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State Bank trims farm bad assets

Strategy shift

Calcutta, April 6: A tweak in the management of non-performing assets (NPAs) has helped the State Bank of India to bring down its bad asset level in the agriculture segment.

The SBI had been witnessing a steady rise in NPAs in the agriculture segment from 6.37 per cent of total agricultural advance in March 2011 to 10.95 per cent in December 2013. It was the second highest in terms of sectoral NPAs for the bank in the third quarter of the last fiscal after the mid-corporate segment where gross NPA stood at 11.39 per cent. Overall gross NPA of the SBI was 5.73 per cent of total assets for the December quarter against 5.30 per cent in the same period a year ago.

However, SBI chairman Arundhati Bhattacharya said a change in the method of monitoring NPAs had helped the bank to lower its bad debts in the segment.

“Management of NPAs is a great challenge. Instead of monitoring what is done (for recovery), we have started looking at what is not done,” Bhattacharya said.

She said the bank had started receiving regular updates on slippages and recovery at the branch level. According to the chairman, the move has helped to bring down the agriculture segment NPA level to around 9 per cent.

Loans to the agriculture sector is part of the priority sector lending of commercial banks, according to the guidelines of the Reserve Bank of India.

The union government has also set a preferential rate of 7 per cent for crop and production loans of up to Rs 3 lakh with a three-year tenure. The government will provide a 1.5-per-cent subvention to the banks on such advances.

However, despite the subvention, industry observers believe there are greater risks in lending to the agriculture sector and bigger recovery challenges.

In the case of the United Bank of India, which had registered an NPA level of 10.8 per cent in the December quarter, the highest among scheduled commercial banks, a substantial part of the fresh slippages was on account of lending to the rural and agricultural sector, where the loans are of smaller amount.

 
 
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