmat, Kalpeni, Kavaratti, Kiltan and Minicoy) are significantly populated and two others (Bitra and Bangaram) have very tiny or floating population. About 95% of the population follow Islam and have been classified as Scheduled Tribes. The Union Territory of Lakshadweep (UTL) is high in population density (2255 as against All India Average of 324), literacy (87.52% - as per 2001 census) and has relatively good health indicators. Outward migration is extremely limited. Poverty and economic inequality are low in Lakshadweep and most of the households are in the lower middle income group.
  • Even though the land area is very small, it is surrounded by lagoons, measuring 4,200 sq. kms. and the territorial waters, measuring about 20,000 sq. kms. Further, it has access to 4 lakh sq. kms. of Exclusive Economic Zone (EEZ). These features make the islands, though very small in land area, a rather large overall territory. These islands are strategically very important to the country for security reasons. They are also ecologically fragile. At the same time abundant potential exists for development of the fisheries, agriculture (coconut and coir) and tourism sectors. There is immense scope for value addition in these areas while simultaneously preserving the ecology of the islands and keeping in view their strategic importance. A basic requirement for the economic activities to take off would be the development of transport and communication facilities, thereby bridging the 'distance gap' between the islands and the mainland. Once the economic activities take off, there would be enough scope for expansion of banking services in the islands and the banking sector would be able to significantly contribute to the healthy economic development of the area, mainly through value addition and realization of the economic potential of the islands to a much greater extent.
  • The islands experience tropical climate and the weather is warm and humid around the year. The region experiences heavy rainfall (average rainfall is 1600 mm per annum) with most of the rain usually falling from May to August. Coconut is the main crop of the islands. Tuna fish is abundant in the territorial waters of islands but hardly 10% of the potential is exploited. Increase in production and expansion of export market for Tuna, enhanced production of coconut and coir based products and active encouragement of visit of tourists to the islands hold great opportunities for expansion of banking facilities both for outreach and penetration.
  • The single airport in Lakshadweep is at Agatti and at present flights to Agatti are operated by Kingfisher Airlines and Indian Airlines on alternate days. Other islands are not connected by Airways. Limited helicopter service, mainly as ambulance evacuating patients between Kavaratti, other islands and mainland, is in operation. The UTL is connected to the mainland by passenger ships and cargo barges. Limited boat services between the islands is also in operation. Entry for the non-islanders into the islands and their stay are regulated.
  • Foreigners are allowed only in three islands, viz., Agatti, Kadmat and Bangaram. Non-islanders including Indian nationals are not allowed to purchase or own property or immovable assets in the islands.
  • Even with the rapid advances in transport and communication facilities, the phenomenon of 'death of distance' has not happened in the case of Lakshadweep, as has happened in the case of other parts of the world. Lakshadweep continues to suffer from the problem of distance in several ways. The distance from the mainland and limited transportation/communication facilities affects (a) mobility of people (for education, employment, medical treatment etc.), (b) increase in the time and cost of travel, (c) access to communication (especially newspapers, periodicals etc.), (d) supply and cost of goods and services. It also affects the psychological process of the people and causes delays in deriving benefits for technological and economic development.
  • The island economy is revolving around coconut cultivation, fishing and tourism. Substantial subsidy is given by the Government of India to the islands in all spheres and the Government is the dominant sector in the islands for almost all economic activities. Private entrepreneurship is very much limited in the islands. Bangaram island has been developed as a tourist resort. The UTL administration has proposed to open more islands for tourists.
  • Agriculture is the mainstay of the economy of Lakshadweep. More than 90% of the population depends upon agriculture. It is a Coconut Mono Crop Territory. The entire island has become an Organic Farming Region as the islanders use bio-fertilisers, organic manure and micro nutrients only. Chemical fertilizers are not allowed to be used. Fisheries is the second most important economic activity of the Union Territory. The estimated potential resources of the sea around Lakshadweep is about 1 lakh tonnes of tuna and equal quantity of shark. In 2006, the tuna catch was 11751 tonnes The present tuna catch is estimated to be just 10% of the available potential.
  • The UTL has been declared as a “No Industry District” of the country in view of the fragile ecology of the islands. An Industries Department, however, exists in Lakshadweep which aims to develop small industries and entrepreneurship among the local population. Industries which do not require much land, large quantity of water, power and which do not pollute the lagoons and soil, can only be considered in these tiny islands.
  • The entire group of islands is considered as one district for Lead Bank purposes. Syndicate Bank is the Lead Bank and Convenor of the Union Territory of Lakshadweep Bankers Committee (UTLBC). Presently there are 12 bank branches in the islands viz. nine branches of Syndicate Bank and two branches of State Bank of India (SBI) and one branch of UCO Bank. The branches of all the Banks are Core Banking Branches. There are in all 6 ATMs in Lakshadweep - Syndicate Bank 4, SBI 2. Syndicate Bank had opened its first branch at Kavaratti in 1971 and is operating throughout the UTL with nine branches in the nine major islands. There are no Regional Rural Banks, State / District Central Cooperative Banks, or Urban Cooperative Banks functioning in Lakshadweep. NABARD and SIDBI do not have any office in these islands.
  • The bank deposits grew from Rs.67.91 crore in 2001-02 to Rs.429.03 crore in 2009-10. During the same period, bank advances went up from Rs.5.47 crore to Rs.31.61 crore. CD Ratio which was 7.37% in 2009-10. Advances to priority sector increased from Rs.2.11 crore to Rs.13.62 crore and to agriculture from Rs.0.65 to Rs.2.22 crore. Thus, performance of the banks under lending to priority sector is about 43.09% of the total advances and the credit under agriculture sector is below the target of 18%. Disbursement of credit to SHG has picked up in the islands. Similar is the case with DRI, KCC, PMEGP and SGSY.

The Major recommendations / suggestions of the Working Group are –

Recommendations for Improving Banking Facilities in Lakshadweep

  • The banks and the UTL administration have to jointly make earnest efforts on improving the CD Ratio through greater exploitation of the potential in the fishing, agriculture and tourism sectors, going up the value chain and improving the entrepreneurial technique and management skills of the island population.
  • Union Territory Level Bankers' Committee (UTLBC) meetings as also other developmental meetings involving the bankers, developmental institutions and the UTL administration...
    line departments should be convened at regular periodic intervals.
  • Taking into account the island-wise per branch population and also the fact that there is limited island movement of people for transacting banking business in view of poor inter-island transport facilities, opening an additional bank branch each in the islands of Androth (population 10727), Minicoy (9495), Agatti (7009) and Amini (7353) could be considered.
  • The new branches in the above islands may preferably be opened by another bank (other than Syndicate Bank which already has the predominant presence) which would help bring greater variety in banking services to the island population and also generate an element of competition between the banks thereby benefiting the customers.
    The member of the Working Group from Syndicate Bank (UTLBC Convenor) was not in favour of opening of additional bank branches which he felt would only lead to unhealthy competition. The views expressed by him are as under:

    "In my considered opinion, taking into account, the low level of population in the islands and the recent financial inclusion exercise conducted by the banks and the best per population per bank branch figures of the islands, there is no need for another bank branch in any of the islands. One branch of a nationalized bank has been serving the population for decades and no banking services are denied to any section of the islanders. Except for few households which have not opened an account due to religious and economic reasons, 100% financial inclusion has been completed in all the islands. The scope for business both for deposits and credit is limited and one bank branch is sufficient to cater to the needs. "
  • In the absence of a cooperative structure, refinance support from NABARD at concessional rate of interest is not availed. The Working Group felt that a co-operative structure with State Co-operative Bank at the apex level and PACS at the base level may not be viable for the present given the peculiar features of the UTL. However, the proposal could perhaps be moved forward after comprehensively considering the business potential, viability and profitability of such a structure once the economic development of the UTL moves substantially forward. Pending setting up of such a structure, the PACSs in the islands may be linked to the branches of the commercial banks for ensuring flow of concessional credit support from NABARD.
  • The Lead Bank has reported completion of first phase of 100% financial inclusion in the islands in terms of linking all willing households to the bank braches. A preliminary evaluation of the achievement based on the household and account information furnished by the bank reveals that there are some gaps, presumably on account of reluctance on the part of some of households to open bank accounts. Taking into account the overall ground realities in the islands, systematic and concerted efforts may be made to persuade the uncovered households to come into the banking fold through a campaign of education and counselling. Financial education can play a meaningful role for the people of the islands by making them aware of the benefits of linkage with the banking system, and of economic development and progress.
  • Given the constraints in transport of cash and coins, air lifting of currency and coins may be considered once all the islands are connected through helicopter services.
  • Since the facility of ECS cannot be extended to the islands on account of there being no clearing house, all the networked branches in the islands should be made RTGS and NEFT-enabled (both for receiving and sending) to bring the benefits of electronic payment and settlement system to the islanders.
  • Till such time when all the branches are brought under Core Banking Solution (CBS), taking into account the volume of instruments, Syndicate Bank may introduce a system of weekly or, if required, more frequent settlement of their intra-bank instruments drawn on the branches in different islands at Kavaratti by bringing here cheques from all the islands.
  • For promoting formation of SHGs and Micro Credit, banks and the Government departments may take initiatives to promote more SHGs by making use of the services of NGOs as business facilitators and link them to the banks for their credit requirement.
  • Banks and NABARD can contribute in the areas of capacity building by organising training programmes and setting up of RUDSETI model of training institutes for promoting self employment opportunities. Syndicate Bank, having larger presence in the islands, should take necessary initiative in this regard.
  • Banks and Department of Industries have to take initiatives to organize awareness programme on PMRY / SGSY / Micro Credit / DRI which will encourage unemployed youth/women to start new business enterprises.
  • Though majority of the population is engaged in agricultural activity all the eligible farmers are not covered under KCCs. Department of Agriculture has to identify all the eligible farmers as well as the farmers who have not been issued KCCs and furnish the list of such farmers to banks so as to cover all eligible farmers under KCCs.
  • Bankers may initiate proactive steps for providing adequate working capital for the traditional fishermen engaged in the Skipjack-Masmin sector to free them from dependence of middlemen.
  • NABARD could adopt a more focussed approach for the development of infrastructure in the islands especially under RIDF schemes.
  • SIDBI, whose regional office is in Kochi, may explore the feasibility of adopting a focussed approach for expanding the outreach and penetration of credit services for development of environment friendly industries.

Recommendations for overall development of Lakshadweep

  • A comprehensive policy for development of fisheries, tourism and establishment of eco-friendly industries may be evolved for a systematic development of these sectors.
  • The feasibility of utilizing the available vacant lands for constructing cold storages for fish processing, cottages for tourists, sheds for promoting eco-friendly industrial clusters for producing value added products relating to coconut and fish, installing Wind Mills may be explored.
  • Active promotion of high value agriculture, vegetable cultivation, product diversification and value added products of coconut and tuna fish with proper market linkages both for mainland and export markets is required.
  • To harness the full potential of coir in the islands, establishment of Integrated coir units in Chetlath, Androth and in other islands may be considered. A Special Purpose Vehicle (SPV) may be constituted under Public Private Partnership (PPP) model for establishing Integrated coir industry in the Islands with tie-up with a chain of departmental stores in main land for marketing. The “Sivaganga Model of Tamilnadu” which has become a great success story of coir industry, could be experimented in the UTL also.
  • Modern techniques for increasing tuna fish catch like, deep sea fishing, mother and collector vessels, mechanised boats etc., may be implemented.
  • Under PPP model, an Export Oriented Unit (EOU) for tuna fish may be set up in the mainland for fish processing, product diversification and export to foreign countries with the help of Marine Products Export Development Authority (MPEDA) and Central Institute of Fisheries Technology (CIFT).
  • An Ocean Development Authority on the lines of the Island Development Authority may be set up to give focussed attention to the task of efficient exploitation of the economic wealth lying within the territorial waters and the Exclusive Economic Zone of the islands.
  • All the islands and mainland (Kochi) may be connected better for tourist travel. Easy mobility from mainland and among the islands will act as a facilitator for several developmental efforts and initiatives.

A comprehensive Toruism Policy may be evolved considering the following:

  • More number of ships may be introduced between the mainland and the islands.
  • More number of motor boats for travel between the islands may be introduced.
  • More uninhabited islands may be opened up for tourism and infrastructure may be created, particularly with regard to lodging, boarding and recreational facilities.
  • Facilities for Coral View from glass bottom boats, SCUBA diving, “Sea walking” in the selected areas of the lagoons may be systematically encouraged.
  • Unique souvenir items pertaining to the islands with local craftsmanship should be encouraged to be produced in adequate scale to meet the demands of the tourists. This can be done without disturbing the 'no industry' character/status of the islands. Since waste disposal is a problem in the islands because of its fragile eco system, waste recyclable items can be used as raw materials for locally crafted souvenir items for the tourists.
  • Development of aqua sports facilities in Kadamat and Minicoy, development of beach resorts in Bangaram and Androit, promotion of fun and entertainment devices in Cheriyam on the lines of Sentosa islands of Singapore are some of the suggestions for promoting tourism. Bangaram is a place which can be developed on the lines of the Boracai islands of Philippines. The concept of "back to nature" should be the theme of developing tourism to attract people from outside.
  • Keeping in view the fragile ecosystem of the islands, cruise-based tourism, where the people spend the day in the island and retire to the ship in the night, may also be considered as an appropriate model for all the islands.
  • For the benefit of the tourists arriving in the islands, foreign exchange facilities may be made available at Agatti airport by opening a money changing counter.
  • Tourist transport system may be developed and strengthened by acquiring exclusive luxury cruise ships.



The entire group of islands is considered as one district for lead bank purposes. Syndicate Bank is the lead bank and convenor of the Union Territory of Lakshadweep Bankers’ Committee. Syndicate Bank has opened its first branch at Kavaratti in 1971 and is operating throughout the UTL with nine branches in nine major islands. State Bank of India opened its first branch in April 2005 at

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