The Hindu : Kerala News : NABARD imposes curbs on loan refinancing

Online edition of India's National Newspaper
Saturday, Sep 29, 2007
ePaper

Kerala

Kerala

NABARD imposes curbs on loan refinancing

N.J. Nair

Steep rise in KSCB NPAs

Small, marginal farmers will be affected
Indiscreet sanction of loans triggered crisis

THIRUVANANTHAPURAM: The National Bank for Agriculture and Rural Development (NABARD) is understood to have imposed curbs on refinancing loans given by the Kerala State Cooperative Bank (KSCB) due to its alarming rise in non-performing assets.

While the NPAs of the KSCB have shot up to an unprecedented level of 26 per cent – Rs.504 crore – the loss has risen from Rs.2.59 crore in 2005-06 to Rs. 29 crore in 2006-07.

The commercial banks exercise excessive caution to contain the NPAs to a maximum limit of five per cent. In this context, the steep rise of NPAs in the KSCB is inexplicable, sources said.

The restrictions on refinancing the loans are feared to upset the disbursal of agriculture loans, whose main beneficiaries are the small and marginal farmers. Indiscreet sanctioning of loans to individuals and institutions during the tenure of the previous director board is being pointed out as the main reason for the dilemma faced by the bank.

Any control on refinancing will force the bank to jack up the lending rates.

The small and marginal farmers in the State, especially those in Palakkad, Wayanad, Idukki and Malappuram, are likely to be affected by such restrictions.

If the KSCB is forced to put a ceiling on agriculture loans, the farmers will be forced to rely on indigenous moneylenders. The scheduled status accorded to the bank by the Reserve Bank of India (RBI) for its trail-blazing achievements in the cooperative sector, is also facing a threat of withdrawal.

As majority of the loans were sanctioned by the previous board without securing adequate documents and mostly in violation of the rules of the bank, the earnest endeavours of the present director board to recover the NPAs and mop up the loss by invoking the provisions of the Securitisation Act, are not attaining fruition as expected. If these steps fail to have the desired result, the loss would again mount to Rs.50 crore, sources said.

The bank has already taken disciplinary action against officials responsible for sanctioning loans in an arbitrary manner.

Printer friendly page
Send this article to Friends by E-Mail

Kerala