Indian banks can weather impact of drought: RBI

The Reserve Bank of India on Tuesday said Indian lenders are resilient enough to weather the pressure on farm loans caused by drought like situation because of deficient monsoon.

“Whenever there is drought, there is a pressure (on farm loans). But we have sufficient rehabilitation measures so that banks can weather it out,” RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of function here.

Indian banking system, he added, “has enough resilience (and) will be able to face the stress”.

Finance Minister P Chidambaram had said the government will converge the (Mahatma Gandhi National Rural Employment Guarantee Act) and other schemes to meet the challenges of drought-like situation in several states and enhance imports of commodities in short-supply to control price rise. He said the contingency plans are in place to help farmers replant alternate crops as well as supply drinking water and fodder.

Monsoon is the life-line of the agriculture sector as only 40 per cent of the cultivable area is irrigated. Rain has been 20 per cent lower during June-July, affecting kharif crops mainly coarse cereals and pulses. Karnataka, Gujarat, Maharashtra and Rajasthan are facing drought-like situations. Last week, Empowered Group of Ministers (EGoM) on drought had approved diesel subsidy of 50 per cent to farmers for saving standing crops, and a Rs 2,000 crore package for states affected by drought-like situation.

Earlier, speaking at the conference organised by Sa-Dhan, Chakrabarty said financial inclusion will require well functioning and efficient financial markets. He said to achieve financial inclusion, there is a need for provision of full range of financial services, credit, deposit, remittance as well as pensions and insurance and also reaching out to the remote markets.