Farmers defaulting to pay back debts to banks, expecting loan waive off

Andhra Pradesh, Telangana, Uttar Pradesh and Maharashtra have agreed to the farmers demand for a complete loan waiver. Though this decision of these states is putting pressure on other states also, especially where the polls are due. The banks are also facing the challenge as this decision has highly impacted the financial situation of the state.

Farmers across states have stopped repayment of money owed to financial institutions. Several bankers have reported to TOI that farmers are refusing to clear dues, and this issue was raised during the meeting also held on Monday, between the finance ministry and heads of different banks. The total farm loans are estimated at a little under Rs 10 lakh crore.

Farmers are withdrawing money from their accounts and emptying it, in order to prevent the banks to deduct money from their accounts. The default rate of the farmers refusing to pay back debt has increased to 50% in different states.

As the record shows, loan waivers have always been difficult for the banks. After N Chandrababu Naidu won the assembly polls in 2014, he had waived off loans of over Rs 40,000 crore and bank chairmen said that it was getting difficult to get dues from Andhra.

Loan waivers or relief from governments help clear our books as far as defaults are concerned but it impacts the overall payment culture badly in the long run,” said a bank head. SBI chairman Arundhati Bhattacharya, too, had recently warned: “Support to farmers is necessary but not at the cost of credit discipline.”