Some lenders could see a rise in bad loans owing to loan waiver schemes likely to be announced across states, Kotak Institutional Equities said in a report on Tuesday, adding that it was not able to take any conclusive decisions on the outcomes of such loan waivers as performance across states has not been uniform. It said that Uttar Pradesh and Punjab are critical states given that the banks have around 10% of loans in those states, mostly in the agriculture sector with high share of overdues between three and 10% across banks.
Public sector banks, have higher exposures in this segment as compared to private banks. “PNB would have the maximum impact from the size of its balance sheet given its strong exposure in this Indo-Gangetic belt while SBI will have the largest impact given its scale of business,” it said. RBI data showed banks have exposure to the tune of Rs 9.2 lakh crore to agriculture and allied activities for the fortnight ended January 20.
SBI has lent Rs 62,300 crore in UP, of which Rs 11,400 crore are crop loans as on Q1FY17. For PNB, loans in UP amount to Rs 55,700 crore, of which Rs 10,100 crore in the same period.
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“The performance in UP appears to be quite comfortable as banks have been able to reduce overdues by 15% ahead of the elections and growth in loans has not been too strong as expected ahead of any election,” the report said.