Banks look to govt to recover farm loans

The increased credit flow to the farm sector seems to be multiplying the woes of bankers in the face of poor recovery rate. Breaking their silence on the 'politically sensitive' issue, the state-level bankers' committee (SLBC), led by Andhra Bank, today urged the state government to appoint officials vested with necessary powers to help banks recover the loans advanced to farmers and small borrowers in rural areas.

During the past 18 months, after the Rajasekhara Reddy government took over the reins of power in the state, the single point agenda of all the SLBC meetings held has been to allow increased lending to the farm sector and achieve tough credit targets set by the government.

Responding to the request, chief minister YS Rajasekhara Reddy assured them of the required support if the bankers came out with specific proposals.

According to reliable sources, SLBC at first wanted to suggest appointment of agents for recovery of bad loans from farmers and others in rural areas. But the committee dropped the proposal as it would have apparently met with resistance from the state government. Alternatively, SLBC urged the government to set up a suitable mechanism to tackle the problem.

The crop loan disbursement in the state saw an unprecedented rise at Rs 13,300 crore for the year 2005-06 vis-a-vis Rs 7,500 crore during 2001-02. While not more than 82 per cent target was reached in credit flow to farmers till 2003-04, it touched 92 per cent during 2004-05, the first year of the Congress rule.

Further, the crop loan disbursements for the just concluded kharif season reached 100.12 per cent "� Rs 8,661 crore as compared to the targeted Rs 8,650 crore. The target achieved during kharif-2004 was 94 per cent.

According to K Ramakrishnan, CMD of Andhra Bank and president of SLBC, the total amount of agricultural advances in the state as at the end of September 2005 was Rs 23,717 crore, which consists of 31.16 per cent of the total advances. The RBI cap on these loans is 18 per cent.

Obviously, commercial banks are a worried lot as their share in total farm credit has been increasing steeply while that of the ailing co-operative banks is decreasing.

For example, during the recent kharif, co-operative banks achieved only 71.98 per cent targets by extending Rs 1,562 crore crop loans as compared to the target of Rs 2,170 crore. As a result, regional rural banks (RRBs) and commercial banks had to fill the credit gap.

Though the chief minister complimented the banks for their performance, he did not hide his unhappiness over their poor achievement with regard to term loans to the farm sector and credit tie-ups with regard to various self-employment schemes undertaken by the government.