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The Government has asked the public sector banks to gear up their branches to support farmers in the rain-deficit areas.
The Department of Financial Services in the Finance Ministry has sent a missive to this effect to the top management of public sector banks, banking industry sources said.
The local machinery — branches — will be asked to implement ‘in full measure’, if necessary, restructuring of loans in line with the RBI guidelines.
With the monsoon playing truant this year, bankers are already facing the heat on advances to the farm sector.
RAIN-DEFICIT AREAS
They fear the situation will worsen if the deficit in rains continues in the remaining monsoon period.
As the four-month monsoon season crossed the halfway mark in end July, the total rainfall deficit across the country stood at 19 per cent.
Parts of Karnataka, Maharashtra, Gujarat and Rajasthan are the worst affected, with scanty rains creating a drought-like situation.
Although, the situation is not that alarming, bankers fear the shortfall in rains, which has already hit sowing of key kharif crops in these States, will hurt the farmers’ repayment capability.
“We are already facing the heat (on farm loans) but proactive steps are being taken to protect the bank balance-sheet,” said S. L. Bansal, Chairman and Managing Director, Oriental Bank of Commerce (OBC).
In the April-June quarter, as much as Rs 231 crore of agri-advances have slipped into the non-performing asset category for OBC.
V. Kannan, Executive Director, OBC, pointed out that for drought-prone areas specified by the Government, there are already standard RBI guidelines for restructuring farm loans.
All farm advances to such areas have to be restructured and fresh advances have to be extended. They will have to be taken out of the NPA category and treated separately.
Standard guidelines
“As of now, we have not come to such a situation where large areas have been declared drought-affected and restructuring has to be done”, Kannan said.
The situation is not alarming but the fear is that it may worsen in the second quarter if the shortfall in rains persists, said an official at Syndicate Bank.
Karnataka has already declared some interior parts of the State drought-affected. It has also announced a debt waiver for loans taken from cooperative societies.
The decline in kharif acreage is the highest in Rajasthan, at 27.9 lakh hectares, followed by Gujarat at 15.7 lakh ha and Karnataka at 15.2 lakh ha. Coarse cereals, pulses and rice have seen a decline in acreage this year.
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