Insurance claims: Banks receive Rs778m, but keep growers on debt list

‘Lenders never waived off loans of flood-affected growers’.

HYDERABAD:

Banks offering agricultural credit received Rs778 million in crop insurance claims for flood affected areas and have still kept farmers on their debt list, claims Sindh Chamber of Agriculture.

“Claiming insurance implies that a bank has lost investment in a natural calamity and can’t recover from a borrower,” said Sindh Chamber of Agriculture General Secretary Nabi Bux Sathio. “But the regrettable fact is that the banks never waived off loans of the flood and rain-affected growers. This is why we have been demanding waiver of agricultural loans from the government time and again.”

Crop Loan Insurance Scheme (CLIS), launched in 2008, offers protection to a banks investment made through loans especially in wheat, rice, sugarcane, cotton and maize crops. Under the mandatory CLIS, which applies to subsistence farmers cultivating up to 16 acres in Sindh, the government contributes 2% and a borrower 1.5% to the insurance premium paid by a bank to an insurance company. The insurance covers risks including bacterial attacks and all types of natural calamities.

Sindh Agriculture Department in its September report estimated overall loss of Rs217 billion to the agriculture sector with 2.2 million acres of farmland damaged.

Sathio, who wrote a letter to Agriculture Credit and Micro Finance Department of the State Bank of Pakistan seeking details of agriculture loan insurance premium recovered by banks in three years, complains the bank did not provide the required complete details. “Although information about Rs665 million premium reimbursed by the government is written in the letter but the premium recovered from the borrowers is not revealed.”

According to the State Bank, a major chunk of Rs778 million recovered in insurance claims went to Zarai Taraqiati Bank Limited.

A meeting of Sindh Chamber of Agriculture, an organisation representing growers of the province, condemned the announcement of withdrawing subsidy from agricultural loans. “We demand a reduction instead in the mark-up on agriculture credit following the government’s move to curtail interest rates of the commercial banks’ loans by 1.5 percent last week,” said a statement issued after the meeting.

The Economic Coordination Committee (ECC) of the cabinet allowed ZTBL to enhance interest rate by six percent on loans offered to the growers. The bank was providing loans at up to 9 percent mark-up.

Published in The Express Tribune, October 15^th, 2011.