Saturday, July 28, 2012

Deficit monsoon to impact loan re-payment: SBI chief

Amid concerns over rising bad loans, SBI today sounded a note of caution saying that failure of monsoon will not only affect the economy but also banks as re-paying capacity of borrowers will come under pressure.

In view of the deficit monsoon rain, Prime Minister Manmohan Singh has already directed all departments and ministries to coordinate with states to meet any eventuality by monitoring the situation on a weekly basis.

"If the monsoon fail it will (have) a cascading impact on credit growth as well as the economy which in turn will impact the re-paying capacity of borrowers," SBI chairman Pratip Chaudhuri told reporters in Mumbai.

He further said the State Bank of India (SBI) will assess the impact of monsoon after August 10 when the situation will become more clear.

Speaking on the impact of monsoon failure, PNB Chairman and Managing Director K R Kamath said in New Delhi that RBI has clearly defined norms for banks for agricultural credit in drought affected areas.

"If any of the area is affected by drought, there is very clearly defined scheme for restructuring of accounts of that particular area," he said while announcing the first quarter result of the bank.

Kamath does not expect the impact of deficient rains on NPAs related to farm credit to be much as there would re-structuring.

Gross non-performing assets (NPA) of PNB has risen to 3.34% at the end of three-month period ended June 30, 2012 as against 2% during the same period of last fiscal.

NPAs in public sector banks stood at about 3.3% of the assets in 2011-12 against 2.3% a year ago.

Meanwhile, IMD said it expects monsoon deficiency to narrow down in the coming days with improvement in rains.

Monsoon rains have been deficient by about 22% so far this year across the country with a worrisome situation in Karnataka, Maharashtra, Rajasthan and Gujarat.

The government has also set up an Empowered Group of Ministers (EGoM) headed by Agriculture Minister Sharad Pawar to review the monsoon situation.

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