State Said it Would be Able to Re­pay Loans

The Economic Times - - Econ­omy & Com­pa­nies -

“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)

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