NPAs in farm credit

This is regarding the observation of the RBI Governor about rising NPAs in the farm credit portfolio ( Business Line , July 13).

He has rightly observed that the unrealistic targets by the government on farm credit have led to manipulation of statistics by banks and multi-fold increase in NPAs.

An increase of Rs 4 lakh crore of farm credit in a span of six years defies all logic.

First, shrinkage of cultivable land due to conversion of land for industrial use and housing makes one wonder whether additional credit is needed. Second, with increased farm credit, agricultural output should have increased, resulting in reduction of inflation. But the reality is otherwise.

Third, the rise in NPAs is largely due to a dent in the morale of borrowers, owing to the large-scale farm debt waiver, in which the defaulters benefited and regular repayment was not incentivised.

The Governor has rightly observed that interest subventions are cornered by non-agriculturists and money lenders.

The agricultural jewel loan needs stringent regulation, as it is a haven for moneylenders.

S. Veeraraghavan

Madurai

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