Banks to provide fresh data on farm loan exposure

Commercial banks and co-operative lending agencies have been asked by the finance ministry to provide the data on farm loans to help the finance ministry in finalizing the basics of the farm loan waiver scheme. The banks and co-operative lending agencies have been forced to operate at the grassroots level since the ministry wants fresh, structured data on their farm loan exposure.

Banks have now been told to remove all the extra data which they had included in the beginning while submitting farm loan exposure data for the first time in early March. For instance, now they have been advised to present only the installments overdue as on December 31, 2007, and which remained unpaid till February 29, 2008.

Almost all banks in their previous reports had presented the total NPA figures, which are, in most cases, higher than the overdue amounts. In real meaning, if a loan is to be repaid fully by September 2008 and two installments are as on December 31, 2007, then the loan becomes an NPA, but banks probably be compensated for the two unpaid installments only, not the entire NPA amount.

Apart from this when a loan becomes NPA; banks do not add interest on this. But while presenting the data on farm loan exposure, most banks had calculated the interest on the NPA amount. This time the ministry has asked banks to exclude the interest (which is not applied to the books) from their calculations while giving the farm loan exposure data.


It has also asked for a separate data on banks’ exposure to plantation and horticulture. Exposure to plantation and horticulture is different from normal crop loan in the sense that these are taken for a 3-5-year period. Short-term crop loans are typically taken for less than a year. Banks have been asked to mention the written-off accounts separately to date. All written-off accounts are likely to be included in the loan-waiver package.

While the new ministry guidelines have made the waiver scheme a bit more clearly to everybody concerned, banks are pushing their branches as they need to get the details from them in the farm belt once again. Agricultural co-operative banks are finding the difficulty as they are unable to collect the data in a short notice with the absence of computerization.

“Collecting the data once again is difficult for even bigger banks. We are left with no option, but to compromise with the authenticity of the data,” said a senior public sector bank executive in Mumbai.