Thirty-eight year old Sahu Sufi Mondal of Abhirampur village near Burdwan — approximately 90 km from Kolkata — is finding it difficult to get a fresh crop loan this year.
Having been hit by unexpectedly low returns in the last two years, Sahu failed to repay his loan of Rs 1 lakh sanctioned last year and had to take a gold loan to meet his cultivation expenses for the following season.
The tumbling of potato prices for the second year in a row, coupled with a disastrous Aman (July-October) crop, turned Sahu's account into a non-performing asset.
Banks have been witnessing a rise in defaults on agricultural loans on account of crop failures this year.
The defaults have been significantly higher in number in Andhra Pradesh, Tamil Nadu, Orissa, West Bengal and Madhya Pradesh, senior bank officials said.
Falling prices
Banks, on their part, are trying to extend gold loans to farmers to help meet cultivation expenses. “Apart from crop loans we are also giving gold loans as this provides additional security,” said Mr T. M. Bhasin, Chairman and Managing Director, Indian Bank. Close to 1.5 per cent of the bank's total agri advances have slipped into the NPA category.
According to Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, roughly 30 per cent of the default is on account of the crashing prices.
While IOB blames price fluctuations in potato, paddy and cotton as the major culprit, according to sources in State Bank of Travancore, the bank's NPAs are concentrated around the High Ranges of central and north Kerala, because of the plummeting prices of ginger and cardamom.
There have also been instances of wilful defaults by some farmers. A senior official at Corporation Bank said that rumours on the possibility of loan waivers were leading to defaults in some cases.
“Talk of an agri-debt waiver has vitiated the atmosphere,” a senior SBI official said. He, however, feels that the agri-NPAs are getting contained.
Interest subvention
The Union Government has given a three per cent interest subvention for timely repayment of crop loans. This apart, the various State governments also provide an interest subsidy, thereby bringing down the effective rate of interest on crop loans. Banks should educate the farmers on the benefits of timely repayments, said Mr S. L. Bansal, executive director, United Bank of India and chairman and managing director-designate, Oriental Bank of Commerce.
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