State Bank of India will give loans to farmers after all (Roundup)

May 21st, 2008 - 7:59 pm ICT by admin  

Mumbai, May 21 (IANS) The country’s largest public sector bank State Bank of India (SBI) Wednesday retracted its earlier decision not to give loans to farmers and apologised for the original decision. In a terse statement here, the SBI said that it had “withdrawn” the controversial circular dated May 16. The move had led to an outcry from farmers’ groups and politicians.

“We regret that our circular concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect,” a note from the SBI chairman’s office said.

The May 16 circular had said SBI was going to impose a temporary freeze on equipment loans to farmers, apparently due to increasing defaults by farmers when it came to repayment.

The SBI is the largest player in the tractor and farm financing business. Its total farm sector advances are around Rs.430 billion (Rs. 43,000 cr).

SBI deputy managing director Anup Bannerjee told IANS that of the bank’s total agri-products portfolio, Rs.70 billion (Rs.7,000 cr) was for tractors and farm equipment.

“Of this Rs.70 billion, around Rs.12 billion (Rs.1200 crore) or roughly 15 percent have been non-performing assets (NPAs). Our multi-pronged efforts over the past more than two years has been to control this NPA,” Bannerjee explained. NPA is bankers’ euphemism for bad loans.

Bannerjee pointed out that though the tractors and farm equipment segment was lucrative, it was also the most vulnerable in view of the inherent risks in the agriculture sector.

“However, our intentions have been misunderstood and we unilaterally decided to withdraw the circular,” Bannerjee said. He declined to comment on how this affected the bank’s image.

Parliamentary Affairs and Overseas Indian Affairs Minister Vayalar Ravi had Tuesday taken strong exception to the state-owned SBI’s decision not to extend loans to farmers for buying tractors and other agricultural equipment.

“It is unfair, and raises suspicion as the decision comes on the eve of assembly polls in Karnataka,” Ravi had told IANS. He had sought some control over public sector financial institutions to restrain them from taking an unilateral step.

“The government should not give full freedom to the nationalised banks, and should have some control over them. SBI’s decision to stop equipment loan to farmers for the time being is unfortunate,” Ravi had said.

He had pointed out that the bank’s move came at a time when the government was doing a lot to save farmers and support them in various ways to overcome the food crisis.

“It is not a right move, and will affect farmers. One hopes that the SBI reviews the decision as soon as possible, and withdraws the order to freeze equipment loan,” he had said a day before the SBI did just that.

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