The Hindu Business Line : Bankers guarded on viability of Budget proposals

WHILE bankers have generally welcomed the measures announced in the interim Budget to promote agricultural lending, some of them seem circumspect about how far these measures can be implemented.

They view these measures as stop-gap arrangements where the Government has only touched upon things with a short-term view.

One senior banker with a public sector bank said, "For example, the Finance Minister has urged banks to lend to agriculture below 9 per cent. But he hasn't specified any limits. It is perhaps possible for banks to lend below 9 per cent for loan limits up to Rs 50,000, but anything over and above that seems like it will be unviable for most banks at the moment."

Speaking to Business Line, Mr Chandan Bhattacharya, Managing Director, State Bank of India, said, "We want to encourage more credit flow to the rural and SME segments and have redesigned some of our systems to achieve this. As far as lending to the agriculture sector goes, SBI is already lending below 9 per cent in some categories of crop loans. We are also working on making the Kisan credit card ATM-compatible, and plan to introduce it shortly.

"The tea industry is going through a difficult phase right now, which is temporary and will pick up like any other economic cycle. In fact, the first signs of pick-up in demand are already visible. If the trade across western borders improves, there will be a huge pick-up." Meanwhile, some bankers seem reluctant to comply with some of the measures as they feel it will prove unviable for the banks.

"Ultimately we have to look at the viability of any project. Agriculture rates have already been slashed considerably; there is not much scope for cutting them further. The tea industry is also going through a bad phase. Russia was our biggest centre in terms of tea exports, and we are now losing our market share there to other countries. There doesn't seem to be much revival happening there either. Similarly, the sugar industry also needs some handholding and restructuring. But restructuring can be done only for viable units. So banks will have to examine the issues and then take decisions keeping their own cost of funds and risk management systems in mind," said a banker.

MANGALORE: The Chairman and Chief Executive Officer of Karnataka Bank Ltd, Mr Anantakrishna, has welcomed the interim budget proposals related to the banking sector, submitted by the Union Finance Minister, Mr Jaswant Singh, in Parliament on Tuesday.

On the proposal to cut interest rate on farm loans, he said Karnataka Bank had already done that. He welcomed the proposal to make kisan credit cards ATM-compatible. On extending fresh working capital to tea growers, he said the bank had little exposure to tea industry.

The Chairman and Managing Director of Corporation Bank, Mr Cherian Varghese, who was in Hyderabad, told Business Line over the phone that till now corporate sector and those opting for home loans were the major beneficiaries of low interest rate regime. The proposal to bring down the farm loan interest rate showed that the benefits should be equally distributed among all sectors.

The proposal to make ATMs compatible to kisan credit cardholders would increase the reach of ATMs to more number of areas, he added.

The Chairman and Managing Director of Syndicate Bank, Mr Michael Bastian, said that the bank had lowered rates on farm loans of as much as Rs 50,000 to 9 per cent. On the proposal to increase the credit limit of Laghu Udyami Credit Cards from Rs 2 lakh to Rs 10 lakh, he said Syndicate Bank was the first one to increase the credit limit in this regard.