Co-op banks seek easier NPA norms

State and district cooperative banks are seeking a relaxation in loan delinquency norms from the current 90 days to 180 days, particularly for fresh farm loans of up to Rs 25,000 lent for a tenure of one year.

Cooperative banks expect a rise in non-performing assets (NPA) in farm loans as many farmers have stopped repaying in the hope that the government will announce another loan waiver scheme.

“Farmers are refusing to repay their loans, due after March 31, 2007, in anticipation of another waiver. But they fail to understand that they will not be eligible for fresh loans and, even if they repay, they will have to pay a higher interest rate of 11 per cent applicable for defaulters instead of 7 per cent normally. So, we have asked RBI to classify NPAs based on the 180-day delinquency norms instead of the existing norm of 90 days for short-term loans,” said a head of a state cooperative bank, who refused to be named.

According to an estimate of cooperative banks, in 2008-09, NPA levels could be as high as 25 per cent from the current average level of 10 per cent.

“To avoid a hit on our balance sheet due to higher provisioning, we have asked for relaxation in the NPA norms,” the source added. The total amount of crop loan disbursed through district central cooperative banks and state cooperative banks during the current financial year was estimated at Rs 7,000 crore.

When contacted, a Nabard official admitted that the recovery rate has declined. “Till February, the recovery rate was fine. But since the loan waiver scheme was announced in the Budget, many farmers have stopped repaying