Bank Gets Right to Give Out Credits

Russia's biggest private bank, SBS-AGRO, has secured the right to distribute 2.8 trillion rubles ($489 million) in government agriculture loans in a deal decided without any bidding process.


Under a March 20 agreement, the Finance Ministry will place the money, earmarked for credits to Russian agriculture, in an account with SBS-AGRO subsidiary Agroprombank by March 31. Agroprombank will disperse the funds to agricultural borrowers based entirely on its assessment of their credit worthiness.


"We are ready to credit any sort of farming -- state, collective or private -- so long as we judge the borrower can pay the money back," SBS-AGRO spokesman Sergei Mesherekov said.


The bank will issue up to one-year loans on lenient terms, with interest not exceeding one-quarter of the Russian Central Bank refinancing rate -- currently 42 percent a year -- SBS-AGRO said in a statement.


The distribution of the funds among Russian regions will be decided by a government committee in consultation with the bank, Mesherekov said, although Agroprombank alone will decide who gets loans.


The government will allow SBS-AGRO to take a 4 percent commission on all the loans it makes from the fund, according to the statement.


But the main advantage for the bank is the presence of such a large sum of money in its accounts, according to one analyst.


"The money won't go to farmers immediately, so the bank will be able to make more money with it in the meantime," said Sergei Komlev, chief analyst with United Financial Group in Moscow.


SBS-AGRO is keen, however, to prove that it will not draw out dispersal of the funds for too long. The bank officials announced they have opened credit lines totaling 168 billion rubles to Russian agro-industry borrowers this week, anticipating the receipt of the government funds.


Banking analysts said a bidding process for the right to manage the loans would have been desirable, but the choice of Agroprombank probably had more to do with the urgency of getting the money to farms than with an insider deal between the government and SBS-AGRO.


"It would be better if there were four banks doing this instead of one," Komlev said. "But farmers need the money quickly for seeds and gasoline, and Agroprombank can reach them through its 1,200 branches around Russia."