M A I N   N E W S

Under attack, SBI resumes farm loans
Anita Katyal
Our Political Correspondent

New Delhi, May 21
The State Bank of India (SBI) was forced to withdraw its controversial May 16 circular suspending new loans for tractors and farm mechanisation instruments after it was pulled up by finance minister P.Chidambaram.

Chidamabram, it is learnt, conveyed his unhappiness over this move to the SBI chairman after anxious Congress members, including union minister Vyalyar Ravi, drew his attention to the circular and expressed concern over its adverse political ramifications.

UPA sources said though public sector banks like the SBI enjoy functional autonomy, the government can lean on them to ensure that they meet their social commitments. The banks are mandated by the government to set aside 18 per cent of their total credit for the farm sector, failing which an appropriate amount is diverted to the NABARD-managed rural infrastructure development fund.

In an effort to make amends, the SBI chairman issued a statement stating: “We regret that our circular dated May 16, 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect."

The circular had stated that since the bank has a large portfolio of tractor loan accounts with high overdues, it had, therefore, decided to put on hold any new loans to finance new tractors or farm mechanisation activities.

When P.K.Bansal, minister of state for finance, had sought an explanation from the bank yesterday, he was assured that this was only a temporary measure and the matter would be reviewed after the implementation of the Rs 60,000 crore farm loan waiver by June-end.

However, the bank’s explanation failed to satisfy the government as the Opposition was quick to use this issue to lambast the ruling coalition and question its “pro-farmer” credentials. While demanding that the circular be withdrawn, the BJP had charged that this was a fall-out of the “half-baked and ad hoc” manner in which the farm loan waiver had been formulated.

Not just the Opposition, but the Congress was equally upset over the SBI’s decision with senior leaders stating that the party’s “pro-poor and pro-farmer” image would take a severe beating and defeat the very purpose of its populist loanwaiver scheme. Pushed on the defensive, party spokesperson Manish Tewari had urged the finance ministry not to take any steps which would be detrimental to the interests of farmers. Besides, there were widespread fears that other nationalised banks may emulate SBI’s example.