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SBI to gain from govt's decision on farm loan repay

Mumbai, 26 february 2010: State Bank of India (SBI) will be the biggest beneficiary of the government’s decision to giver farmers more time to repay their loan.The finance minister in his union budget speech on Friday said that the the government would extend the repayment period under one-time settlement (OTS) scheme by six months to June 2010.

In its third quarter results ending December 2009, SBI had indicated that it has not provided for a sum of Rs 1530 crore farm loan as it is ‘awaiting decision of government on request by bank for extension of repayment date.’ Had government not extended the scheme, SBI would be required to set aside the sum from its fourth quarter pre-tax profits.

Earlier, the government has come out with a scheme where by 25% of the loan would be waived if the farmer pays 75% of the loan due as one time settlement which was valid till December 2009. Farm loans which are under stress and where the borrower has failed to provide 75% on the table by December 2009 had to be treated as bad loan.

While many banks like Bank of Baroda had fully provided for such farm loans will also benefit as any payment made by the farmers could to be plouged back as profit. Rating agency ICRA too had estimated that a part of the delinquent agriculture portfolio could be classified as NPA if some relaxation by the RBI or government does not come.