RBI data: Agriculture bad loans jump by 23 percent thanks to farmers’ loan waiver, demonetisation
Banks have witnessed a spike in agriculture bad loans of Rs 11,400-crore in fiscal 2017 to cross Rs 60,000 crore. Demonetisation and farm loan waivers have also added to the woes of the bank. A Reserve Bank of India data NPAs rose over 23 per cent from Rs 48,800 crore in 2016 to Rs 60,200 crore in 2017. Bad loans in the agriculture sector have jumped 142.74 per cent from Rs 24,800 crore in fiscal 2012, indicating distress in the segment in the last five years. The data further shows that the maximum default took place in 2017 while significant four years- 2012 to 2017 only showed defaults of Rs 24,000 crore. Farming sector has a bad loan which constitutes 8.3 per cent of the total banking sector NPAs of Rs 728,500 crore as of March 2017. Farm credit, which forms part of priority sector lending, includes short-term crop loans and medium-term or long-term credit to farmers.
As much as 35.4 per cent of the priority sector NPAs of Rs 170,000 crore are now accounted by farm sector bad loans. Credit to agriculture and allied activities and personal loans saw deceleration in growth to 12.4 per cent (Rs 992,400 crore) in 2017 from 15.13 per cent (Rs 882,900 crore) the previous year, says the RBI’s Trends and Progress in Banking report.
The non-priority sector, largely the industry and infrastructure sectors, accounts for Rs 558,500 crore NPAs or 76.7 per cent of the system NPAs. Inspite of loan waiver issues, farmers are still better when compared to corporates in repayment of loans. Of the total non-priority sector credit of Rs 26,80,000 crore, borrowers have defaulted 20.83 per cent of the credit.
Reserve Bank Governor Urjit Patel had cautioned against increasing farm loan waivers by state governments. He stated that the impact of the loan waiver is directly on the balance sheet of lending instituitions and finances of states and interest rates. However, a former bank CEO questioned the RBI caution on farm loan waivers saying “corporates defaulted on repayments, destroyed credit discipline and culture. Why should farmers be blamed?”
Incidentally, bad loans of small and micro units jumped from Rs 70,800 crore in 2016 to Rs 82,500 crore during the year ended March 2017.