Agri NPAs: SBI says it should do a better job at recovery

With agriculture emerging as the most stressed segment for State Bank of India, SBI chief financial officer Diwakar Gupta today said the country's largest lender needs to do a "better job" of collecting dues from the farm sector.

"I think we need to do a better job on collecting from the agriculture sector. May be some of it would come back if we were doing it more effectively," Gupta said at an investor conference, organised here by financial services firm India Infoline here.

In the quarterly earnings announced on Monday, the bank had said that the gross non-performing assets (NPA) ratio for agriculture stood at 9.45% as against an overall 4.61%. Along with agri-lending, aviation loans to Kingfisher, the bank's provisioning rose 87%.

Agriculture accounts for 12% of the bank's book as of the December quarter.

Gupta said that a lot of the problems in agriculture are structural like lack of right linkages and storage facilities among other things.

However, he also pointed out that there are "moral" issues at play with some borrowers showing reluctance to pay in spite of their ability to pay.

"A lot of anecdotal feedback we get from the ground is that there is a reluctance to pay, apart from inability to pay," he said.

It can be noted that after the massive farm loan waiver in 2003 by the Centre amounting to nearly Rs 60,000 crore, many banks have been reporting that farmers are not reluctant to pay up expecting periodic bailout by the government.

Gupta did concede, however, that from the recoveries perspective agricultural segment, with its small ticket sizes, is difficult for banks.

SBI has nearly 53 lakh accounts and the average size of a loan is Rs 62,000, he said.

"The short-term challenge for banks internally is to ensure that their systems and processes allow for adequate micro-tracking and follow-up on the smaller accounts on unsecured retail, on agriculture, on the small and micro in the SME segment," he said.