Maharashtra calls for review of RBI prudential norms

The Maharashtra government on Saturday made a strong pitch for review of Reserve Bank of India’s prudential norms relating to all loans where government guarantees are being insisted upon, in a time-bound manner.

This was necessary so that the commitments of the state government under the Fiscal Responsibility Act are honoured and the banks start taking coercive actions against defaulters, rather than proceeding to invocation of guarantees without liquidating their assets.

Chief Minister Prithviraj Chavan made the request during the meeting of western zone states chaired by Finance Minister Pranab Mukherjee to review state of crop loans, debt waivers and bank self help group linkage programmes.

Chavan said government guarantees were being asked for before the loan amount was sanctioned by the National Bank for Agriculture and Rural Development for rescheduling crop loans after natural calamities.

Such guarantees are also asked for the loans extended by them to cooperative sugar mills and spinning mills. However, the chief minister said the basic premise for asking for the guarantee has been questioned by the courts and they have said the default amounts standing against loans guaranteed by the government should be first recovered by selling off the assets of the borrower who has defaulted, before the banks approach the government to meet its obligations against the guarantee.

The chief minister said the state government has taken steps and continues to do so to reduce the risk of extending loans by way of equity infusion, interest subvention, provision of viability gap funding, waiver of taxes and through loan waivers at periodic intervals.

On agriculture credit, Chavan said, out of the target of Rs 15,508 crore for kharif season in Maharashtra, cooperative banks have already disbursed 100 per cent of its target share of Rs 7,700 crore, while commercial banks have disbursed credit worth Rs 4,108 crore, against the target of Rs 6,850 crore. Regional rural banks have so far disbursed Rs 597 crore, against the Rs 985 crore target.

Chavan told the finance minister that the share of commercial banks in crop loan disbursement has increased since 2001-02 from 45 per cent to 70 per cent at the all India level. However, in Maharashtra, the performance of commercial banks was around 50 per cent. He asked the CEOs of commercial banks to enhance their efforts for the current year to increase their share in crop loan disbursement.

Source: Business Standard