Thu. Mar 28th, 2024
FarmersFarm loan waivers in states may put squeeze on lending

After the top officials of NITI Aayog gave a thumbs-down to the farm loan waiver scheme by several state governments, now the Public Sector Banks(PSB) have gone against the grain and registered their dissent over the scheme.

The bank officials believe that post-relief, farmers start skipping repayments which adversely impacts bank finances. The banks, in turn, refrain from giving fresh loans until the government reimburses them. This leads to a slowdown in credit supply to farmers which in turn pushes them to nonbanking sources of loans

The State-Level Bankers’ Committee cited the latest data on farm-related Non-Performing Assets(NPA) in Madhya Pradesh doubled to 10.6% of advances in a little over three years between 2014-15 and June 2018. Also, in the period of just one-year ending in June, NPAs on farm loans in rose by 24% in MP.
A bank executive on the condition of anonymity told the media that agricultural loans worth Rs 1.47 lakh crores are outstanding in Madhya Pradesh, Rajasthan, and Chhattisgarh. He questioned that if the banks don’t get repaid, where will the funds for giving loans in the next cycle come from.
Another bank official expressed his apprehension over a possible rise in loan defaults spreading to other states as well because of the expectations for such a waiver.
He called it a “spiral impact on credit repayment culture”.  He added that these states might suffer from a rise in defaults.
One thought on “Bank officials in Madhya Pradesh express dissent over Farm Loan Waiver”
  1. Farmers are always suffering and something should be done by governments to save them.My name is Martin tony. I have been working as freelance writer for the past few years. The trendessays is a best platform for the new writers. It encourages new writers to share their ideas and thoughts.

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