As rubber prices hit a six-year low of Rs111/kg, banks in Kerala are starting to take a hit.
Banks like the South Indian Bank and Fedaral Bank witnessed a decrease in CASA (current account, savings account), in the central Kerala area. Simply put, farmers and smallholders have no more money to put in the bank.
“The growth in CASA from these segments has been affected due to the price decline.” VG Mathew, Managing Director and CEO of South Indian Bank, which has a number of clients who are rubber farmers or dealers, told The Hindu BusinessLine.
“In prominent rubber growing regions, such as Kottayam and Tiruvalla, growth has been 9-11% as against the average 25% across the bank. Many other rubber growing areas like Muvattupuzha and Kozkihode are also showing similar trends.”
Meanwhile, rubber smallholders are turning to non-banking financial companies (NBFCs) to loan gold. There was 20% growth in gold loans from May to July, most loaners being smallholdres, a senior official at Muthoot Fincorp told the Businessline.
Money coming in from non-resident Indians cushions the effect of the falling rubber prices, but bankers admit that conditions will worsen if prices don’t go up soon. Rubber is a major contributor to Kerala’s economy, making up 10% of the GDP.
“Any fluctuation in rubber prices will affect people’s lifestyles, especially in the rubber growing areas of central Kerala,” Sibi J Monippally, General Secretary of the Indian Rubber Growers Association told the Businessline.