Public sector banks are worried about increasing Gross NPA’S under farm loans. The Gross NPA’S of such banks for the quarter ending March 2013 were 5.25% of total farm loans advanced. Such figures went up to 6.05% for the quarter ending Dec.2014. In the month of March /April 2015, unseasonal rains and hail storms had effected crops in 18.9 million hectares in the country and as a result union Agriculture Minister had announced on 27th April 2015 that Government has deferred farm loan recovery for one year. The crop loans given to farmer are being converted in medium term loans and repayment schedule is decided keeping in view old track record and income generation. However a farmer would get fresh crop loan in the current year.
Above figures of Gross NPA’S for the quarter ending March 15 and June 15 would increase further adding worries of public sector banks. Cooperative banks whose major loan goes towards Crop loans would be badly hit by this postponement of recovery for one year as their Gross NPA’S would increase considerably.
Public sector banks as well as cooperative banks fear that at times, Government announces loan waiver in such conditions which badly effects recovery climate. Those who are in a position to pay also take benefit of Government announcements.
Due to slowdown in economy, banks are facing similar problem of NPA’S in corporate sector also. In a recently held meeting at RBI headquarters, outstanding bank credit of Rs 3.51 lakh crores in 85 large projects was discussed.
RBI, NABARD Finance Ministry and Public Sector Banks have to evolve suitable strategy to bring out banks from this critical situation.
BK Jain, Dean MBA
