KSCB’s lending plans might be affected

N.J. Nair

Alleged delay in setting credit limit by NABARD.

THIRUVANANTHAPURAM: The alleged indecision of the National Bank for Agriculture and Rural Development (NABARD) in responding to the Kerala State Cooperative Bank’s (KSCB) request to set the credit limit may derail its agriculture lending plans for the current year.

The KSCB, with a network of 14 district and 1,602 primary cooperative banks, is positioned to act as the fulcrum of agriculture lending as well as provide vital assistance to farmers to increase area under cultivation and productivity.

Informed sources in the cooperative sector told The Hindu here that the KSCB has applied for a credit limit of Rs.638 crore to meet the increasing demand for farm loans, but the delay in fixing the limit is likely to upset its plans for providing more financial assistance to the farmers.

Action plan

To overcome the hiccups for getting the benefits of the refinance facility, the bank had prepared an action plan to recover the dues and improve its financial position. A committed effort was made for bringing down the rate of non-performing assets which stood at Rs.480.07 crore or 21.96 per cent on March 31, 2008, to Rs.338.35 crore or 14.04 per cent.

The bank incurred the burden owing to the indiscreet sanctioning of loans by the previous director board.

The bank had disbursed agriculture loans worth Rs.620 crore from its funds at 4 to 5.5 per cent interest last year when the refinance was limited to Rs.113 crore.

High NPA rate

The funds were sanctioned after pledging securities worth Rs.144 crore. High rate of NPAs and capital erosion were cited as the main reasons for denying refinance then, the sources said.

Presidents of the district cooperative banks and those active in the cooperative sector at a recent meeting of the bank were understood to have registered their protest against the inordinate delay of NABARD in fixing the credit limit even after improving the financial position.

They were understood to have expressed their resolve to boycott the refinance facility and resort to agriculture lending from their own funds as a mark of protest against the hesitancy in giving the cooperative sector its due.