With finance minister P Chidambaram?s Rs 60,000-crore farm loan waiver package is in the implementation process, it seems the assumptions made by the government regarding losses by different categories of banks do not hold. According to estimates provided to the Centre by the National Bank for Agriculture and Rural Development and other financial entities, bad farm loans by co-op banks may be much lower than anticipated while scheduled commercial banks may have lost much more.
The government had originally estimated that the hit on co-operative banks? books on account of the debt waiver would be Rs 37,000 crore and Rs 12,000 crore in case of commercial banks. Regional Rural Banks (RRBs) were expected to have bad farm loans of Rs 11,000 crore. However, initial inputs on the waiver package that was to write off loans that had turned ?bad? as on December 31, 2007 indicate a different picture.
Scheduled commercial banks may actually be the worst hit, with as much as Rs 32,000 crore in farm loan defaults. Anecdotal evidence showed these banks were more inclined to lend to farmers with bigger holdings. On the contrary, non performing assets (NPAs) of co-operative banks? on farm credit accounts may only be Rs 15,000 crore. RRBs? bad farm loans are expected to be marginally higher at Rs 13,000 crore.
Sources said farmers from Maharashtra, Andhra Pradesh , Assam and parts of Karnataka and Uttar Pradesh are likely to be main beneficiaries of the Rs 60,000-crore debt relief package. These states have been identified as main beneficiaries of the package as they suffered the most due to droughts and monsoon failures. The number of farmer suicides has also been maximum in these states. More than 50% of the farmers in the country have no access to institutional source of credit.