Farm distress worsens as credit growth stagnates, agri loan NPAs surge

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Updated: February 15, 2019 4:50:13 PM

There has been a 40 per cent rise in NPAs of the farm sector as it reached over Rs 1,00,000 crore in September 2018 compared to around Rs 70,000 crore in September 2017.

The Indian agriculture sector has been reeling under distress. The disconcerting condition of farmers has made them resort to practices such as protests or suicides in the recent past. Against this backdrop, the RBI report on “Sectoral Deployment of Bank Credit” sheds light on the probable causes of such a denouement.

While the non-performing assets (NPAs) have surged by over 40 percent in the agricultural sector, the share of the sector in non-food credit off-take has remained stagnant and the bank’s exposure has declined, said the RBI report.

The share of agriculture credit in total non-food credit has remained unaltered at around 13 per cent over the years, primarily due to priority sector lending (PSL), the report said. The total outstanding credit to the farm sector has remained at Rs 10,82,100 crore in November 2018 as against Rs 10,30,200 crore in March 2018, show RBI data.

However, there has been a 40 per cent rise in NPAs of the farm sector as it reached over Rs 1,00,000 crore in September 2018 compared to around Rs 70,000 crore in September 2017.

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“Despite targeted lending, the credit disbursement to agriculture in 2017-18 has deviated from the trend, reflecting drought in some states in the southern region, while expectations of announcement of farm loan waivers have made banks generally averse to lending to this sector. Consequently, exposures of both public and private sector banks has been falling,” the RBI said.

Banking experts feel that the loan waivers and income support scheme announced in the budget may not be enough to revive the sector, rather it requires profound structural changes.

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