Wa_ithaka wrote:VVs- some bs i need to correct. Equity actually recognises all its npls equally (I believe 90 days of non-repayments). That is why if you recall 2 yrs, we had a lot of Safcom IPO guarantors complaining about getting those guarantees called in by Equity.
For farmers, a loan will become npl if its not repaid as scheduled i.e. on the date after harvest payments are due. Once a loan becomes NPL, there are variuos ways of proceeding with it. You can write-off a portion of it and reschedule the rest based on wether forecasts and discussions with farmers concerned. Write-off the whole amount...
I was not targetting Equity but overall banks who lend to farmers.
This is what the banker told me:
1) They do not expect repayment until harvest (say 6-9 months after lending)... so a loan going bad (coz it does not rain) is already 6-9 months out. Still considered 'good' loans. No provisions.
2) When the repayment fails, they give the farmer 3 months (so now at 9-12 months) to find alternates. Then classified as NPLs but not provided for. All loans are graded 1-5 but only provided for if 4 or 5.
3) If the farmer still can't pay, then they enter into settlement negotiations with the farmer. Provisions are then made. The loan will not be written off unless there is no chance of recovery.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett