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Loans to National Agricultural Cooperative Marketing Federation of India (Nafed) by several state-run banks have turned bad, with banks classifying these as non-performing assets (NPAs).
The overall exposure of these banks to Nafed stands at about Rs 2,000 crore.
State Bank of India (SBI)’s exposure stands at Rs 800 crore. Since SBI’s loan was for price-support operations, this had a government guarantee. Therefore, the lender is yet to classify it as an NPA. Even if it does so, the NPA won’t attract higher provision, owing to the government guarantee.
However, loans by other lenders, which were towards commercial operations, didn’t have sovereign guarantees.
Most of these lenders have classified the loans as NPAs. In the quarter ended September, Central Bank of India’s Rs 200-crore exposure turned into an NPA. Earlier, Punjab National Bank had declared its loan, too, had turned into an NPA.
An executive of a public sector bank with exposure to Nafed said, “We have written to the government for its approval for a one-time settlement. The government will pay 60 per cent, according to the proposal.”
For 2011-12, though the cooperative earned a gross profit of Rs 45.68 crore, owing to the huge interest liability on outstanding loans, there was a net loss of Rs 188.42 crore. It had reported a turnover of Rs 1,063.28 crore for 2011-12.
Nafed is the government’s procurement agency for non-cereal crops such as cotton, oilseeds and pulses. It procures these crops from farmers when market rates fall below minimum support prices, and sells these when prices recover.
Earlier, Nafed had planned to sell bad loans worth Rs 1,800 crore to asset reconstruction companies, but the plan is yet to materialise. Its annual interest liability has exceeded its operating profit through the last few years, and, as a result, the entity is unable to service its debt.
BAD LOANS
* The overall exposure of the banks to Nafed stands at Rs 2,000 crore
* SBI’s exposure stands at Rs 800 crore
* Earlier, Nafed had planned to sell bad loans worth Rs 1,800 crore to asset reconstruction companies, but the plan is yet to materialise
