Banks are likely to receive their dues related to farm loan waivers from the state governments by the end of September or latest by early October, two bankers with direct knowledge of the development said. “We are hoping that either in this quarter or early next quarter we would be getting the money from the governments,” a senior official with a state-run banks said. So far this year, four states — Uttar Pradesh, Maharashtra, Punjab and Karnataka — have announced farm debt waivers for small and marginal farmers. The total amount of loans waived exceeds Rs 85,000 crore, data from the states showed. “Uttar Pradesh was the first state to waive farm loans and we expect it to be the first state to clear its dues,” a banker with another public-sector lender said. “Recoveries are happening in other sectors, but in agriculture it would depend on how these schemes are approved. We should get it by September or early October,” he said.
While Uttar Pradesh had announced a waiver for crop loans of up to Rs 1 lakh for nearly 87 lakh small and marginal farmers, Punjab had waived off farm loans of up to Rs 2 lakh for farmers with less than 5 acre of land and loans of Rs 2 lakh for farmers with a larger land holding, which is likely to benefit about 10.25 lakh farmers. Maharashtra had said it would waive loans of up to Rs 1.5 lakh for about 87 lakh farmers. Karnataka had said it would waive crops loans of up to Rs 50,000, a move that is likely to benefit more than 22 lakh farmers. Farm loan waivers have been a cause of concern for lenders struggling with a massive bad loan crisis as it increases the risk of default in farm loan repayments.
Though the government reimburses crop loan waivers, such schemes impair credit discipline and could lead to higher NPAs, bankers said, adding that they remain cautious about the agriculture sector. The overall gross NPAs for 41 listed banks increased to Rs 8.28 lakh crore (10.4%) as on June 30, 2017 from Rs 7.65 lakh crore (9.5%) as on March 31, 2017. The gross NPAs are likely to increase to Rs 8.8-9.0 lakh crore (9.9-10.2%) by March 31, 2018, Icra said in a report on Thursday. With fresh slippages of 6.3% (annualised) in April-June as against 6.2% (annualised) in January-March, the asset quality pain for Indian banks continues, Icra said. “The announcement of farm loan waivers by four state governments (so far in 2017-18) and the potential announcement by several others pose a major fiscal risk over the medium term,” the Reserve Bank of India said in its Annual Report on Wednesday.
By Shamik Paul