About 25-30 per cent of working-capital loans potato farmers and traders took may become non-performing assets (NPA) this year, as the crash in tuber prices has made repayments difficult across the country.
Cold-storage associations — which act as intermediaries between banks and borrowers — have already been urging for restructuring of loans. However, senior bank officials said restructuring would be difficult without special dispensation from the Reserve Bank of India.
Though official confirmation on the total loans is not available, cold-storage associations estimate disbursal of Rs 800-900 crore in West Bengal alone. Estimates for Uttar Pradesh — the largest potato grower — are not available. “We have written to the State Government and the State-level bankers' committee (SLBC) to convert the outstanding into interest-free term loan for a period of five years,” said Mr Patit Paban De, member, West Bengal Cold Storage Association.
Banking sources, however, said that the sector has already witnessed such restructuring in 2008-09. “Since that restructuring is still in vogue, a second round of restructuring will render the account NPA,” a senior bank official said.
A working capital loan is extended to a farmer or trader against his warehouse receipts at a predetermined ceiling price fixed usually by the SLBC.
Cold-storage stocks
The repayment problem cropped up as farmers and traders refused to release stock from cold storages after prices crashed.
Close to 25 per cent of the 1 crore tonnes of potatoes kept in cold storages in UP has not been able to find its way out till so far, said Mr Mahendra Swarup, president, Federation of All-India Cold Storage Associations.
In West Bengal, close to 5 per cent of the stock still lies in storage houses. “At the time of loading, the average price was hovering around Rs 460 a quintal. However, post September prices started spiralling down and now the bond price (price excluding all expenses) has crashed to nearly zero. So most farmers have not been removing stock from cold storages and are unable to repay the loans,” Mr De said.
West Bengal has decided to set up a committee involving all stakeholders — banks, producers, warehouse units and the Government — to look into the issue.
The SLBC also plans to convene a special sub-committee meeting on January 12 to take stock of the situation, said a senior official at United Bank of India, the SLBC convenor in the State.