Date:19/08/2008 URL: http://www.thehindu.com/2008/08/19/stories/2008081954870500.htm

Kerala - Thiruvananthapuram

Delay in fixing credit limit may hit farm loan disbursal

N.J. Nair

THIRUVANANTHAPURAM: The reported delay by the National Bank for Agriculture and Rural Development (Nabard) in sanctioning credit limit for the Kerala State Cooperative Bank (KSCB) could disrupt disbursal of agriculture loans in the cooperative sector for 2008-09.

The sanctioning has allegedly been delayed at a time when the cooperatives have offered to provide loans at a rate of 4 per cent to paddy cultivators to bolster agriculture productivity in the State.

Official sources told The Hindu that other than the KSCB, all 14 District Cooperative Banks and 1,602 Primary Agriculture Cooperative Banks, forming the main lending source for farmers in the State, would be forced to freeze agriculture lending, which is one of their primary tasks. Though commercial banks too have been providing agriculture credit, cooperative banks continue to be the easily accessible source for farmers in the State.

Following the recent announcement by Nabard that the refinancing facility to KSCB will be increased from 35 to 75 per cent of the actual crop loans for 2008-09, there have been a flood of inquiries from district as well as primary societies.

This facility was offered to avert a looming liquidity crisis in cooperative banks. Nabard had specified that the level of non-performing assets of the KSCB would not be a criterion for extending the ‘instant facility’ offered on condition that the excess amount released beyond the quantum of refinance would be adjusted from the funds sanctioned by the Central government to the KSCB under the agriculture debt relief and debt waiver packages.

The sanctioning has been delayed since the action plan drawn up by the KSCB to bring down the rate of non-performing assets (NPAs) as well as the accumulated loss had not been approved by Nabard. In order to sustain the momentum in the farming sector, the cooperative banks would be forced to provide loans from their own resources. The banks would be faced with a financial crunch upon implementation of the debt relief and waiver packages and hence that option would not even be considered.

Timely refinance from Nabard is the only solution and further delay will only complicate agriculture lending, sources said.