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Thursday, Apr 25, 2002

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Coffee loans to be fully rescheduled -- Consolidated special term loan proposed

C. Shivkumar


THE outstanding loans of the coffee plantation industry are to be completely rescheduled and consolidated into a single special coffee term loan (SCTL) 2002. This move is a part of a broad package being taken in a bid to support beleaguered planters.

The relief package has been recommended by the working group headed by Mr M.S. Kapur, Executive Director of the public sector Syndicate Bank. This working group was set up by the Reserve Bank of India (RBI) to assess and provide solutions to the coffee industry, which has been reeling under the impact of a continuous international price falls. The group members included the chairman of the Coffee Board, public sector banks and the National Bank for Agriculture and Rural Development (Nabard).

Sources said here that the consolidation would include, short, medium and long term loans availed by coffee planters. SCTL will have a maximum repayment period of 9 years and is in line with the recommendations of the working group.

The rephased loans will also have a moratorium on repayment for two years. The moratorium though would be applicable only to the principal portion, the sources added. Interest servicing will have to be done by the planters during the rephased period.

Bankers have also agreed to reduce the lending rates by one per cent on this consolidated loan. However, this reduction would not be lower than the current prime lending rate, which ranges from 10.5-11 per cent among the public sector banks. But past loans by the coffee planters have been accessed at rates as high as 14 per cent.

The sources added during the moratorium, the international markets would also be closely watched. Accordingly the moratorium would be reviewed. But bankers have indicated that the cost of any subsidies to provide any further relief would have to be incurred either by the Coffee Board or by the Government of India. Further the sources said that the banks were willing to consider a fresh crop loans to the sector, after the completion of the consolidation.

But in providing this relief package bankers have also chosen to be firm. Loans to planters already classified as non-performing assets have been precluded from the relief package. Further, the sources said the growers would have to repay at least 75 per cent of the loans availed during the last financial year, 2001-02. Only the balance of 25 per cent would be consolidated into SCTL 2002, the sources added.

The purpose behind these conditions was to ensure that only those coffee growers who have been consistent in their debt servicing benefit from the relief package. Further the sources said such steps would also ensure that quality of loan assets to the coffee plantation industry was still within the standard category.

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