SBI to make provisions for Punjab farm loans

The Reserve Bank of India (RBI) has asked State Bank of India, the country’s largest lender, to set aside provisions for losses on foodgrain-related loans issued to the government of Punjab, SBI chairman Arundhati Bhattacharya said at a banking and financial conclave on Monday.

The Reserve Bank of India (RBI) has asked State Bank of India, the country’s largest lender, to set aside provisions for losses on foodgrain-related loans issued to the government of Punjab, SBI chairman Arundhati Bhattacharya said at a banking and financial conclave on Monday.

A farm labourer is seen planting paddy in a field near Mannawala in Amritsar. (HT File Photo)

She, however, did not disclose the quantum of SBI’s exposure to such loans, but confirmed that the lender had been making provisions in its books.

According to reports, banks extended loans of Rs 12,000 crore to fund the Punjab government’s foodgrain procurement programme. However, RBI told lenders to mark the loans as potential non-performing assets (NPAs) and make provisions for them after Rs 20,000-crore worth of foodgrain went missing from godowns.

Minister of state for finance Jayant Sinha, who was also present at the conclave, later said the government was taking steps to check whether similar situation had spread to other states. “We need a systemic solution to ensure that whatever needs to be resolved across various agencies, can be done in a structured and systemic way. We are working with the RBI as well as with the banks and government agencies to ensure that the matter with respect to food stocks is satisfactorily resolved.”

Bhattacharya said public sector banks should not be solely held responsible for infrastructure funding turning into ban loans. “If we as a developing county are only going to advise banks to follow the retail model, who is going to do project financing?”