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LATEST NEWS UPDATES | Agri-credit disbursement: Banks worry as states with most loans talk about waivers -Anil Sasi

Agri-credit disbursement: Banks worry as states with most loans talk about waivers -Anil Sasi

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published Published on May 1, 2017   modified Modified on May 1, 2017
-The Indian Express

UP, Maharashtra, Punjab, Tamil Nadu account for 36% of total agri-lending in FY17 till December

New Delhi:
AMID EARLY signs of farmers in Maharashtra starting to default on their farm loans in anticipation of a waiver on the lines of the one announced in Uttar Pradesh, what is adding to the worries of banks and other lending institutions is that the four states where such waivers are under discussion figure on the list of the top five states in terms of agri-credit disbursements. Apart from Uttar Pradesh, Maharashtra, Punjab and Tamil Nadu have seen the maximum agri-credit disbursements in three of the last four years (see box). In the first three quarters of FY17, these four states accounted for 36 per cent of the total Rs 8.08 lakh crore disbursed across 36 states and Union territories. Beyond the overwhelming shadow of these four states on the agri-lending map of India is the worry that periodic farm loan waivers could further deteriorate the credit culture, a point that was flagged by the chief of the country’s largest state-owned bank last month.

“We feel that in case of a (farm) loan waiver, there is always a fall in credit discipline because the people who get the waiver have expectations of future waivers as well. Such future loans often remain unpaid,” State Bank of India (SBI) chairman Arundhati Bhattacharya had said on the sidelines of an event in Mumbai on March 15. Bhattacharya was echoing worries flagged earlier by former Reserve Bank of India (RBI) governor Raghuram Rajan — that “repeated loan waivers by various state governments distort credit pricing, thereby also disrupting the credit market”. On April 4, at its first Cabinet meeting, the new BJP government in Uttar Pradesh had decided to waive farm loans totalling Rs 36,359 crore, potentially putting pressure on other state governments to follow suit.

The decision came on a day the Madras High Court directed the Tamil Nadu government to write off loans of all drought-hit farmers in the state, which would entail an additional burden of Rs 1,980 crore on the state government. On April 6, Maharashtra chief minister Devendra Fadnavis indicated that the state government was favourably disposed towards the demand for a waiver and was “studying” the UP model. Intervening in a debate sparked by strong opposition protests, joined by ally Shiv Sena, Fadnavis said he had asked the state’s finance secretary to get the details of the UP model and find out if it was feasible for implementation in Maharashtra.

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The Indian Express, 1 May, 2017, http://indianexpress.com/article/business/banking-and-finance/agri-credit-disbursement-banks-worry-as-states-with-most-loans-talk-about-waivers-4634825/


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