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C.R. Sukumar

HYDERABAD, May 20

THE agriculture and rural development banks across the country, including the financially stronger ones, fear the prospect of defaulting to National Bank for Agriculture and Rural Development (Nabard). The default spectre looms large owing to severe drought conditions during this year and also due to the dual policies adopted by Nabard on deferment of interest on agricultural loans in the drought-affected areas.

The National Co-operative Agriculture and Rural Development Bank's Federation Ltd (NCARDBF), comprising all the State co-operative banks, at the board meeting held here recently, expressed serious concern over the problems being faced by the cooperative credit institutions.

Though the Government had initially announced deferment of the current year's interest as well as principal on all agricultural loans in the drought-hit districts of 12 States with waiver of interest, the relief was, however, subsequently extended only to kharif loans without any arrangement for making good the losses of cooperatives on account of deferment and waiver.

According to the Federation Chairman, Mr T.D. Janardhan Rao, the deferment was carried out in respect of both interest and principal at the borrower level as per Nabard scheme with regard to long-term loans. "However, at the bank level, Nabard is permitting deferment of only the principal portion, insisting on payment of interest as usual. This has aggravated the crisis faced by the banks."

According to Mr Rao, the recovery is very poor both in the drought-affected and other areas. "Consequently, even financially strong banks are facing the prospect of defaulting to Nabard."

He informed the representatives of the Federation that Nabard was requested to defer the interest portion of refinance in respect of deferred loans and also to delink the lending eligibility of banks with recovery/non-performing assets (NPAs) till the situation improves.

"There is a need to revamp and strengthen the cooperative credit system. It is estimated that they require a one-time support of about Rs 8,500 crore for wiping out their losses accumulated in their operations during the last 100 years," Mr Rao said.

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Farm loans in drought-hit areas — Co-ops seek deferral of interest payments

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