TN banks vie for agri sector lending

Providing assistance to the agricultural sector seems to be the name of the game not only for political parties but also for the banks in Tamil Nadu.

The credit for agricultural and allied activities in 2004-05 has been scaled up by nearly 250 per cent by the State Bank of India (SBI) Chennai circle, 31 per cent by the Indian Bank and 18 per cent by the Indian Overseas Bank (IOB) in the state.

"If the monsoons are more active during the current year there will definitely be an increased utilisation of agricultural credit by the farming community. We make available the agriculture machinery at competitive prices with readily available finance to the farmers," M B N Rao, chairman and managing director of Indian Bank, told Business Standard.

The failure of monsoons last year had resulted in a nearly 39 per cent fall in the SBI Chennai circle's agricultural credit. The growth of agricultural credit was just 11.65 per cent in the case of the Indian Bank while IOB's credit jumped nearly 39 per cent.

IOB had increased its credit to the agricultural and allied activities, particularly poultry and diary in Salem, Namakkal, Erode and Coimbatore districts.

IOB officials pointed out that the farmers did not go in for investment credit last year due to drought.

Indian Bank and IOB are Chennai-based banks. In the case of Indian Bank, much of its farm advances are disbursed in Tamil Nadu.

The banks have tied up with tractor companies such as Mahindra & Mahindra, TAFE and Escorts, and therefore offer agriculture equipment loans at cheaper interest rates extending for nearly 10 years.

Nabard data shows that the commercial banks have exceeded their target for crop loans of Rs 3,023.62 crore, achieving an estismated Rs 3,671.39 crore in 2003-04.

This is in direct contrast to the performance in the term loans. The commercial banks have fallen far short of their target of Rs 1,131.27 crore in term lending, managing to lend only about Rs 498.55 crore for year ended March 31, 2004.

There are three regional rural banks (RRBs) in Tamil Nadu. Indian Bank has sponsored two RRBs -- Vallalar Gramin bank and Adhiman Gramin bank. IOB-sponsored Pandian Gramin bank covers five districts with a network of 162 branches.

Abhijit Datta, chief general manager of SBI, said that the central government had declared most of the districts of Tamil Nadu as drought-prone, and therefore the failure of credit payment by farmers will not be considered as defaulted accounts.

"These will not be accounted as non-performing assets (NPAs)," he said. "If the government had not come out with such a policy measure, we would not have been able to scale up the credit to agriculture during the current year," he pointed out.

According to the RBI guidelines, banks lending to the priority sector should not be less than 40 per cent of their total advances, while the lending to agriculture and allied activities should not be less than 18 per cent.

Priority sector includes agriculture and allied activity, small scale units, small road transport operators and self-employed professionals.