The Hindu : National : Circular on farm loans puts SBI in a spot

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Wednesday, May 21, 2008
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Circular on farm loans puts SBI in a spot

Ashok Dasgupta

The apparent intention was to bail out distressed farmers; last para picked out of context

NEW DELHI: A well-intentioned internal advisory circular on the issue of loans to farmers for the purchase of tractors and other farm equipment appears to have put the country’s largest lender State Bank of India (SBI) in a spot.

A scrutiny of the e-circular issued on May 16 by the Mumbai-based corporate centre of the SBI to all its branch circles reveals that an apparent intention to bail out distressed farmers has boomeranged as not only farmer associations, tractor manufacturers and political parties but also its own staff association has flayed the bank’s move to stop financing farm equipment, saying it would have a negative impact on the agriculture sector.

However, the tenor of the circular can be understood when it is read in full. Referring to the subject ‘Agri Business – Debt Waiver & OTS, NPA & overdue Tractor Accounts,’ the circular reads: “As you are aware, Hon’ble Union Finance Minister in his budget speech on 29 February, 2008 has announced the Debt Waiver & Debt Relief Schemes for distressed farmers. Our Bank has a large portfolio of tractor loan accounts with high overdues and such farmers in distress can avail benefit under these schemes.

“In this regard, branches may get in touch with tractor dealers (the loan account of the tractor sold by them has become overdue in the Bank) with a view to exploring using their good offices in educating tractor borrower to take the benefit under the Debt Relief Scheme announced by GOI (One Time Settlement Scheme) to distressed farmers, operating guidelines of which are expected shortly.

“Branches may take up the task, keeping in view Bank’s obligation in regard to maintaining the secrecy on customer account.

“Incidentally, the Bank has put on hold financing New Tractor and Farm Mechanisation activities viz. Power Tiller, Combine Harvester etc., with immediate effect in view of the very high overdues in this sub-segment of agri advances. The decision will be reviewed based on the progress achieved in reduction of overdues in due course.”

The contents of the circular makes it clear that the last paragraph was picked up out of context which evidently portrayed the SBI as “anti-farmer” whereas the motive appears to be to help the farmers while cleaning up its own NPAs.

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