Peru's Congress approved a proposal that would revive and financially strengthen Banco Agropecuario, the distressed state-run agricultural lender known as Agrobanco, according to an El Comercio report.
In doing so, Congress discarded an alternative option that would have created a new institution called Mi Agro to take over Agrobanco's assets and liabilities — a plan that had been supported by both the country's finance ministry and financial regulator SBS.
The initiative to save Agrobanco had been approved by the legislative agrarian committee in September.
Under the proposal, lawmakers reportedly would hive off Agrobanco's nonperforming loan portfolio, revamp its board composition and inject 100 million soles in capital that had been earmarked to fund Mi Agro.
Under the plan, Agrobanco's nonperforming loan book would be splintered off into a separate entity outside of the financial system. That new entity's sole purpose would be to manage the loan portfolio. Troubled debtors would also receive accommodation in their repayments by effectively eliminating the interest-portion of their loans and allowing them to only pay down the principal.
Five representatives will lead the revamped Agrobanco board: one each from the finance ministry, the agricultural ministry, and agricultural association Conveagro, as well as two independent members.
Peru's agriculture ministry said in August that it had recovered about 350 million soles of overdue debt owed to Agrobanco after starting with debts totaling some 800 million soles in April. The ministry is aiming to recover another 145 million soles worth of outstanding loans before the end of the year.