Banks’ NPAs up 37%, courtesy Punjab’s debt-waiver scheme

Vijay C Roy

Tribune News Service

Chandigarh, August 14

Wilful defaulters of farm loans in Punjab may be debarred from getting financial support from any bank in future as bankers are startled by a whopping 37% jump in non-performing assets (NPAs) pertaining to agriculture sector of Punjab in the past one year.

Though the state government had announced a loan waiver scheme for small and marginal farmers up to Rs 2 lakh, the rate of default is quite high among rich farmers whose loan amounts are much beyond the Rs 2 lakh cut-off. They are not servicing their debt in anticipation that the government would eventually waive their loans because of ensuing General Election, bankers working for commercial and cooperative banks said.

Farmers’ default has already started affecting farm credit in Punjab. The total crop loan disbursement has declined by 30% in the first quarter of the current fiscal. Against the target of Rs 28,078 crore, the banks disbursed only Rs 19,701 crore on the grounds that the defaulters are not eligible to avail fresh loans.

Banks’ NPAs under agriculture loans have risen sharply by 37% to Rs 7,858 crore as on June 30 as compared to Rs 5,731 crore a year ago. The bad loans are around 9.52% of the total agricultural credit of Rs 82,501 crore.

The Punjab government had issued the debt waiver notification on October 17 last year. In around 10 months, the state has disbursed around Rs 1,750 crore to the marginal farmers who had taken loans from the cooperative banks.

“The announcement of debt waiver scheme for farmers has adversely affected the recovery process as farmers have stopped making repayment of their crop loans. Even rich farmers, other than small and marginal, are not making repayments in the hope of debt waiver,” PNB General Manager and convener, State Level Bankers Committee (Punjab), PK Anand said. The quarterly review meeting of the committee was held in Chandigarh on Tuesday.   

Bankers say farmers are under impression that once they repay their debt, they would not be eligible for the state-announced debt waiver. “The repayment made by them will not affect their eligibility for debt waiver as the cut-off date for determining the eligibility is fixed at March 31, 2017,” Anand said.

The bankers added that accounts of small farmers are slipping into NPAs, making the banking sector’s recovery a Herculean task. It is not only adversely affecting their CIBIL (Credit Information Bureau India Ltd) records but they have also being deprived of the interest subvention available for regular payments.