In Punjab, banks seek audit of farm loans by RBI

CHANDIGARH: Banks in Punjab have approached the RBI to check reckless lending to agriculture sector and sought a special audit. According to bankers, some of the banks are flouting norms and sanctioning crop loans against the value of land instead of yield, thereby affecting the servicing of loan.

Illustration: Sandeep Joshi

Vijay C Roy

Tribune News Service

Chandigarh, February 15

Banks in Punjab have approached the RBI to check reckless lending to agriculture sector and sought a special audit. According to bankers, some of the banks are flouting norms and sanctioning crop loans against the value of land instead of yield, thereby affecting the servicing of loan.

“Few of the banks are sanctioning agriculture loans more than the scale of finance prescribed by National Bank for Agriculture & Rural Development (Nabard) and the state government, resulting in farmers being over financed as compared to the land they are cultivating. Further, a large number of farmers are getting multiple loans from different banks. Due to over financing, farmers are not able to service their loans and are under distress,” said PNB general manager PK Anand and convener, State Level Bankers’s Committee.

“We have suggested that the banks should be asked to strictly finance within scale of finance and, if feasible, RBI may conduct a special audit. We have also requested the state government to digitise 100% revenue records to avoid over lending,” he added.

The total institutional debt of farmers in the state was Rs 77,229 crore as on December 2018 in case of agricultural loans.

According to the bankers, the debt of the farmers has grown manifold in the state in the past five years as compared to the income, resulting in indebtedness.

Acceding to the request of PNB, it was informed that a committee constituted by the RBI was studying the loan disbursement pattern to the farmers.

“The uneven pattern of loan disbursement is a cause of concern for the banks. For example, one bank gives Rs 60,000 crop loan for a particular acre, while the other bank lends Rs 1.5 lakh for the same area,” a banker said.

Officials feel most of the unmanageable debt was given for non-agricultural purposes, largely to address social needs of the farming community.

The over-lending by banks has affected the recovery of loans. In the past one year, the NPAs of the banks under farm loans have increased by 2%. In absolute terms, the NPAs have increased by Rs 1,335 crore during the last year.

Current scenario

Outstanding loans Rs 77,229 cr (as on Dec’18)

NPAs (as on Dec’18) Rs 7,949 crore

NPAs (as on Dec’17) Rs 6,611 crore

Average debt of farmer Rs 5.75 lakh