BHUBANESWAR: The mushrooming of self-help groups (SHGs) may spell trouble for the State. Nearly 40,000 SHGs got linked with banks in the State in just one year.
More SHG linkages means more loan disbursement and more disbursement leads to increased loan outstanding and a rise in non-performing assets (NPAs). NPAs will then lead to all sorts of stress for the bankers and the loanees alike precipitating crisis.
Orissa needs to remain cautious as NPAs on loan outstanding of SHGs linked with public sector and regional rural banks have registered a spurt in the period ending March 2010, said an expert.
The NPAs for the public sector banks have increased by over 40 per cent during the last fiscal. In case of regional rural banks, it has risen by over 30 per cent during the same period.
The NPAs for private sector banks increased to a whopping 20 per cent of the total loan outstanding.
Such a high NPA could have led to a major crisis but for the low outstanding amount in proportion to the total amount they have.
Given that all major players have registered an increase in NPAs, the total NPAs would have had increased quite significantly in the State. But improved performance by the cooperative banks has saved the State.
Cooperative banks, which had a high of 10 per cent NPAs against mere 1.6 per cent by their public sector counterparts last year, have seen a drastic reduction in NPAs - a little over three per cent for the period ending March 2010.
The fall in NPA despite the loan amount being tripled appears quite significant. But this is little comfort as the loan amount outstanding is not even 10 per cent of the loans disbursed by the public sector banks.
The cooperative banks’ disbursement was only around 25 per cent of the total disbursement by rural banks.
High NPAs would dissuade the banks to approve new loans to SHGs. But to fulfil their credit requirement, they may avail loans from micro-finance institutions, who in pursuit of their growth, will be very eager to lend.
“The problem is they take this loan to retire the bank loans to get a new tranche as they carry only nominal interest. But the moot point is in the process the NPAs get transferred to MFI and increased transfer of NPAs to MFIs would see an AP-type crisis here,” said an RBI research officer.