Decrease In Farm Loan Lending

The Good news was that Farm loan was waived across the country in various States, but has bounced on its reverse side otherwise.

The waiver by the State Governments has forced banks to hold back on extending farm loan to farmers.  Thus the Farm Loan lending has come down to the tune of 6.8 per cent which is indeed regrettable a report adds.

It is also reported by many bankers that people have stopped repaying loans, in many places, since they have the feeling that the loan will be waived.  The statistics further reads

  • Banks lending to agriculture and allied activities grew 13.4 per cent year on year in July last year
  • The outstanding loans have minimized by 1.8 per cent to 9,743 crore as on July 21st which was 9,924 crores in March.
  • The compensation arrival from Government in the form of a waiver has affected the Balance Sheet.
  • The result is that the quality of assets hae deteriorated and bridge provisions crowd out new loans
  • In 2016-17 the volument of short term crop loans stood at Rs. 6,22,685 crores which surpassed the target of Rs. 6,15,000 crore.
  • The farm loan waiver also has injured the quality of several of the India’s vulnerable vendors. This has resulted in their enhancing the specific provision coverage for their non performing agricultural advances.

Concerns:

  1. Banks are expected to lend 18% of annual net bank credit to farm sector which they may not be able to achieve.
  2. The repeated loan waivers would go against the spirit of lending and bank officials at rural branches are busy in submitting farm loan data to the respective governments to recover their loans.
  3. There is also a likelihood of inordinate delay in sanctioning new loans which would affect the crop cycles.

Author: Admin Bankedge

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