SBI feels the heat as bird flu hits Navapur

The impact of bird flu is going to be felt by banks who have extended credit to the poultry industry in Navapur. The exposure of financial institutions is around Rs 3 crore with the State Bank of India (SBI) having the highest exposure of around Rs 1 crore.

Speaking to Business Standard, a senior SBI official said, "As per the Nabard guidelines, we extend a loan of Rs 11 per bird to poultry farmers for purchasing birds and also provide cash-credit to farmers who have more than 10,000 birds for buying feed, medicines etc and to meet other day-to-day expenses."

The official further said, "We not only fear payment defaults by farmers, but it will also affect our savings account and term-deposit business. Though banks are not much worried about the losses as sooner or later they will get money from insurance, the local economy is going to be hurt seriously. Nearly 5,000-6,000 workers of the poultry industry will be the most hurt."

He further said the state government has banned local poultry industry from undertaking any fresh initiative for three months. This means after three months, when these farmers buy new birds and start raising them, the first egg they will get from new birds is still 20 weeks away. In nutshell, we don't expect any repayment of Equated monthly instalments for at least one year or so, he added.

"We are considering various options such as putting moratorium on EMI payments, converting cash credits into term loans etc to bail out the local industry," he said.

However, on the question of giving fresh loans to poultry farmers, he said, "Since the case of bird flu has been proven in the area, a decision on providing fresh loans will be taken only after we receive fresh guidelines from RBI and Nabard. The decision on fresh loans will be taken by the top management of the bank."