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Saturday, Oct 04, 2008
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Farm lending comes to a halt

N.J. Nair

NABARD fails to release sanctioned credit limit
Refuses to approve farm debt waiver claims

THIRUVANANTHAPURAM: With the National Bank for Agriculture and Rural Development (NABARD) refusing to release sanctioned credit limit and approve agriculture debt waiver claims submitted by the Kerala State Cooperative Bank (KSCB), the disbursal of agriculture loans from the cooperative sector has virtually come to halt in the State.

Banking sources told The Hindu here that the KSCB had submitted debt waiver and relief claims worth Rs.927.27 crore to NABARD in two instalments.

Claims worth Rs.847.93 crore were submitted on September 1 and Rs.79.34 crore on September 30, the deadline set by the government for furnishing this information. NABARD had sanctioned Rs.503.86 crore as refinance for farm loans and Rs.395.25 crore to avert a liquidity crisis but the funds had not been released yet.

Refinancing facility

Recently, NABARD had announced its intention to increase the refinancing facility to the KSCB from the current 35 per cent to 75 per cent of the actual crop loans for 2008-09.

It was specified that the level of non-performing assets of the KSCB would not be a criterion for extending the ‘instant facility’ offered on condition that the excess amount released beyond the quantum of refinance would be adjusted from the funds to be sanctioned by the Central government to the KSCB under the agriculture debt relief and debt waiver packages.

The delay in clearing the claims could force the bank into a liquidity crisis. Repayment of loans as well as the recovery rate had been badly affected since Union Finance Minister P.Chidambaram announced the debt-waiver scheme in February.

The 14 district cooperative banks and 1,602 primary cooperative banks could not register any progress in agriculture lending during the past six months. The apex bank was also forced to give up recovery measures like one-time settlement which was seen as an effective means to tide over the financial crisis. Since the level of non-performing assets is above the permissible limits, NABARD is insisting on government guarantee or securities to release funds to the KSCB. The government is unlikely to stand guarantee to funds released to the bank.

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