Banks happy, too, as Cong govt waives farmers’ loans

Bhopal: On December 17, Kamal Nath’s first decision, within two hours of assuming office as the chief minister, was to waive off farmer loans of up to Rs2 lakh. This has not only left the debt-ridden farmers happy, but also the bankers. While with the signing of the files, the waiver process has been initiated, the bad loan-laden banks are happy that their headache of recovering loan advances to the non-performing agriculture sector in the state have clearly shifted to the Congress-led MP government’s court.

With low deposit rate, district cooperative banks have limited money for advancing loans. Therefore, scheduled and cooperative banks were under heavy stress from credit towards agriculture and allied sector that stood at around Rs92,976 crore as of June 2018. Again, adding to their stress was the slowing down of loan return, soon after the Congress government announced waiver of farm loans.

Bad credit kept eating banks’ deposit

As per data state-level bankers’ committee (SLBC) data, the credit flow to agriculture and allied sectors increased to Rs92,976 crore during June 2018, recording a 9.20% year-over-year growth. It was Rs85,142 crore in 2017. Agriculture credit of commercial banks grew by 7.60% reaching Rs58,955 crore.

The share of agriculture term loan to total agricultural credit was 23.72% in the first quarter of the current fiscal. However, for the commercial banks it was 32.52% on June 2018, which is slightly higher than the country’s minimum norm of 32%.

Agriculture credit constitutes 34.02% of the total credit portfolio as on June 30, 2018. Ratio between gross non-performing assets (NPA) to gross credit constrained at Rs36,503 crore (or 13.36%) as on June 2018 as against Rs18,773 crore (or 7.89%) as on June 2017.

Ratio imbalanced

  • Gross credit of the banks increased to Rs2,73,313 crore as on June 30, 2018 against Rs2,37,792 crore on June 30, 2017. This registered year-over-year growth of 14.94%, which is higher than 2017’s growth at 13.81%.
  • Talking to DB Post, a senior bank official and SLBC member, on condition of anonymity, said that the stress in the banking sector continues with rising NPA ratio. NPA ratio of banks in Madhya Pradesh rose from 7.89% of total credit in June 2017 to 13.36% by June 2018. In absolute terms, NPA showed 94% increase year over year.