Banks face crisis as unable to recover loans

The number of loan repayment defaulters has increased; the Reserve Bank of India has put restrictions on the procedures adopted by banks for recovery of loans. Therefore Banks are facing crisis as they have been unable to recover the loans given to various sections of people especially the farmers.

In the Budget 2008-2009 Congress-led UPA Government announced loan waiver scheme for the farmers who had became defaulters to strengthen its vote bank. Centre is finalizing the guidelines for the loan waiver scheme. Meanwhile out of 17 lakh only 2.4 lakh farmers are expected to get benefit of loan waiver and this will increase the burden on the exchequer of about Rs 300 crore. Though, Chief Minister Y S Rajasekhara Reddy has promised to work out a separate package for the farmers who were not covered under the scheme.

The announcement of loan waiver scheme has irked the farmers who have been paying their installments regularly. They are also demanding for their inclusion under the scheme and have stopped repaying the installments.

Telugu Desam supremo N Chandrababu Naidu, during his ‘Mee Kosam’ yatra in the district early this month, as a political stunt has assured the farmers that his party would return to power in the next general elections and he would waive all loans.

During the last financial year ending on March 31, 2008 the combined outstanding of all 190 banks in the district was Rs 1,103 crore during out of which Rs 300 crore waivers has been announced by the Centre but there has been no discussion about the remaining loans.

In an interview a senior bank official told the website's newspaper that, "Due to non-recovery of loans, all banks are worried as they will not be in a position to give fresh loans for the kharif season beginning next month. Last year, the percentage of loan recovery was around 70 per cent but this year, it is abysmally low."

He said the banks are in a state of confusion they don’t what to do as no orders have been received on the loan waiver scheme till date. The kharif time is coming near and the farmers are getting worried as the banks are not coming forward to provide new loans until their previous debts are cleared.

"If the banks fail to provide crop loans in time, the ryots would approach private money lenders pushing the agriculture sector in the district on the brink of disaster," the official said.

According to bank sources some of the banks which had given the maximum crop loans in the district include Andhra Pradesh Grameena Vikas Bank (Rs 152 crore), District Cooperative Central Bank (Rs 130 crore), Andhra Bank (Rs 86.35 crore) and State Bank of India (Rs 83.20 crore). Similarly, many other banks gave crop loans and some of them were in deep trouble, sources said.