Criticising the popular practice of waiving crop loans, State Bank of India (SBI) chairman Arundhati Bhattacharya on Wednesday said that it disrupts “credit discipline” among borrowers as they expect future loans to be waived as well. Ahead of the assembly elections in Uttar Pradesh, the BJP had promised to bring in a loan waiver scheme for farmers in the state, if it’s voted to power. Speaking on the sidelines of a CII conference in Mumbai, Bhattacharya said that the bank has not received any proposal to waive of farm loans in Uttar Pradesh as yet. “As such future loans given often remain unpaid and therefore it is important for us to take when we are trying to ensure that the farmers do well,” said Bhattacharya.
“Today the loans will come back as the government will pay for it but when we disburse loans again then the farmers will wait for the next election expecting another waiver.” According to Bhattacharya, while it is important for banks to make credit available to farmers so that they can leverage and do better, it is also important to maintain a credit discipline. “For the time being we will get our money back as the government will pay for it. But farmers will keep waiting for the next election to avail the next round of waiver,” she said.
The Reserve Bank of India had also expressed reservation over the loan waiver scheme by various state governments. “Repeated loan waivers by various state governments distort credit pricing, thereby also disrupting the credit market,” former RBI Governor Raghuram Rajan had said. Andhra Pradesh and Telangana governments had earlier declared loan waivers for farmers hit by cyclone Phailin. Meanwhile, SBI had recently announced a one time settlement (OTS) scheme worth
Rs 6,000 crore in the tractors segment to speed up its recovery. The bank has also announced such OTS scheme in education and SME segments. “We do give OTS in respect of many loans which are outstanding for a long time and people may have had some difficulties,” she said. Bhattacharya said the recovery due to OTS scheme in these segments have been fairly good. Bad loans of PSU banks rose by over Rs 1 lakh crore in the first nine months of current fiscal to Rs 6,06,911 crore by December 31, 2016.
Bhattacharya also blamed the governance at public sector banks for poor investor appetite for them and their resultant inability to raise cheaper funds from markets. “State-run banks cannot have a default fall-back on the government for capital…if you are looking to raise capital…the one thing that investors always talk about is the board governance,” said Bhattacharya. “I think it’s time PSBs get out of this. But now government is very clear that it will give money only if the banks are actually efficient in all they do,” she added. Out of the Rs 25,000 crore that Centre has earmarked for recapitalising its banks this fiscal, SBI alone has got over Rs 7,000 crore so far. Last year also it had received a similar amount.
Bhattacharya said SBI is planning to convert its branch operation in Paris into a representative office. “At this point Paris is a branch and so we will be probably roll it into an representative office instead of a full fledged branch. Our returns from that office are not as per the benchmarks we have set,” she said. SBI has 199 global offices which contribute 16-17 per cent to the topline and 25 per cent to the bottom line for the bank. “Each and every operation is being assessed to understand if its contribution to the bottomline is sufficient for us to justify having it,” Bhattacharya said.