Even as rainfall continues to play truant in several parts of the country, Kerala, referred to as God’s own country, has faced the wrath of monsoon fury over the past week or so. The Kerala government has taken an immediate step to assuage the concerns of the farmers by declaring a one-year moratorium on all agriculture loans. 

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The state accounts for about 3% of the total bank credit in the country, of this about 20% is agriculture loans. 

The decision was taken at the state level bankers meeting with the state agriculture minister VS Sunil Kumar. 

Restructuring of the agriloans can also be undertaken for the next five years, and if there is any default no action under various recovery acts can be undertaken, according to the minister.

The state-level bankers committee (SLBC) led by Canara Bank is expected to meet shortly for a joint action in dealing with regard to other exposures in home loans, car loans and other loans to small and medium enterprises (SMEs).

Among banks with major exposure in the state are  State Bank of India (SBI) and Canara Bank. But a clutch of smaller banks like Dhanlaxmi Bank, South Indian Bank, Catholic Syrian Bank and Federal Bank have 35-65% of their loans and 50-75% of their deposits coming from Kerala.

Kotak Institutional Equities said in a report, “Kerala has historically been a state that has provided a lot of priority sector lending opportunities.  The priority sector loans  from this state is well above the required 40% levels.”

The report said that one of the interesting trend is the high share of gold loans within the agriculture portfolio. 

“We are yet to understand the impact of this collateral and whether banks would look to enforce this collateral if they see any stress post-moratorium of loans. SBI has one of the highest share of agriculture loans that are collateralised by gold loans,” said the Kotak report.

However, NRI remittances to Kerala are expected to see a sharp rise with financial aid pouring in from West Asian countries, Malaysia, Singapore and the United States. 

Indian-origin billionaire businessmen based in the UAE have pledged Rs 12.5 crore for the state.

“Floods may have a positive impact considering that the flow could increase to compensate the wealth destruction that has happened, it is still not clear if there is a big direct overlap between flows and borrowers. In other words, it is not clear if borrowers have access to other sources of cash flows,” Kotak said in its report.

NRI deposits would nevertheless be a key point in discussion considering the share of these deposits to overall deposits, the Kotak report said, adding, “The share of these deposits has increased to 33% of the overall deposits in Kerala from 22% in FY2011.” 

Overall non-resident deposits have grown by 21% compounded annual growth rate since FY2013 as compared to overall deposit growth of 15% CAGR. 

Regional banks like Federal Bank and South Indian Bank has seen a marked improvement in their share of non-resident deposits in this period. 

Federal Bank has improved its market share in Kerala to 25% from 14% in FY2011.

THE LOAN GRID

  • Among banks with major exposure in the state are  State Bank of India and Canara Bank   
  • Smaller banks such as Dhanlaxmi Bank have 35-65% of their loans coming from Kerala  
  • Overall non-resident deposits has grown by 21% since FY2013

Source: DN Money