Karnataka   

Mining slump hits finance firms

BELLARY: Almost all financial institutions in Bellary district, especially the private ones, have been hit by the slump in iron-ore mining caused by falling demand and price for the past two months.

There is uncertainty about the recovery of loans, on which the future of these private financial institutions depend. After doing roaring business during the iron ore boom for about four years, the slump in the market has severely affected recovery. Also, nobody wants to take loans at this difficult time.

Over 15 major private finance companies set up branches in Bellary, Sandur and Hospet, where mining is a major economic activity. A few other companies operated from their regional offices located either in Hubli or in Bangalore. Except for a couple of companies, the rest vied with one another to offer loans to people for the purchase of lorries, earthmovers and cars believing that the boom would continue for a long time.

“On an average our company used to finance around 100 lorries each month and recover the amount in three to four years. Now, after the fall in the price of iron ore and mining almost coming to a standstill, there are no enquiries, let alone financing of commercial vehicles,” a senior official of a leading financial institution said on condition of anonymity. “For the past two months, recovery has been poor as almost all the lorries have remained idle. If the trend continues, the liquidity of the financial institutions will be severely affected and non-performing assets will mount,” he said.

Proving these fears to be right, most of the lorry owners have already said they are unable to repay their loans and are ready to surrender their vehicles. Some financial institutions have started seizing vehicles.

Venkatarao, president of the Bellary District Lorry Owners’ Association, said owners of tipper lorries are the most affected because these lorries can carry only loads such as iron ore, mud, sand and stones used for construction.

A large number of lorries can be seen parked in several yards.

“The ban on digging of patta land a couple of months back led to the closure of a few sponge iron units, which affected the transport sector to some extent. But now, after mining came to a halt, lorry owners have been severely hit, and they are finding it very difficult to repay their loans,” he said.

An official in another financial company said, “Seizure of vehicles is the only alternative left.

But even that will not solve the problem because there are no purchasers. As an alternative, we have been trying to make use of our business links with contractors and construction companies in different States to persuade them to engage the lorries lying idle here in the interests of both the lorry owners and the company, which may ease the financial position to some extent.”

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