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Our Bureau

Mr Michael Bastian, Convenor - State Level Bankers' Committee and CMD, Syndicate Bank (left), and Mr Srinivasa Gowda, Minister for Agriculture, Karnataka Government (right), at a special meet in Bangalore on Friday. Also seen are Mr M.S. Kapur, CMD, Vijaya Bank (extreme right), and Mr B.B. Mohanty, Chief General Manager, Nabard. — G.R.N. Somashekar

Bangalore , July 16

CREDIT offtake of most banks is expected to increase with bankers preparing for large rescheduling of farm loans for the current financial year.

The rescheduling of loans would allow farm borrowers an extension in repayment with revised terms. At the same time, bankers were also simultaneously carrying out a restructuring exercise to alleviate the debt burden on the farm sector.

The restructuring implied that rescheduled farm loans would not have any penal interest rates. Instead, on a merit basis, interest charges on some of the loans would be pegged to the current rates. This would bring down the borrowing costs considerably.

Speaking at the State Level Bankers' Committee meeting here on Friday, Mr Michael Bastian, Chairman and Managing Director of Syndicate Bank, said that over and above the rescheduling, farmers would also be extended fresh credits to meet their needs for the current financial year.

Senior level executives from other banks also attended the meeting. The SLBC meeting was represented by Mr M.S. Kapur, Chairman and Managing Director of Vijaya Bank; Mr Kanta Kumar, Executive Director, Canara Bank; the National Agriculture Bank for Rural Development, ING-Vysya Bank, and almost all the public sector banks.

This is also the first time that ING-Vysya Bank is attending the meeting, indicating the increasing interest of private sector banks in the farm sector. The meetings have increasingly become forums for hard selling farm credit, top banking officials said.

Bankers were keen on pushing up farm credit, in view of the low delinquency rates in the sector, unlike in the industrial sector. Farm loan recoveries even during crop failures have remained high, say as high as 80 per cent. Besides, spreads on farm credits were also in the region of about 5 per cent over the weighted average cost of working funds. Consequently, bankers were prepared to raise exposure to the farm sector, they added.

According to the special agriculture credit plan (SACP) prepared by the Indian Banks' Association, farm credit disbursements are projected to rise by at least 30 per cent or about Rs 1,04,500 crore this year.

Commercial banks alone were expected to contribute about Rs 57,000 crore this year. This is also expected to include, the rescheduled/ restructured loans.

Karnataka has already made out a case for additional restructuring of loans and for fresh credit. The Karnataka Minister for Agriculture, Mr Srinivasa Gowda, who attended the meeting, said that the three-year long drought had ended and rains so far in all the areas were above normal.

Consequently, sowing this year was taken up in about 61 lakh hectares as against 40 lakh hectares last year.

He sought additional support from bankers by way of crop loans for the farm sector.

More Stories on : Credit Market | Farm credit

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