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Aug 09, 2012, 01.48 PM IST
With monsoons giving a slip this time, banks having exposure to agriculture loans may have reasons to worry.
With monsoons giving a slip this time, banks having exposure to agriculture loans may have reasons to worry. Speaking about agricultural loans, SL Bansal, CMD at Oriental Bank of Commerce (OBC) said their exposure to the sector stands at Rs 18,000 crore.
He said assets worth Rs 231 crore from the agriculture sector have slipped so far, but ruled out the possibility of further slippages. Given the current situation, Bansal believes waivers from government may vitiate a recovery process.
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is your direct and indirect loan exposure to the farm or agricultural sector?
A: Our direct agriculture funding is up to 12.37% against the target of 13.5% and indirect funding is 3.37% against 4.5%. We will be able to achieve our mandated target level of 18% - 13.5% (direct funding) and 4.5% (indirect funding) by year end.
Q: In absolute terms, in rupees?
A: In absolute terms it comes to around Rs 18,000 crore; Rs 13,500 crore for direct agriculture and Rs 4,500 crore for indirect agriculture.
Q: Any concerns surfacing post monsoon on exposure of Rs 18,000 crore?
A: Of the total Rs 18,000-crore exposure, around Rs 8,000 crore is from crop loan. In this quarter Rs 231 crore has slipped to NPA category. A welcome change has been made by the RBI where they have mentioned that farmers need not repay 100% of the loan till they are servicing their interest and it is adequately backed by the security. i.e their produce.
Nowadays, farmers are not required to offload their entire product in the market, at times they store them in the godowns and we also lend them against warehouse receipt. So to that extent some stress in the farm sector will be taken care of.
Q: You do expect more slippages during the course of the next two quarters?
A: No. Till date, our agriculture loans under NPA category is 4.6% it may spike by another 50 bps, to 5%. Going forward if agriculture loans which is available at 3% interest are marketed well then I don't see any major default in the farm sector. In some states loan is avail at 2% because 3% interest subvention is available from central government, 1-2% subvention is available from some state governments.
The farmers need to be sensitized that these loans are the best loans which are available at 2-3%. We expect that even the awareness at the political level will also improve and we will get support from the state government so that they should not announce some ad hoc waiver for one sector or the other which ultimately vitiate the climate for recovery.
Q: Would provisioning go up in the next couple of quarters to allow for some kind of slippages because of how things have progressed with the monsoon?
A: In last seven days monsoon has progresed well and the overall deficit remains within the range of 23%. In last three-four year our will to fight for the deficit minus monsoon has also improved. Going forward bankers are well prepared to take care of these eventualities. Accounts of infrastructure and industry segment slipping into NPA category is a cause of concern for banks.
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