The Gross Non-Performing Assets (GNPA) for the public sector banks (PSBs) in the agriculture sector has surpassed Rs 1 lakh crore mark, according to the Reserve Bank of India (RBI) data.
The GNPA from agriculture sector and allied activities in PSBs stood at Rs 1.04 lakh crore at the end of July 2019 as against a total credit of Rs 9.42 lakh crore. Hence, the proportion of GNPA to total credit is around 11 per cent.
Meanwhile, the increase in Non-Performing Assets (NPAs) over the last year was slightly less than 20 per cent. Sectoral GNPA for the month of June 2018 stood at Rs 86,032 crore, which is about 9.6 per cent of the entire credit for agriculture and allied activities, the Business Standard reported.
The rise in sectoral GNPA in the past two years has been around 30 per cent.
According to bankers, decline in credit culture over the past one year has been due to general elections in the country and anticipation of a debt waiver, the report said.
An internal working group of RBI tasked to assess agricultural credit had said in its recent report that "the instances and scale of farm loan waivers have seen an unprecedented increase since 2014-15. This surge in loan waivers is driven by state governments. Ten states have announced loan waivers aggregating Rs 2.4 lakh crore since 2014-15."
Uttar Pradesh (UP) had given farm loan relief of Rs 36,400 crore in mid-2017. The state of Maharashtra also announced the same for an amount of Rs 30,500 crore in May 2017. Karnataka declared a farm loan waiver of Rs 8,200 crore in June 2017, followed by Punjab in October 2017 for nearly Rs 10,000 crore.
Other states which also announced farm loan relaxation comprise Tamil Nadu, Andhra Pradesh and Telangana.
"The Reserve Bank data shows NPA levels increased for all states that announced a farm loan waiver programme in 2017-18 and 2018-19. On the other hand, almost all other states (with an exception of Bihar, Odisha and Haryana) have shown either no material change in their NPA level or actually registered a decline between 2016-17 and 2017-18. Taken together, this could be indicative of the presence of a moral hazard, with borrowers defaulting strategically in anticipation of loan waiver," the RBI said.
Meanwhile, the PSBs have been restructuring their strategies on agricultural loans. In lieu of short-term credit, they are now favouring long-term agri infrastructure credit as the odds of likely defaults are low, the report added.