Bankers have their fingers crossed

Every year towards May-end and early-June, farmers across the country expectantly gaze skywards even as they plough their land and sow seeds.

Not that they have any special interest in the faraway stars. Their sole interest is to look for visible signs of monsoon rain.

The country’s food security and farmers well-being hinges on monsoon. Rains also kindle hope among bankers that farmers will crowd their branches to take loans.

Given that more than half of the gross cropped area in the country is rain dependent, farmers and bankers are always on the edge. A monsoon failure will result in losses for the farmer. This, in turn, has repercussions for bankers as loan repayments will suffer. Though monsoon set in over Kerala on June 5, its progress has been hampered, resulting in large swathes of the country receiving rains with a delay of 15-20 days. This has raised the spectre of lower food production, triggering inflation and precluding the central bank from cutting interest rates to prop up a sagging economy.

However, now that monsoon has covered most parts of the country, it is hoped to bring cheer to farmers as well as bankers.

The feedback that banks are receiving from the ground level is that sowing, though delayed, is catching up with the progress of monsoon. As farmers usually buy seeds, manure, fertilisers and pesticides beforehand, there has been no slack in demand for farm loans, said a senior Union Bank of India official.

The looming El Nino condition could, however, be the surprise package this monsoon. The Weather Department has predicted that there is a substantial probability of the emergence of El Nino conditions during the latter part of the monsoon season. The El Nino could result in lower rainfall, leading to a decline in foodgrain production. There is an outside possibility of a drought occurring, which may force the Government to announce a debt waiver and debt relief scheme for farmers.

A senior Bank of Baroda official said that the real picture for banks on the agriculture loans front will emerge when it is time for making post-harvest repayments.

A senior State Bank of India official said: “It is early days to pronounce a denouement on the agriculture credit scenario. We are keeping our fingers crossed.”

Bankers, on their part, will be hoping that the credit absorptive capacity of farmers across the country improves so that the stiff farm loan disbursement target of Rs 5.75 lakh crore that the Government has set for all banks in 2012-13 can be achieved.

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