The banking sector in Andhra Pradesh is facing a double whammy from mounting non-performing assets (NPAs) in the priority sector, which is affecting credit disbursement to agriculture and allied sectors, as well as in the small and micro enterprises.
While the total overdues stood at Rs 12,382.83 crore, constituting 11.98 per cent of the total loans extended, an amount of Rs 9,432 crore, or 9.12 per cent of the these overdues, have been categorised as NPAs so far this year.
As a result, loan disbursements to the agriculture sector during the Rabi 2010-11season and to other sectors such as self-help groups (SHGs) fell short of the targets.
While pointing to floods as one of the major reasons for missing the targets in the agriculture sector, R Ramachandran, chairman of the State-Level Bankers Committee (SLBC), at its meeting here on Wednesday, said the banks had lent Rs 8,050 crore with an achievement of 92 per cent under crop loans and Rs 6,314 crore with an achievement of 90 per cent as per the provisional data available on March 19, 2011.
Achievement under these two categories by December 2010 was only 70 per cent and 62 per cent respectively.
Similarly, under SHG-bank linkage scheme, which has assumed new significance as the activities of micro finance institutions (MFIs) in the state had come to a stand still, the banks could disburse only Rs 6,791 crore as against the target of Rs 8,636 crore so far. The apparent reason is that the recovery rate is still low with net overdues amounting to Rs 586 crore.
“Situation is not alarming and still under the manageable limits,” Ramachandran, who is also the chairman and managing director of Andhra Bank, told Business Standard. He said there could be a marginal impact on credit disbursements on account of the mounting overdues.
He added that the banks have been seeking the help of government to improve the recovery rate in SHG loans in the state as well.
In his address at the SLBC meeting, Ramachandran said the feedback received indicated that some of the farmers were expecting another debt waiver and were not repaying their dues. He noted that a large number of crop loans disbursed during 2007 and 2008 were still unpaid.
In agriculture sector the overdues on total advances are Rs 4,340 crore, with NPAs standing at Rs 2,101 crore which is 3.59 per cent, according to the SLBC data.
The banks have been facing yet another issue of rescheduling of agricultural loans under 680 mandals, which was announced on account of floods.
Of the Rs 11,637 crore crop loans given during kharif 2010 eligible for loan reschedulement, farmers have come forward to reschedule about Rs 777 crore loans as of the due date.
On the other hand, the state government has been asking the RBI to extend the date up to June this year. While 25 per cent of the above loans are expected to have been repaid, the payment of the remaining loans are hanging in balance.
The priority sector advances at the end of December, 2010 stood at Rs 1,46,028 crore in the state constituting 47.55 per cent of advances. Of this, agricultural advances were Rs 80,252 crore constituting 26.13 per cent of total advances.
