The Hindu Business Line : Banks told to train better focus on farm loans

The Executive Director of Canara Bank, Mr H. S. Upendra Kamath, has called upon banks to train better focus on improving advances to the State’s farm sector since more than 50 per cent of the population swore by this vocation.

Mr Kamath said this while addressing a meeting of the State-Level Bankers’ Committee here on Thursday.

Lending to the farm sector at the end of the June 2009 constituted 19.54 per cent of the total, according to figures thrown up in the review. This was just above the mandatory 18 per cent fixed by the Reserve Bank of India.

OTS SCHEME

The review noted that banks/lending institutions are allowed to receive even less than 75 per cent of the eligible amount under the one-time settlement (OTS) scheme under the larger Agriculture Debt Waiver and Debt Relief Scheme (ADWDRS).

But this is applicable only if the banks/lending institutions bear the difference themselves and do not claim the same from the Government or the farmer.

The Union Finance Minister had in the Budget speech said that under the ADWDRS, farmers having more than two hectares of land were given time up to June 30, 2009 to pay 75 per cent of their overdues.

He had extended the date by another six months in view of the late and poor monsoon.

It was clarified in the SLBC meeting that the Government would pay only 25 per cent of the actual eligible amount under debt relief as has already been intimated by the Ministry of Finance.

The lending institutions would not charge any interest on the eligible amount from February 29, 2008 to June 30, 2009.

CD RATIO FALLS

The credit-deposit (CD) ratio of banks in the State had come down by 7.62 per cent during the one-year period from June 2008 to June 2009, according to the data presented at the SLBC meeting.

The CD ratio had fallen to 62.54 per cent in June 2009 from 70.16 per cent during the year-ago period.

As if in tandem, the credit and investment to deposit ratio (C+I-D) too had looked down by 6.88 per cent from 72.48 per cent to 65.60 per cent. Deposits increased by 24.03 per cent during the year, while advances grew only by 10.57 per cent. Total deposits with the banking system in the State as on June 20, 2009, were Rs 1.34 crore and the total advances at Rs 84,284 crore.

According to the SLBC review, the decline in CD ratio could be partially attributed to a fall in agricultural advances (outstandings level) due to loan waiver and other relief extended under the Agriculture Debt Waiver and Debt Relief Scheme.

Urban areas in the State have a high CD ratio of 77.44 per cent, while in the rural areas it was 61.64 per cent, which is slightly above the mandatory 60 per cent.

In the semi-urban areas, however, the CD ratio is only 53.33 per cent. There has been a positive shift in the matter of CD ratio in the semi-urban areas in the recent months, the review observed.