Falling rubber prices in Kerala are not only affecting the growers but also banks. With prices plummeting to a six-year low of ₹111 a kg, growers’ savings have reduced and fresh loans to the sector have slowed, according to bankers in the State.
South Indian Bank, for instance, has seen its CASA (current account, savings account) deposits in the rubber growing areas of central Kerala decline. Federal Bank, too, has seen its client accounts come under pressure, although the overall impact on savings accounts has been mitigated by higher remittances from NRIs following the recent rupee depreciation.
Low-cost deposits hit
VG Mathew, Managing Director and CEO, South Indian Bank, which has a sizeable number of clients who are rubber farmers or dealers, told BusinessLine that “the growth in CASA from these segments has been affected due to the price decline.
“In prominent rubber growing regions, such as Kottayam and Tiruvalla, growth has been 9-11 per cent as against the average 25 per cent across the bank. Many other rubber growing areas like Muvattupuzha and Kozkihode are also showing similar trends.”
KA Babu, Head of Retail Business at Federal Bank, said that rubber prices had not yet impacted the bank’s CASA deposits, largely due to the increase in money flow through non-resident accounts (up nearly 32 per cent).
Also, the bank’s increased pan-India reach, according to him, cushions short term location-based challenges.
He did, however, concede that there may be an impact in the long run if the downtrend in rubber prices continues and the rupee gathers strength.
A senior official in the State Bank of Travancore, Kottayam Zone, said that while CASA has been stable, credit offtake in the rubber-growing areas has fallen 20-25 per cent.
Meanwhile, NBFCs dealing in gold loans registered a growth in business, especially in central Kerala. A senior official at Muthoot Fincorp said that there was, on an average, a 20 per cent growth in gold loans during May, June and July and the demand came mostly from small farmers with small landholdings.
According to Sibi J Monippally, General Secretary of the Indian Rubber Growers Association, rubber is the mainstay of Kerala’s economy, accounting for 10 per cent of the State’s GDP. “Any fluctuation in rubber prices will affect people’s lifestyles, especially in the rubber growing areas of central Kerala,” he said.