Govt banks may have to provide for Rs 25,000 cr in pending farm loans

Public sector banks (PSBs) may have to deal with higher provisioning on a total outstanding amount of around Rs 25,000 crore under the farmers’ debt relief scheme.

Farmers were supposed to pay the first two installments of their loans by 31 March, 2009. But according to bank officials, the response has been very poor, particularly on account of election manifestoes of different political parties, which have been luring farmers with promises of another debt waiver.

Earlier, in September 2008, the government had extended the repayment date by six months under the farm loan waiver scheme as per a request from bankers. That was because farmers, who were struggling to make their repayments, pleaded for rescheduling their loan packages as the initial repayment schedule clashed with the new crop cycle.
 

DEBT WOES

* Farmers were supposed to pay the first two instalments of their loans by 31 March, 2009

* According to bank officials, the response has been very poor

* In September 2008, the government had extended the repayment date by six months under the farm loan waiver scheme

However, with general elections round the corner now, there is little chance of the government coming to the rescue of the banks again. According to data, the total outstanding debt to nearly 60,00,000 farmers who own more than 5 acres of land stood at Rs 32,000 crore at the end of December. Prudential rules require banks to declare farm accounts as non-performing assets (NPAs) if the dues aren’t paid by the first instalment date.

“The government had decided to extend the repayment tenure in August-September as it was an investment season for farmers. So the accounts were updated as standard assets, instead of providing for it. But, this time, there is little chance of extension and hence banks will have to provide for any amount which is due,” said an official with the National Bank for Agriculture and Rural Development (Nabard).

For Bank of India, the number of accounts under the scheme stood at 85,000, amounting to around Rs 888 crore. “More than half of the dues are yet to be paid. As per standard norms, there is one month grace period till April 30. After that, if the situation does not improve, we have to provide for the dues,” said an executive at the bank.

Similarly, Union Bank has 82,500 accounts under the debt relief scheme with a total exposure of Rs 900 crore. “So far, we have recovered around Rs 300 crore of the amount,” said an executive at the bank.

But the experience seems to be better in the case of the country’s largest lender. When contacted, a State Bank of India (SBI) official said that 70 per cent of the account holders gave consent letters to the bank regarding clearance of their outstanding dues, which was necessary for availing further loans.

“Of the 7 lakh accounts under the debt relief scheme amounting to Rs 5,200 crore, 2 lakh farmers have already paid 75 per cent of their dues. So the response has been satisfactory,” he said. The official, however, refused to divulge further details regarding the status of the remaining 5 lakh accounts.

Under the revised plan, farmers were required to pay the first instalment of their loan in March 2009 as against the earlier deadline of September 2008, along with the second instalment.

In February 2008, the then Finance Minister P Chidambaram announced a Rs 60,000-crore wavier and relief package for farmers. As a part of the plan, farmers who owned land of 5 acres and above in size were required to settle only 75 per cent of their outstanding amounts, with the government waiving off the remaining 25 per cent, or Rs 20,000, whichever was higher.

The first instalment was to be paid in September last year, the second in March 2009, and the last in June 2009.