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| State co-op banks may end up with higher NPAs |
| Namrata Acharya / Kolkata Apr 15, 2009, 00:37 IST |
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State co-operative banks (SCBs) are likely to be burdened with higher non-performing assets (NPAs) for the financial years 2008-09 and 2009-10, with the recovery rate expected to be lowest among the rural banking institutions.
According to P Mohanaih, chief general manager, National Bank for Agriculture and Rural Development (Nabard), West Bengal, several SCBs had seen their recovery rate go below 20 per cent in 2007-08 itself.
A senior Nabard official says the SCBs expect an adverse impact of the farm debt waiver to be reflected in their books for 2008-09 also. According to rough estimates, they might see a further 20 per cent drop in recovery across some states.
The fall is in anticipation of another debt waiver scheme for farmers, something that many political parties have promised ahead of the elections.
A large part of the written-off accounts last year were on account of the farm waiver scheme. But, while co-operative banks had not received full assistance under the debt waiver scheme from the government, they were required to treat all the NPA accounts as standard, said B Subrahmanyam, MD, National Federation of State Co-operative Banks.
“Future recoveries are expected to be affected drastically due to promises of debt waiver by almost all the political parties,” Subrahmanyam said. While the overall recovery for almost all the SCBs fell from about 86 per cent to 83 per cent between June 2007 and June 2008, the fall has been more drastic in some states. For example, recovery in Maharashtra fell from 73 per cent between June 2006 and June 2007 to 57 per cent a year later.
But primary agriculture credit societies (PACS) have fared extremely poor in terms of actual recoveries. The co-operative sector has been the worst affected due to the debt waiver scheme, as it directly lends to PACS and does not have the support of commercial banks, unlike the regional rural banks.
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