Banks want longer repayment tenure for Kisan Credit Card loans

There were also deliberations on allowing farmers to take fresh loans even if they fail to repay exsiting ones, as long as they service the interest

In view of significant stress in the agriculture sector, bankers have suggested enhancing the repayment cycle of loans under KCC (Kisan Credit Card) from 12 months to 36 or 48 months at the state level bankers’ consultancy meet in West Bengal. Further, there were also deliberations on allowing farmers to take fresh loans even if they fail to repay earlier ones, as long as they service the interest.

Based on the direction from the Department of Financial Services, public sector banks started a three-stage consultation process last week, with focus on nine issues, including digital banking, credit to MSME and agriculture sectors, direct transfer of benefits, education loans, among other issues. While last week was a intra-bank meet, this week banks are doing interbank meetings at the state level  to discuss the key issues that transpired at the branch level meeting.

The final set of suggestions from all the meetings will be sent to government, which will meet banks in the first week of September.  

“Stress in the agriculture sector is touching double digits and is it’s a phenomenon visible across the banking sector. Bankers are really concerned about the issue,” said Ashok Kumar Pradhan, managing director and chief executive of United Bank of India at a press meet on the state level bankers’ meet in Kolkata today.

There were also suggestions to have agriculture credit guarantee scheme, and a stronger institutional network to prevent multiple lending in the agriculture sector. Some of the suggestions at the branch level also included the need to press the government for digitization of land records, failing which there were instances of multiple borrowing.  

Last week at the branch level meet, Rajnish Kumar, chairman, State Bank of India, too had stressed the need to revamp agriculture and MSME (Micro, Small and Medium Enterprise) lending practices, given the high stress in the sectors.

Bankers have also suggested the need to have a credit guarantee mechanism for The Pradhan Mantri Mudra Yojana (PMMY), the government's flagship credit scheme for micro and small enterprises, and source another big chunk of NPA for banks.

Among other suggestions, the need for cyber security to promote digital transactions was also discussed. According to Pradhan, the bank would suggest the government the need to have an umbrella organization in the banking and financial services sector to protect against cyber frauds in the sector. Banks could pool funds for the organization to address the cyber security concerns, said Pradhan.

The falling share of public sector banks in the banking industry was also cause of worry for banks, he said. The share of public sector banks in the banking industry has come down from around 75 per cent four years back to nearly 67 per cent at present, with non banking finance companies cornering a large share, he said.