State Bank of India (SBI) will be the largest recipient of the government’s decision to offer farmers more time to repay their loan.
In his budget speech, finance minister said that the government will increase the repayment duration under one-time settlement (OTS) scheme by 6 months till June 2010.
In its 3rd quarter results concluding December 2009, SBI had shown that it has not made any provision for an amount of Rs 1530 crore farm loan, since it is waiting for the government’s decision on its request for extending the repayment date. If the government had failed to increase the duration of the scheme, SBI would have been forced to keep aside the amount from its 4th quarter pre-tax profits.
While various banks such as Bank of Baroda had made total provisions for farm loans, they will also gain since any payment made by the farmers would be plouged back as profit. Rating agency ICRA also had projected that a portion of the delinquent agriculture portfolio can be categorized as NPA if some relief is not provided by the RBI or government.
SBI also stands to gain from its decision to continue with its teaser home loans.