State Bank of India (SBI) Chairman Pratip Chaudhuri has sounded a note of caution saying that poor monsoon will not only affect the economy but also banks in the country, as re-paying capacity of borrowers will come under pressure.
"If the monsoon fail, it will (have) a cascading impact on credit growth as well as the economy which in turn will impact the re-paying capacity of borrowers," SBI Chairman Pratip Chaudhuri said.
In view of the deficit monsoon rain, Prime Minister Manmohan Singh has already directed all departments and ministries to coordinate with states to meet any eventuality by monitoring the situation on a weekly basis.
FROM THE MAGAZINE:Is India still a monsoon economy?
Chaudhuri further said SBI will assess the impact of monsoon after August 10 when the situation will become more clear.
Speaking on the impact of monsoon failure, Punjab National Bank Chairman and Managing Director K R Kamath said the RBI has clearly defined norms for banks for agricultural credit in drought affected areas.
"If any of the area is affected by drought, there is very clearly defined scheme for restructuring of accounts of that particular area," he said, while announcing the first quarter result of the bank.
Kamath does not expect the impact of deficient rains on non-performing assets (NPAs) related to farm credit to be much as there would re-structuring.
Gross NPAs of Punjab National Bank has risen to 3.34 per cent at the end of three-month period ended June 30, against 2 per cent during the same period of 2011-12.
With inputs from PTI