Farm loan write-offs touch Rs 4.7 trillion in last 10 years, says report

Various states have cumulatively written off a whopping Rs 4.7 trillion of farm loans in the past one decade, which is 82 per cent of the industry-level bad loans, according to a report.

In FY19, farm loan NPAs jumped to 12.4 per cent or at 1.1 trillion of the Rs 8,79,000 crore of total bad loans in the system, up from Rs 48,800 crore or 8.6 per cent of the total NPAs of Rs 5,6,6,620 crore in FY16, the report by SBI Research said.

"Even though agriculture NPA was only Rs 1.1 trillion or 12.4 per cent of the overall NPAs in FY19, if we accounted for Rs 3.14 trillion worth of farm loan waivers announced in the last decade, agri NPAs/burden for the exchequer/banks could be as much as staggering Rs 4.2 trillion and if the latest Rs 45,000-51,000 crore of write-offs announced by Maharashtra (second in three years) this it could be at Rs 4.7 trillion which is 82 per cent of the industry level NPAs," the report claimed.

It can be noted that since FY15, ten of the largest states announced farm loan waivers worth Rs 3,00,240 crore to alleviate the indebtedness of farmers and the spate of suicides. If the numbers announced by the Centre under Manmohan Singh regime in FY08 is counted, this goes up to around Rs 4 trillion.Of this, over Rs 2 trillion have been made since 2017.

In FY15 Andhra announced to write off farm loans worth Rs 24,000 crore, in the same year Telengana too did so involving Rs 17,000 crore. FY17 saw Tamil Nadu announcing write-offs of Rs 5,280 crore. FY18 witnessed Maharashtra writing off Rs 34,020 crore; Uttar Pradesh (Rs 36,360 crore); Punjab (Rs 10,000); and Karnataka (Rs 18,000 crore), and another Rs 44,000 crore in FY19.

In FY19, Rajasthan written off Rs 18,000 crore, Madhya Pradesh (Rs 36,500 crore), and Chhattisgarh (Rs 6,100 crore) and Maharashtra's Rs 45,000-51,000 crore announced last month is the latest.

But, it is entirely a different matter that most of these write-offs have been only in paper as actual write-offs have not been more than 60 per cent, while the lowest delivery has 10 per cent in Madhya Pradesh.

Another interesting finding is that the years when farm loans were written off, there has been a massive fall in fresh farm loan intake. For instance in FY18, when Maharashtra, Karnataka and Punjab announced farm loan waivers, the annual growth in fresh loan disbursement was a whopping (minus) - 40 per cent in Maharashtra, a paltry 1 per cent in Karnataka and 3 per cent in Punjab, the report noted.

Over the years, kisan credit cards have became one of the most popular for agricultural loans, mainly because of the interest subvention scheme and the 5 per cent incentive for prompt repayment incentive offered by the Centre (for up to Rs 3 lakh per borrower).

At the end of March 2019, the KCC loans aggregated to about Rs 6,68,000 crore constituting about 60 per cent of the total agricultural loans.

Majority of our farmers are indebted because around 70 per cent of the farm land is being cultivated by tenant farmers and not land-owning farmers, and hence is not entitled to getting any benefit, as being not the owner of the land.

Also, barring Kerala, which has enacted the Money Lending Act, protecting borrowers from usurious rates of interest that incidentally protected tenants from excesses in private debt, no other state offers such legal safeguard to farmers.

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