Mixed bag for banks, farm loans target can prove a burden

Budget has given a mixed bag of goodies for banks in India. While it has increased capital allocations, it has also asked them to increase their lending to the agriculture sector, which until now is throwing up non-performing assets (NPAs).

The public sector banks will get recapitalisation of Rs 15,000 crore, about 19.83 per cent higher from the last financial year, to meet the Basel III requirements, which will start getting implemented in a phased manner from the financial year 2013-14. In 2012-13, the capital infusion was Rs 12,517 crore. Indian banks will have to raise Rs 2.7 lakh crore by March 2018 to meet tier-I capital requirement under Basel III norms, according to an estimate by rating agency Crisil last week.

The finance minister has also targeted 22 per cent growth in agricultural loans, which may put pressure on the already high portfolio of bad loans for the public sector bank.

The interest subvention scheme for short-term crop loans where loans are given at 4 per cent to farmers, which are usually provided by public sector banks, regional rural banks (RRB) and co-operative banks, but now it is being extended to private banks and it will continue to those who make timely payments.

Bhaskar Som, director of India Ratings and Research said, “The creation of a level playing field for private sector banks by extending them the interest subvention scheme for farmers will improve their competitiveness in rural areas. However, 22 per cent growth targeted in agriculture loans may maintain the pressure on non-performing loans (NPLs), particularly for government banks.”

All scheduled commercial banks and all regional rural banks (RRBs) are on core banking solution (CBS) and on the electronic payment systems (NEFT and RTGS). We are working with RBI and Nabard to bring all other banks, including some cooperative banks, on CBS and e-payment systems by December. Public sector banks have assured me that all their branches will have an ATM in place by March 2014.

EDITORIAL OF THE DAY

  • No ifs and buts, please, in India’s engagement with Iran

    Some foreign policy purveyors in this country have for long insisted that India does not leverage its civilisational connections as it should or is ca

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Taslima Nasreen

Hate in the time of bhaijaan

A few days ago I went to watch Bajrangi Bhaijaan, ...

Purnendu Ghosh

Death reveals the true colours of life

Death is instantaneous but it comes progressively. Some say, death ...

Dharmendra Khandal

Go spot a gecko

Iam sure you must have read about how a lizard ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture