With various States having launched farm loan waivers, bankers are facing a tough time implementing the scheme. Worse, farmers have stopped servicing their debts as well. In this scenario, Mrutyunjay Mahapatra, MD and CEO, Syndicate Bank, and Chairman of Karnataka State-Level Bankers’ Committee (SLBC), spoke to BusinessLine on the changing trends in lending to both farm and corporate sectors. Excerpts:
What is the status of the form loan waiver in the country, and what is the scene in Karnataka?
In the agriculture sector there are a large number of debt accounts coming mainly from States such as Karnataka, Maharashtra, Uttar Pradesh, Andhra Pradesh and Telangana. Now, a few more States have launched the debt-wavier scheme. Now, after the announcements, we see that farmers are not servicing their debts. This is creating pressure on the banking system. As I speak to you, Karnataka government is very keen that this should be executed as fast as possible. I have been attending SLBC meetings, and understand that the government has already set aside 25 per cent of the total amount committed. After the nitty-gritties are sorted out, they (government) should be able to disburse.
So, what is taking the banks in Karnataka so long to conclude the deal?
When we began talks with the State government, we came across a number of loans accounts that turned into non-performing accounts. Now, in these accounts, there are two issues facing us (bankers).
One, related to un-applied interest. Now, the banking community has agreed that for an account that become an NPA two years ago, interest for the two years is not applied. We will wave this off. But the State government is requesting that we should share the burden by writing off a part of the principal. So, discussions are going on right now on what needs to be done.
Second, once the account becomes an NPA, we are not allowed to apply interest, but when it goes to recovery, we can recover the interest from the person.
The ongoing recovery process in the country is through NCLT. How much is Syndicate Bank expecting from the settlements?
Syndicate Bank is expecting a recovery of ₹1,000 crore through NCLT accounts in the next two quarters. We have recovered ₹600 crore already and expect another ₹1,000 crore.
On the whole, we are seeing that recovery is picking up momentum. The bank is also witnessing people coming in to resolve their debts. I think, in the corporate debt sector, we expect to see something good in the next two quarters. And the money that got stuck in the corporate sector will get resolved. I would like to see the bankruptcy proceedings that are currently going on to move a little faster. But there are other institutions involved which are not delivering as fast as a banker would have expected. So, I think, there is some overcrowding in the NCLT.
What has been Syndicate Bank’s performance on home loan and MSME disbursals?
The bank’s home loan portfolio is ₹27,000 crore, and I would like our growth rate to be a little better. We have grown 9 per cent in home loan portfolios. We are trying to do a lot of project financing so that we become the preferred provider for corporates.
We have also been launching home loan sales schemes. We are expecting these to yield good results. The bank has seen some additional stress on MSMEs, but we are managing them efficiently, and the RBI guidelines have come in handy.
Which are the broad areas the bank is planning to focus on?
We plan to grow at the normal run rate in the corporate sector – between 6-8 per cent. We are expecting to grow much more in the housing loan, current account and savings bank deposits. We also want to grow based on computer-generated validation; we want to grow selectively in the MSME sector.