Five days earlier the State Bank of India (SBI) had released circular to suspend loans for purchase of tractor and other farm equipment. The Finance Minister, Mr P Chidambaram, today said, the circular was “poorly worded and misunderstood”, he stated that bank has been asked to withdraw the circular.
When the reporters asked for his comments on the circular he said, “That circular was poorly worded and misunderstood. I asked my secretary to advise the bank to withdraw it.” He added loans should be given and recovered but a proper method has to be followed. He further added that at any given time there will be some non-performing assets (NPA). . “I don’t think the circular was justified in the manner it was worded,” he said, adding that the best thing was to withdraw it. “The matter is now closed,” he quipped.
He said loans must be given and recovered but there was a proper method of doing it. At any given time there would be some non-performing assets (NPA), he added. “I don’t think the circular was justified in the manner it was worded,” he said, adding that the best thing was to withdraw it. “The matter is now closed,” he quipped.
On the advice of the finance minister the country’s largest lender SBI yesterday withdrew instructions from its branches which it had issued five days earlier to stop fresh loans for purchase of tractors and other farm equipment.
Bank’s decision to stop tractor loans was strictly opposed by tractor manufacturers, politicians and the farm lobby. The rollback of a commercial decision clearly indicates the bank has acted under pressure.
Commenting on the rollback of the circular by the SBI, Venugopal N. Dhoot, president of the Associated Chambers of Commerce and Industry of India (Assocham) said, "It seemed that the SBI came under heavy political pressure from various quarters, including bureaucracy, which forced it to withdraw the circular which is not a healthy practice in a vibrant democracy like that of India."
"As a result of withdrawal of this particular circular, the balance-sheet of the SBI would adversely be affected and its profitability would erode to a great extent as the bank issued the circular as a pressure practice to affect its recoveries," he added.
In a press meet yesterday SBI chairman, Mr OP Bhatt, said: “We regret that our circular dated 16 May 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect.”
Although bank is trying to justify the rationale behind the suspension the SBI took a sudden decision to drop it.
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