Even before the impact of farm loan waiver hits banks, there is some bad news on their agricultural loan front. According to a statement given by Finance Minister Arun Jaitley in Lok Sabha, gross NPAs for agri loans have been rising since 2015. The gross NPAs of banks on account of agriculture and allied activities stood at Rs 37,853 crore in March 2015. It saw a sharp surge and went up to Rs 51,964 crore in March 2015 and is at Rs 62,307 crore as of March 2017.
The gross NPA ratio, that is, the percentage of NPAs to total advances (loans), also shows a similar pattern. From 4.6 per cent in 2015, it has gone up to 5.44 in 2016 and 5.61 in 2017.
Recently, HDFC said that 60 per cent of their incremental bad loans was from agri segment. In anticipation of loan waivers, farmers from several states were avoiding loan repayments.
A recent paper by Credit Suisse estimated that farm loan waivers across eight states including Madhya Pradesh, Rajasthan and Punjab would cost under Rs 2 lakh crore, with that amount spread over a few years.
Agriculture NPAs for all large state-owned banks have risen in the last six years. SBI’s NPAs have risen from 3 per cent of loans in March 2010 to 6 per cent in March 2016, while Canara Bank’s NPAs from the sector have increased to 3.21 per cent in March 2016 from 1.84 per cent in March 2010. Punjab National Bank’s NPAs have increased to 6 per cent from 3.65 per cent while Bank of Baroda’s NPAs have risen the sharpest to 10.74 per cent from 3.33 per cent.
The latest economic survey has also sounded alarm against farm loan waivers saying that if all states start offering them, the total burden could swell to Rs2.7 lakh crore and cause deflationary shock to an economy yet to gain full momentum.
So far, Uttar Pradesh, Karnataka, Maharashtra, Punjab, and Tamil Nadu have announced farm loan waivers.
“Loan waivers could reduce aggregate demand by as much as 0.7 per cent of GDP, imparting a significant deflationary shock to an economy yet to gain full momentum,” the survey said.
