MUMBAI: More than Rs 5,000 crore of crop loans could turn bad in the wake of the Heavy rains, hailstorms take their toll on banking sector’s profitabilityhailstorms in several parts of the country over the past few days, hitting the banking sector at a time when it is saddled with increasing non-performing loans due to the severe impact of economic slowdown on corporate borrowers.
About eight lakh hectare of farmland spread across 28 districts in Maharashtra has been hit by heavy rain and hailstorms over the past 10 days, according to state government officials. About 50,000 hectare of fruit crop, including grapes, oranges, bananas and pomegranates, has been damaged, they said, adding that the damage extends to wheat, jowar and cotton crops.
“We have begun touring the areas,” said a private banker. “The loans extended by the banking sector to cash crops like grapes, pomegranates and oranges have been affected. Onions and tomato crops have also been affected.”
The northern parts of interior Karnataka, central Maharashtra, Marathwada, Vidarbha, entire Madhya Pradesh, Chhattisgarh, parts of Andhra Pradesh and Haryana have been affected by the hailstorms. “Although these crops are insured, the insurance amount can be claimed only after the district authorities declare this as a calamity. In an election year such administrative decisions are usually delayed, which couldmean loss to farmers and banks,” said the ban-ker, who didn’t wish to be named.
Union agriculture minister Sharad Pawar toured the affected areas in Maharashtra late last week and reportedly gave an assurance that assistance would be extended from the central government after taking due consent from the Election Commission.
PJ Joseph, chairman and managing director of Agriculture Insurance Company, said, “We have a commitment to 2.5 hectare of farmland that is damaged and covered around 3 lakh farmers under the two insurance schemes – weather-based insurance and national agriculture insurance scheme. Not all 100% crops are damaged and we are in the process of assessing the loss.”
Farmers from Maharashtra are especially in a bad shape, said a private bankexecutive who visited parts of Maharashtra and Gujarat. “Without any relief from the government, farmers and bankers will be in distress,” said the executive, who has recently taken charge as the head of agriculture business at the bank.