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Punjab loan waiver: Banks fear rise in NPAs

Even as Punjab government is yet to work out the modalities to implement its farm loan-waiver scheme, banks fear rise…

Punjab loan waiver: Banks fear rise in NPAs

(PHOTO: IANS)

Even as Punjab government is yet to work out the modalities to implement its farm loan-waiver scheme, banks fear rise in their non-performing assets (NPAs) due to non-payment of agriculture loans.

The Chief Minister Captain Amarinder Singh announced the loan waiver in the recently concluded budget session of the Assembly, but the banks are yet to receive any communication from the government regarding it.

“With a provision of only Rs. 1,500 crore in the state budget, we really don't know how and when the scheme will be implemented. But we really fear rise in NPAs as farmers may stop paying the farm loans on the basis of government announcement,” said a senior official of a public sector bank on the condition of anonymity.

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The official expressed apprehension that the government wants the farmers to stop paying loans so that it could bargain with banks for waiving off the loan interest amount or negotiate payment of such loans in installments as announced the CM.

When it comes to farm loans, banks in Punjab currently have NPAs of less than six per cent but banks fear the same would go up in coming months as many farmers have already stopped paying farm loans in hope of government scheme.

Recovery of agriculture loans has already gone down in the state by over 10 per cent in past one year. "There is about 50 per cent drop in recovery of farm loans. Even farmers who are competent to pay loans have stopped paying agriculture loans as they expect the state government to waive off the loans as promised in the (Congress)," the convener of State Level Bankers Committee (SLBC) and Punjab National Bank general manager (Punjab), PS Chauhan said after the SLBC meeting on 30 May.

As of March 2017 data with the SLBC, the total farm loans in Punjab are over Rs 72,000 Crore. Out of this, about Rs. 36,000 crore loans have been taken by small and marginal farmers who are expecting for farm loan waiver. The Punjab government scheme would, however, cover only 10.25 lakh small and marginal farmers who own farm land up to 5 acres and are having loans up to Rs. 2 lakh or more.
CM Captain Amarinder Singh maintains that full implementation of the scheme would require Rs. 9,500 crore and farm loans will be settled with banks in instalments in four to five years.

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