Friday , 23 March 2018

Banks ready to face up to mining shutdown

shoma patnaik | NT



With just two days to go for the Supreme Court ban on mining operations to come into effect, banks in Goa on Tuesday claimed that they are better prepared to handle the industry shutdown.

Officials of several public sector and urban co-operative banks told ‘The Navhind Times’ that the  incipient  mining closure although a matter of concern would not push banks to the wall, in terms of spike in non-performing assets.

“The mining shutdown will affect future proposals but it will not result in fresh NPAs,” said Yogish Acharya, deputy general manager of Canara Bank in Panaji.

He said that with the reduction in exposure to the mining sector and settlement of previous mining loans, the NPA position of banks has improved.

“Mining is not everything and banks have opened up to other industries,” pointed out Acharya, adding that the bank is pursuing hospitality sector aggressively along with related business such as medical tourism.

Most bankers claimed to have diversified their loan portfolio to withstand the oncoming shock of mining closure.

According to Prashant Naik, Goa zonal manager, Bank of India, the bank has modified its business module.

“In the changed scenario our risk exposure to mining is less,” Naik claimed.

Several public sector and urban co-operative banks continue to hold previous mining NPAs on their books. But officials from these banking institutions said that they are financially stronger currently and geared to absorb shocks.

The officials said that even mining dependants have developed multiple sources of income and therefore are not likely to be in dire straits as they claim to be.

An official of Goa Urban Co-operative Bank said that whatever happened in the 2012 mining

closure will not happen again and the bank is not extending fresh loans to truckers.

“About 80 per cent of our mining loan portfolio is already settled through the government one-time settlement scheme and we are not financing mining activities,” said Anant Chodankar, managing  director of Goa State Co-operative Bank.

In 2012, banks in Goa faced a major jolt when the mining industry shut down for the first time. Banks that had extended generous loans to mining truckers and barge owners landed with huge NPAs on their books as the borrowers defaulted on loan repayment.

The total exposure of banks to the mining industry was estimated at over Rs 1,700 crore and loan servicing took a major hit.

Subsequently to bail out the borrowers, a one-time settlement scheme was launched by the state government that initially lasted from September 2014 to September 2016.

The OTS scheme was reopened on October 2017 and will be in force till March 31, 2018.

The banks have said that they reduced exposure to mining loans through a combination of OTS and write-offs.

“We cleared off our mining loans by availing the government scheme and by entering into compromise settlement with borrowers,” Acharya said.

He said that banks are financially stronger currently and in better position to face the second mining industry closure.

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