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CHENNAI, Feb. 6

THE State Bank of Mysore, one of the leading lenders to the coffee sector in Karnataka, has started extending assistance to those going in for vanilla cultivation as an alternative crop in coffee plantations.

This measure, according to the bank, is to help the coffee plantations that have been affected by low domestic prices to earn income from other sources. The bank sanctions both crop and term loans for vanilla cultivation, Mr M. Sitarama Murty, Managing Director, State Bank of Mysore, told a press conference here on Wednesday.

He said the bank had sanctioned about Rs 30-40 lakh for vanilla cultivation to about 50-60 borrowers.

On the coffee industry, Mr Sitarama Murty said the bank had converted all the coffee loans into term loans. One of the conditions for converting the coffee loans into term loans was that the plantations must repay 50-75 per cent of the crop loans for the current season. The balance amount and all other loans would be converted into term loans repayable over a longer period at an interest of one percentage point below the prime term loan rate, which now was 11.75 per cent.

He said the prospects for the coffee industry were improving, especially with the Brazilian coffee prospects for the coming season looking "subdued". A 40-50 per cent fall in Brazilian coffee production was expected, and this would help improve prices for the Indian coffee plantations. As it is, prices had gone up by 10-15 per cent.

The bank's exposure to the coffee sector - growing, processing and exporting - was about Rs 150 crore, which was 15-20 per cent of the total assistance to the sector in Karnataka.

Mr Sitarama Murty said the bank hoped to bring down its net non-performance assets level to 5.5 per cent by the end of this financial year from about seven per cent now. It had targeted to bring it down further to four per cent by March 2004.

He said the bank posted a net profit of Rs 35.36 crore on total income of Rs 329.76 crore for the third quarter of this year against a net profit of Rs 24.18 crore on total income of Rs 301.35 crore for the same period last year.

For the nine month period ending December 31, 2002 the bank posted a net profit of Rs 66.89 crore on total income of Rs 942.91 crore against a net profit of Rs 48.20 crore on total income of Rs 877.39 crore for the same period the previous year.

Mr Sitarama Murty said that during the third quarter, other income increased by Rs 64.39 crore of which the major component was profit from trading in securities at Rs 30.15 crore, as against Rs 15.73 crore in the corresponding period the previous year.

The State Bank of Mysore would spend Rs 50 crore in phases over two years on installing a core banking solution, which was being implemented by the State Bank of India and its associate banks.

About 14,000 branches of the State Bank of India and its associate banks would come under an integrated software solution, he said.

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