For agricultural loans, bankers call for longer repayment period

In view of the significant stress in the agriculture sector, bankers at the state-level consultancy meet in Kolkata have called for longer repayment periods for loans under Kisan Credit Card (KCC) from 12 months to 36 or 48 months. 

There were also deliberations on allowing farmers to take fresh loans even if they fail to repay the entire loan, as long as they service the interest. 

Based on direction from the department of financial services, public sector banks started a three-stage consultation process last week. 

They focused on nine issues, including digital banking, credit to micro, small and medium enterprises (MSMEs), and agriculture sectors, direct transfer of benefits as well as education loans, among other issues. 

This month has seen intra-bank as well as inter-bank meetings to discuss key issues. The final set of suggestions from all the meetings will be sent to the Centre, which will organise a meeting with banks in the first week of September.  

“Stress in the agriculture sector is touching double digits and is a phenomenon visible across the banking sector. Bankers are really concerned about the issue,” said Ashok Kumar Pradhan, managing director and chief executive officer (MD & CEO) of United Bank of India, at a press meet in Kolkata last week.

There were also suggestions to have an agriculture credit guarantee scheme, and a stronger institutional network to prevent multiple lending in the agriculture sector.

Some of the suggestions at the branch level also included the need to press the government for digitisation of land records, failing which there had been instances of multiple borrowings.

At the branch-level meet, Rajnish Kumar, chairman, State Bank of India, too, stressed the need to revamp agriculture and MSME lending practices, given the high stress in these sectors.

Bankers have also suggested the need to have a credit guarantee mechanism for the Pradhan Mantri Mudra Yojana (PMMY), the government’s flagship credit scheme for micro and small enterprises. It is another source for a big chunk of the non-performing assets or NPAs.

Among other suggestions, the need for cyber security to promote digital transactions was also discussed. According to Pradhan, the bank would suggest to the government the need to have an umbrella organisation in the sector for protection against cyber frauds. Banks could pool in funds for an organisation to address cyber security concerns, said Pradhan.

The falling share of business of public sector banks in the banking industry was also a cause of worry for banks, he said. 

The share of public sector banks in the banking industry has come down from around 75 per cent four years ago to nearly 67 per cent now, with non-banking finance companies cornering a large chunk, he said.