New package for farm loans applicable to private banks also

Our Economy Bureau
22 June 2004

New Delhi: The finance ministry has clarified that the restructuring package for agricultural loans made by scheduled commercial banks, announced on Friday, is scheduled commercial banks "The package is applicable to all members of the Indian Banks'' Association (IBA), which includes public sector banks and Indian private sector banks," a ministry spokesperson said.

It would not, however, extend to foreign banks, who, in any case, do not operate a single branch in rural areas and have no exposure to farm lending.

But the impact of the package may not be all that pronounced even for private Indian banks. As on March 2003, the total NPAs on account of agriculture for Indian private banks stood at only Rs 536.78 crore, against the corresponding figure of Rs 7,707.35 crore for public sector banks.

Of the total farm NPAs for private sector banks, a significant share was accounted for by ICICI Bank (Rs 219.14 crore).

"The package, first of all, does not require any waiver of existing loans. Even if some outstanding loans are converted to five-year advances, it will have little impact on the balance sheets of any private sector bank," sources said.

The total outstanding advances to the agriculture sector by public sector banks at the end of 2002-03 stood at Rs 73,507.06 crore, which included Rs 21,707.86 crore worth of indirect advances.