If news reports are to be believed, Andhra Pradesh CM-elect Chandrababu Naidu is set to waive off Rs 54,000 crore worth of farm loans. If loans taken by mortgaging gold are also included, then the amount will cross Rs 60,000 crore. However, the state level bank committee made it clear that waiver of gold loans is not possible.
Naidu had promised waiver of all farm loans if TDP was voted to power while chief minister-designate of Telangana state, and president of TRS promised farm loan waiver applicable to loans of under Rs 1 lakh.
Touted as the single biggest populist measure, sources say it is to be the first on Naidu's to-do list once takes charge as CM on June 8. Banks are likely to be compensated through state government bonds.
Speaking to CNBC-TV18's Latha Venkatesh and Sonia Shenoy, CVR Rajendran, CMD, Andhra Bank said the lender met both the chief ministers to discuss the modalities of the waiver.
He said the waiver will come with certain conditions attached as the Andhra government is fighting a huge deficit and cannot afford to have loan waiver on such a large scale.
"Yesterday, Telangana state said that only those agricultural loans availed after June last year that is the cropping season for the last year — June to May — will be waived. It comes to around Rs 12,000 crore for Telangana and about Rs 19,000 crore for AP," he told the channel.
Also Read: Timeline: Birth of Telangana, India's 29th state
Rajendran believes this amount, around Rs 31,000 crore, will be fully reimbursed by the state governments.
Below is the transcript of CVR Rajendran's interview on CNBC-TV18
Latha: What is your exposure in terms of farm loans below Rs 1 lakh?
A: As far as Andhra government is concerned, below Rs 1 lakh, my exposure is Rs 1,472 crore. Above Rs 1 lakh is Rs 2,430 crore. So total exposure is Rs 3,902 crore.
As far as Telangana state is concerned, it is Rs 1,350 crore below Rs 1 lakh and Rs 568 crore above Rs 1 lakh. Total is about Rs 1,928 crore.
Latha: Have you heard from the Andhra government at all?
A: We had discussions with the chief minister and we discussed about the modalities. Also because Andhra Bank is the lead bank in the state for the combined Andhra Pradesh. We met both the chief ministers and gave the provisional numbers available with us and discussed about the various possibilities. We are kept in the loop all through the discussions.
Sonia: So will the Andhra government fully reimburse you and will this actually help you in terms of bringing down your non-performing assets (NPAs)?
A: My NPA in Andhra Pradhesh itself is very low. Agricultural NPAs if you look at the industry level it is around 8 percent, my NPA in agriculture is hardly 2.5 percent. But if Andhra Pradesh is reimbursing the entire agricultural loan it will be a substantial relief and substantial recovery in the NPA. But I don't think any state government can afford to do that. That too Andhra Pradesh state government, which is fighting with the deficit, they cannot afford to have loan waiver on such a large scale.
So they are discussing about loan waivers subject to certain conditions.
Latha: What are those conditions?
A: Yesterday, the Telangana state said that only those agricultural loans availed after June last year that is the cropping season for the last year, June to May, will be waived. It comes to around Rs 12,000 crore for Telangana and about Rs 19,000 crore for AP.
Latha: How much of this will they reimburse; that works to Rs 31,000 crore?
A: To the extent, I understand this total amount will be reimbursed.
Latha: But they have that much money?
A: Those possibilities are also being discussed. If they are going to issue the bonds -- there are two issues which are coming up. If it is an SLR bonds then there will be possibility of liquidity available, we will be in a position to sell the bonds in the market. If SLR status is not attached to these bonds the liquidity will be constrained. Particularly for regional rural banks and the corporative banks, if they are stuck with the banks they cannot take additional lending activity.
We highlighted this and told them banks will prefer to receive it in cash. If it is not possible, then it should be given SLR status. But there could be some constraints.
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