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Kharif loan disbursals have hardly taken off in Andhra Pradesh even after sowing is complete in almost one-third of the crop area owing to the continued stand-off over repayment of the previous loans.
“The credit cycle has come to a complete halt because farmers are not even willing to pay interest on loans and this gesture does not make them eligible for fresh credit. They are not repaying fearing they could miss the opportunity of loan waiver,” a senior official of Syndicate Bank told Business Standard.
A few other bankers and government officials tracking the ground situation said recovery was hardly around 5 per cent of the total demand while new loan disbursals were also at a minimum since fresh loans could be given to only those who have either repaid the old loan or to a fresh borrower.
According to Anil Chandra Punetha, principal secretary - agriculture, AP government, sowing in the ongoing kharif season has been completed in 1.4 million acres of a total crop area of around 4.5 million acres due to the delayed monsoon. “If the rains continue like this we may complete sowing across the rest of the area in the next fortnight,” he said. On the status of farm loan disbursals, he said the delay in loan reschedulement was hampering the credit flow to the agriculture sector.
Leaving aside the uncertainty over the loan restructuring issue, lack of clarity at the ground level on who is eligible for the loan waiver scheme is also affecting recovery and credit operations.
“The committee constituted by the government had already framed the guidelines prescribing the eligibility criteria for the beneficiaries of the loan waiver scheme. However, these guidelines have neither been circulated to the banks till date nor the borrowers have been told about this in clear terms,” a former banker said.
Until the government identifies the beneficiaries and non-beneficiaries, it would be very difficult to motivate farmers to start repaying. The government has, however, maintained those who repay loans would also be compensated under the loan waiver scheme, according to the bankers.
A senior government official said the government had commissioned for a special software for identifying the family-wise borrowers list so as to enforce the cap of Rs 1.5 lakh per family. “But it would take at least one month to make this tool ready,” he added. According to him, it was not possible for banks to achieve the farm credit targets in the present kharif season.
On the other hand, banks will have to face a sudden spike in NPA levels on account of the added overdues of last year and will have to reverse the interest income that was booked on these loans, bank officials said.
“According to the norms, even if someone repays Rs 99 out of a Rs 100 loan overdue, the entire loan amount will be treated as NPA because of the remaining Re 1. Therefore, the governments will have to work with the RBI to sort out the issue without making it a bigger mess,” a bank official said.
While the commercial banks are sound enough to bring fresh money into circulation even in the face of a near zero recovery on this front, regional rural banks (RRBs) and co-operatives, which had lent around Rs 12,000 crore to the farm sector, have no hope of functioning without an external assistance, the officials said.
While there are over Rs 1 lakh crore in agriculture loan overdues in AP, the government had decided to repay as much as Rs 42,000-plus crore under the loan waiver programme. However, it is yet to announce a clear plan regarding its implementation.
Naidu speaks to RBI governor
Andhra Pradesh chief minister N Chandrababu Naidu on Thursday today spoke with Reserve Bank of India (RBI) Governor Raghuram Rajan in the light of the banking regulator's reservations over restructuring farm loans in AP. According to an official release, the chief minister forcefully presented the case of distressed Andhra farmers while reiterating his request for a loan reschedulement. Following the conversation, the RBI governor has suggested to the state government to send a team of officials to discuss the issue with his executive director, the statement stated.
