The recent deal between Adani Capital and the State Bank of India has raised eyebrows. State Bank of India was known as the people’s bank, and it could rightly claim that it was ‘the largest bank serving the smallest man.’ Since the year 1991, things have changed. Small credit in SBI has declined. SBI has been fined a few times by the Reserve Bank of India, which was earlier unheard of. SBI has not refunded Rs 164 crore collected from financial inclusion accounts, which has been criticized. There is a worldwide campaign against loans to the Adani Group for their coal project financing in Australia. When the SBI joined the Jio Payment Bank, it was called the camel into the tent. SBI has already burnt its fingers by financing Anil Ambani’s Group. Now the deal with Adani Capital is seen as SBI caving in too much to corporate interests.
Why did SBI get into such a bad deal?
As per the press release of SBI dated December 2, 2021, SBI has signed a master agreement with Adani Capital Private Ltd, the NBFC arm of Adani Group for co-lending to farmers for purchase of tractors and farm implements, to increase efficiency in farm operations and productivity of crops. SBI is actively looking at co-lending opportunities with multiple NBFCs for financing farm mechanization, warehouse receipt finance, farmer producer organisations etc. for enhancing credit flow to double the farmers’ income, stated the SBI release.
The question is why SBI has to get into an agreement with such a small company when SBI already has 22,219 branches. SBI already has Rs 1.37 crore ‘farmers credit accounts’ and an outstanding farm credit of Rs 1,96,268 crores. It has supply chain credit with 28,000 dealers, 14,000 vendors and various companies. SBI also has 71,968 Business Correspondents outlets (as of March 2021).
As per the Business Line issue dated Oct 26, 2021 the Adani group has an outstanding loan of Rs. 1,56,115 crore. So Adani Group is the most indebted company, as stated in the Credit Suisse report. National Securities Depositories Ltd reported in May 2021 that it froze the accounts of 3 Mauritius based companies which owned Rs 43,500 crore equity in Adani Group. (The Adani group disputes that.) The group keeps borrowing more and more to keep itself afloat.
Adani Capital started its operations only in 2017. It has a capital of just Rs 20 crore. It has only 63 branches with 738 employees in 6 states namely Maharashtra, Gujarat, Rajasthan, Karnataka, Uttar Pradesh and Tamilnadu. It has just 28,000 customers with an outstanding loan of Rs 1292 crore and a gross NPA of 1.38% already. Not only that, but it also has a loan limit of Rs 1476 crores from SBI, PNB, Indian Bank, Canara Bank, PSB, Union Bank, Central Bank, BOI, SCB, DBS, ICICI, Axis, IDFC, Yes Bank, Karnataka Bank, Federal Bank, HDFC and NABKISSAN. While Adani capital is borrowing left and right from everywhere, it has not been able to utilize its own current credit limit.
Adani Capital will influence
In no way, Adani Capital is going to help SBI to increase farm credit. But it can use the name and infrastructure of SBI to approach the farmers. The Adani capital will influence the branch managers of SBI to provide credit to the farmers and advise them about what to grow, where to sell, where to store and dictate them using SBI as its trump card. The NPAs will definitely increase soon, corruption will enter into lending because of these brokers. The farmers will be at the mercy of Adani.
Adani capital will be using the bank’s money to have control over farmers similar to what existed before nationalisation. Those days the moneylenders were the dealers of fertilizers, pesticides and seeds and also purchaser of the farm outputs at rates decided by them. Giving loans to NBFCs which are modern day ‘Shylocks’ is bringing a bad name to SBI.
SBI has to be role model
SBI, the largest bank in the country and the largest bank in the world in terms of number of branches and staff, has to once again become a role model. As a public sector bank, SBI’s role is that of the state which is a sovereign, socialist, secular, democratic republic and to secure for all its citizens, justice, social, economic and political; equality of status and opportunity. Therefore, it has the obligation to uphold the principles of a welfare state spelt out in the constitution of India. It cannot become a slave to the corporates and serve their vested interests.