State Bank of India Mounting NPAs mostly due to own mistakes

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While Mrs. Arundhati Bhattacharya, who joined and served State Bank of India as the Chairperson in 2013 at the financial capital of India; one Mrs. Bagmi Prava Bidhar wanted to establish a layer poultry unit near Khordha in one of the poorest state of the country. While Arundhati was the first woman to lead the largest bank, Bagmi Prava was one of the rarest lady entrepreneurs interested to establish a 40,000 strong layer unit. In a male dominated society, the courage of both these ladies should be treated at par, although the fate of both the ladies was totally different.

Bagmiprava conceived the idea of establishing the layer unit during 2013, while Arundhati’s name was getting announced for heading the premier bank. As per condition of Agricultural Promotion and Investment Corporation Ltd (APICOL), the only Farm promotion organization of Odisha, she approached SBI branch and the bank had issued a consent letter on 15.10.2014. Bagmi submitted an application for establishing Layer Unit with State Bank of India, Khordha Branch in Odisha along with a project report through the CDVO, Khurdha on 28.10.2014.After due verification and vetting, APICOL sponsored her project proposal to Khordha branch of the largest bank on dtd.5th December 2014. Thereafter, Bagmi submitted the project report and financial analysis made by a Chartered Accountant for consideration of her Agribusiness loan proposal. She requested to consider sanction of a Term Loan limit of Rs.260 lakhs and Working Capital Limit of Rs.40 lakhs in favour of the proposed Layer Poultry unit.As the branch was having no expertise on Poultry advance, it took up the matter with their Regional and Local Head office and subsequently, an officer from the LHO, who had no expertise on poultry advances, visited the proposed Layer unit site during the month of February 2015 and submitted a favourable note during May 2015. The branch manager advised Bagmi to submit Encumbrance Certificate (EC) from the Sub-Register for a period of 30 years and to submit a fresh, revised, updated Project Report from the Chartered Accountant; which she submitted again. Thereafter SBI branch obtained legal opinion and valuation report in respect of the landed properties, being offered towards Primary and collateral securities.

Subsequently, SBI Khordha branch asked her to submit a number of documents and clarifications in piece meal, which she complied. By then, Bagmi had already undertaken certain extent of construction work at the site, as per the prepared plan and estimate.  She was asked subsequently to obtain NOC from the State Pollution Control Board, Bhubaneswar and she submitted the same on 21.11.15. All these were deliberately done by the bank to dissuade her from undertaking an enterprise.

The SBI branch asked her to obtain extended validity period of the GO-AHEAD letter and she had to submit the same with extended period till 30.11.2017 for claiming subsidy. Although Layer Unit comes under ‘allied to Agriculture’, there was no need for converting the land category from ‘Agriculture’ to ‘Gharabari’ as the bank was authorized to create registered mortgage under OAMP Act. As advised by the bank, she had to construct an approach road beginning from the main road till the farm site with her own expenses, apply for installation of a transformer on site and convert the land category to homestead; so that bank can enforce sale under SARFAESI Act 2002 – in case of default ! She established a deep borewell on site and started construction of the poultry shed. All relevant quotations, materials and technical man power were kept in readiness.

The Technical Officers from the Local Head Office, Zonal Office and the branch, none of whom had the required knowledge on poultry science, visited the proposed site and guided her on the proposed Layer Unit. The land level was elevated, 4 feet above the ground level. On 29.4.2016, entrepreneur was advised to prepare a revised project report, by bringing down the Bank Loan, without reducing the Project cost. Accordingly, she was asked to be satisfied with a Term Loan of Rs.190 lakh, working capital limit of Rs.40 Lakhs and to bring the remaining amount as her own contribution. By this, the contribution of the entrepreneur got enhanced to 38% from the stipulated 15-25%.Bagmi planned to start the construction work by end of June and start rearing the day old chicks by September 2016. As the Branch had no technically skilled manpower, the officers including the smart Chief Manager of the branch failed to make SWOT analysis. By this, the aims and objective of the project got defeated. It is one of the reasons, why north-eastern Indian states including Odisha has remained backward particularly in Layers. Odisha mostly imports eggs from Andhra Pradesh to meet its requirements.

Two precious years of time got wasted for studying of a loan proposal. The bank had never declined the proposal at any stage. It proves that the proposal and the promoter had merit; where as the non-performing officers of the bank had no merit. The largest bank of India, may find the inefficient performance of the bank officials – if any accountability study is undertaken in future. There may not be any bad intention of the bank officials, but the acts of the bank officials are certainly not beyond suspicion and it goes against the spirit of the largest bank headed by a topmost woman executive.

Bagmiprava is an educated woman applicant and wanted to get self-employment through Agribusiness activity. While the governments at center and state emphasize on woman empowerment, self-employment and doubling in farm production by 2022, we could not witness any proactive co-operation from the largest bank – State Bank of India.

After 2 years of hard work, the loan proposal got sanctioned by the bank during October 2016 and after completing the formalities, the branch started releasing the term loan in installments beginning from November 2016. We learn that the branch has disbursed only Rs.75 Lakhs, out of sanctioned amount of Rs.190 Lakhs, by the end of October 2017, although it was planned to complete the disbursement by September 2017. While the term loan has not been disbursed to the extent of 40 percent of the sanctioned amount despite the fact that the civil work has already been completed to the extent more than 90 percent, the branch has stopped disbursing further loan amounts. Bagmiprava runs from post to pillar for early grounding of her project, but to no avail. As a bolt from the blue, bank has asked her to start repaying the interest with effect from September 2017 ! As per the terms of sanction letter, the repayment of loan installments begins from March 2018.

Now Bagmi has no other way than to either commit suicide or sell the unit to the interested poultry promoters. Two poultry houses have already contacted Bagmi to take over her assets and liabilities and pay them monthly rent and a lump sum money towards the deal. It is feared that these South based poultry houses might have nexus with the bankmen to create such a situation; so that the entrepreneurs shall be forced to fall prey to these poultry houses.

While enquired, we learn that the largest bank of the country has neither a technical officer trained in poultry management with at least ‘BVSc & AH’ degree nor they hire the services of any chartered poultry specialist for appraisal and disbursement of poultry units. Although the bank has recruited officers from agriculture and fisheries background, it has no single officer to monitor poultry projects in Odisha Circle. Due to lack of exposure, confidence and knowledge, the branch officers behave irrationally, as a result of which, Bagmiprava suffered. In a hi-tech world, can any bank afford to behave is such a fashion?  The situation is almost similar, in the department of MSMEs. Non-technical officers handle the technical and high-tech projects. Start-up units too suffer a lot for this type of attitude of the largest bank.It is alleged that NPA & Overdue position as on 31.03.2017 of the Banks of the State had remained at 11.51 % and 35.68 % respectively which were at much higher side and alarming. We agree that the Banks are facing problem to recycle the funds owing to non-repayment of loans, mounting overdue and rising NPA %. We also agree that banks are dealing with public money, which should be utilized properly and the beneficiaries must be made capable of repaying the bank loan together with interest. State bank, in Odisha circle, has more NPAs to the extent of 14.72% – much more than the state average of 11.51%. This is acute in case of allied activity loans, which stands at 38.15%. The bank has to review the reasons, failing which, public money is not safe in the hands of the largest bank of our country.

Back-tracking from releasing the sanctioned loan to a loanee by the bank amounts to unfair trade practice. The Dispute Redressal Forums have asked the lender banks in past to refund the entire EMI charged and directed the banks to pay the loanees compensation for deficient services. The bank has right to obtain valuation reports from its empanelled engineers/valuers from time to time before disbursing the term loan components. No one prevented the bank to do so, the cost of which is normally loaded on the loanee. But many questions have remained unanswered in this given case. The loan account is fast heading towards NPA. Who should be accountable for this? Whether the bank shall rectify its mistakes, disburse the remaining bank loan within a stipulated period, extend the repayment period, waive the unwanted interest amount loaded on the loan account by recovering the same from the bank officer responsible for such nuisance? The largest bank of our country should not be a huge demon; we expect it to be prudent, equipped, responsive and pro-entrepreneurs. It has to ensure that Bagmiprava is given justice, if not during the tenure of Mrs. Arundhati, atleast during the tenure of his successor.

We don’t know whether SBI authorities are going through this case study. If at all they are serious, the Bank has to redress Bagmi’s inconveniences, disburse the full sanctioned loan amount, reschedule the repayment period by extending the holiday period, waive the unnecessary interest loaded in the account and take appropriate action against the erring officials, failing which, we shall certainly believe that the largest bank has no heart and they are against Odia entrepreneurs. For non-repayment and alarming NPAs, can the bank blame our youth? The bank has to introspect.

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