Farm-loan waivers turn nightmare for banks -G Naga Sridhar

-The Hindu Business Line

Farmers in election-bound States have stopped repaying in anticipation of write-offs

Hyderabad:
The increasing demand for farm-loan waivers and slippages in existing loan repayments by farmers in anticipation of write-offs are giving banks a nightmare.

Apart from drawing the attention of policy makers and political pundits, last week’s mega farmers’ rally in the national capital has also created tremors among bankers.

“The expectation of agricultural loan waivers next year when elections to the Lok Sabha and some key States are slated to be held is so high that some farmers in many States have gone slow on their repayment, leading to a bigger bad loan portfolio,’’ said a senior official of a leading public sector bank.

While overall data for banks are not available yet, individual cases of election-bound States with loan write-off prospects show increase in agri NPAs.

In Telangana, which is going to polls on December 7, NPAs went up by ?18,194.49 crore in the quarter ended June 2018. Similarly, non-performing assets in agricultural loans had increased by ?4,795 crore in the quarter. While NPAs in agri term-loans crossed 12 per cent, bad loans in total agriculture advances stood at 7.70 per cent.

The NPAs in total outstanding agricultural advances touched 23-30 per cent across States. Bankers are expecting a major announcement in the ensuing Union Budget about waiver of certain categories of farm loans and are gearing up to face it.

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The Hindu Business Line, 4 December, 2018, https://www.thehindubusinessline.com/money-and-banking/farm-loan-waivers-turn-nightmare-for-banks/article25665398.ece?homepage=true

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