State Said it Would be Able to Repay Loans
“RBI does not agree,” one banker said. “It is not (convinced) about the recoverability of the receivables. Hence, it has asked banks to make provisions.”
The development, a bolt from the blue for the banking system, is also a huge embarrassment for the Badal government whose popularity is under pressure from a resurgent Aam Aadmi Party (AAP) and Congress. The state goes to polls in 2017. The Akali Dal, a partner in the ruling NDA at the Centre, runs the state in alliance with BJP. The state government is believed to have told banks and RBI that there is no deficit and it would be able to repay the loans.
An anguished banker told ET that his bank’s entire profit may be wiped out by the provisioning. “All the parties involved, state government, Centre and RBI, were aware of the deficiency — the stock versus the loan amount, but it is always the banks which have to pay the price. Why can’t the government set up an enquiry about the missing stock?”
Although the issue of ‘deficient stocks’ in Punjab’s granaries have been discussed for months, bankers did not think of provisioning as the loans were considered ‘zero-risk’ since they went into the state government’s books.
“There has been an issue of reconcilia- tion between FCI and Punjab state government, and till the matter gets resolved, RBI has told us to make15% provision on the food credit given to Punjab government,” said a banker who preferred anonymity. A mail sent to the Reserve Bank of India on Wednesday evening did not elicit response. The central bank and commercial banks are shut for a national holiday on Thursday.
When contacted over phone, FCI Chairman Yogendra Tripathi declined comment saying the Punjab government officials ‘will give a better clarity’.
The issue is being looked at, said an official at the state food, civil supplies and consumer affairs department who did not want to be identified. “There has been no siphoning off of grain stock. The money being stated is the compound interest of the past few years,” the official said.
Loans in the Indian banking system are divided into two broad categories — food credit and non-food credit. Food credit is mostly through FCI which is a canalising agent for the states in buying grain from the market. While non-food credit is at Rs 71lakh crore, food credit is at Rs1lakh crore, RBI data shows.
For food purchases, banks lend to FCI and foodgrain are stored in godowns in each state. The monitoring of the godowns and the payment of interest on the loans are done by the state government.
(With inputs from Madhvi Sally)