Agri Business

Loans to agri sector see sharp rise in NPAs

G Naga Sridhar Hyderabad | Updated on August 07, 2019

In what could be a major cause of concern about the rural economy and health of banks, bad loans in the agriculture sector are on the rise with a marked increase in fresh slippages in some banks.

Going by the first quarter numbers of banks, an increase of up to 3 per cent is seen in non-performing assets (NPAs) under this portfolio on a year-on-year basis, as well as sequentially, with individual variation among banks.

State Bank of India (SBI) registered a 13.08 per cent rise in NPAs as on June 30, 2019, against 11.60 per cent in the same period last year. The increase was more when compared to the June 2018 and June 2017 period.

Fresh slippages almost doubled in the first quarter of this fiscal at ₹4,239 crore, against ₹2,560 crore in the year-ago period. For Canara Bank, NPAs in total agricultural advances surged to ₹5,261 crore (₹4,136 crore) at 5.7 per cent of gross advances.

A noteworthy feature is the increase in bad loans even when there was little or no increase in agricultural lending in the last one year.

In Allahabad Bank, for instance, agri advances decreased by 0.25 per cent in June 2019. But fresh slippages in the agricultural sector were at ₹1,127 crore, representing 38.5 per cent of total slippages. As a percentage of gross credit, NPAs had gone up to 2.47 per cent in the first quarter of the current fiscal, from 1.11 per cent in June 2018.

The same is the case with Bank of India. Even though agricultural advances decreased by 0.28 per cent, agri NPAs surged to ₹9,603 crore from ₹6,557 crore.

Private lenders also hit

Some private sector banks are also not immune to the trend. At ICICI Bank, of a total retail slippage of ₹1,511 crore during the first quarter, the Kisan Credit Card portfolio has a slippage of ₹452 crore.

A senior official with ICICI Bank attributed the stress in the Kisan Credit Card portfolio to farm loan waivers. “There has been stress mainly from the farm loan waiver schemes, which have been announced in various States,” he said.

A top executive with SBI, too, concurred by saying: “The recent elections and loan waiver schemes, or expectations about them, have destroyed the credit culture in an otherwise normal repayment culture.”

Interestingly, there is a dichotomy. On the one hand, schemes such as PM Kisan Samman and Rythu Bandhu in Telangana have been handing out sops to farmers under income support schemes, but on the other hand, there has been a surge in bad loans.

Published on August 07, 2019

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