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Bengal govt soft on rural borrowers

Bengal govt soft on rural borrowers
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First Published: Thu, Jun 19 2008. 10 29 PM IST
Updated: Thu, Jun 19 2008. 10 29 PM IST
Kolkata: Recovery of farm loans in West Bengal slowed in fiscal 2007-08 as the Marxist-led state government went easy on borrowers ahead of rural elections held last month, bankers said.
According to the the State Level Bankers’ Committee, or SLBC, which met last week to review the performance of banks in the state, lenders in West Bengal recovered 60% of total outstanding principal and interest due in the year ended 31 March. That was down from 69% in the previous year.
“It’s not bad compared with the national average, which is more or less the same as in Bengal, but recovery this year was significantly lower for the state,” said an official at Kolkata-based United Bank of India, who requested anonymity because he is not authorized to speak to the press.
Banks recovered Rs2,242 crore from borrowers in the farm sector in 2007-08, against total outstanding principal and interest of Rs3,748 crore.
“Usually the state government helps us in recovering loans, but this year that didn’t happen because of the panchayat elections,” said P.K. Gupta, chairman of United Bank.
Committees headed by district magistrates, or officers in charge of revenue administration, and comprising bankers and representatives from gram panchayats, or village councils, work closely with banks and help them recover loans.
“They even hold workshops to educate people about the importance of timely repayment of loans. But all that didn’t happen last year because of the panchayat election,” said the United Bank officer.
West Bengal’s finance minister Asim Dasgupta discounted the link to the elections, which produced a setback for the Left. “Elections come and go,” he said. “But at all times, we are very strict about recovery. We ask banks to name willful defaulters so that we could initiate action against them through the district administration.”
According to Dasgupta, recovery slowed because of the Centre’s debt waiver scheme for farmers, announced in the Union budget. “We have seen it in the past as well. Whenever such a scheme has been announced, people have stopped repaying loans. Let’s hope the trend is reversible,” he said.
While almost all bankers Mint spoke to blamed the panchayat elections in the state for the decline in farm loan recovery, some agreed with Dasgupta. Many borrowers who were not eligible for the debt waiver but thought they too could benefit from it had stopped repayment after the announcement in February, they said.
“We received guidelines regarding the debt waiver scheme from Reserve Bank only in June whereas the scheme was announced long ago. This too impacted recovery to an extent because the beneficiaries were not immediately known,” said S.K. Goel, chairman and managing director of UCO Bank.
The slowdown affected almost all banks in the state. The worst-hit was Punjab National Bank, which managed to recover as little as 34% of farm loans due in the year till March. The amount due for repayment was Rs185.28 crore, but the bank managed to recover just Rs63 crore.
Banks lent Rs4,662 crore to farmers in West Bengal during the year, which was about 93% of the target the SLBC had set at the beginning of 2007-08. As much as Rs3,403 crore was lent to small and marginal farmers.
Romita Datta contributed to this story.
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First Published: Thu, Jun 19 2008. 10 29 PM IST