Lend more to farm sector, FM tells banks

Finance Minister P Chidambaram said the government wanted banks to increase lending to farmers since non-performing assets were low in the agriculture sector.

Replying to supplementary questions in the Lok Sabha, he also made it clear that the central government would not bail out all failed co-operative banks.

On agriculture lending, he said though it is the Reserve Bank of India (RBI) which laid down classifications for lending by banks, the government was encouraging banks to lend more to farmers. "Agriculture is a commercially advantageous sector for banks," he said.

When his attention was drawn to the lack of enough infrastructure with the debt recovery tribunal, he said the government would empower more categories of officers as recovery officers.

He said the fact that both net and gross non-performing assets of banks have been coming down showed that the banks were taking steps to recover loans. "Each bank has been advised to have a recovery policy," Chidambaram said.

He also said a 1:1 deposit-credit ratio was not possible in a large country like India, especially since economic activity needed to be stimulated.

The Finance Minister said loans were written off as a last resort by banks when all efforts to recover them failed or as part of a settlement with the borrowers.

"This technical write-off of bad loans from the books of head offices helps banks in availing tax benefits. However, loans continue to remain outstanding in the books of branches and are pursued for recovery."

Chidambaram said a total of 10,340 suits have been filed by all the banks, including private and foreign banks, for recovering amounts totalling Rs 62,427.44 crore as on March, 2004. Of these, nationalised banks, including the State Bank of India, and its associate banks, have filed 6813 suits for amounts totalling Rs 39,105.32 crore.