Elevating agriculture lending targets aggressively in modern several years has led to overleveraging. Deterioration in credit rating lifestyle on the back of farm loan waivers and diversion of money (as pointed out by the RBI’s report on agriculture credit rating past September)is also a expanding result in for get worried.
The March quarter results of PSBs recommend that all of this has led to a sharp increase in delinquencies in agri loans. For occasion, Central Bank of India has witnessed its agri NPA ratio spike to fourteen.7 for every cent in FY20, from nine.7 for every cent in FY19. Bank of Maharashtra’s agri NPA stood at practically 26 for every cent of its agri loans in FY20, up from 19.3 for every cent in FY19. Union Bank, which experienced agri NPAs at just six for every cent of loans in FY18, described 11.eight for every cent NPA ratio in FY20.
SBI, the country’s largest loan provider, has also witnessed agri NPA ratio climb to 15.eight for every cent in FY20, from 11.two for every cent two several years in the past. For HDFC Bank, far too, though its overall asset high-quality has been beneath look at, it has been witnessing signs of anxiety in its agri portfolio. ICICI Bankhas also been highlighting bigger delinquencies in the kisan credit rating card portfolio for a number of quarters.
Bankers have been stating that most of the farmers have turn out to be overleveraged more than a time period of time because of to restructuring and doling out of supplemental funding. The deterioration in credit rating lifestyle, because of to loan waivers announced by many Condition governments, has built issues even worse.
Overshooting agri lending targets
Credit rating stream into agriculture has been pushed by coverage thrust, specifically via lending targets, fascination subvention scheme, and priority sector lending stipulations.
Agri lending targets have been lifted substantially more than the earlier three to four several years. Concerning FY17 and FY20, agri lending concentrate on has long gone up by about fourteen for every cent each year to ₹13.5-lakh crore. In the Budget 2020-21, the Centre experienced established a much bigger agriculture lending concentrate on of ₹15-lakh crore for FY21.
Banking institutions have been surpassing the agriculture lending targets more than the several years by a noteworthy margin. But anecdotal proof from the FY20 figures of some PSBs suggests that banks have been careful in the direction of lending to the agri section. For occasion, SBI described a meagre one.7 for every cent expansion in agri loans in FY20, as the bank sought to cleanse up its book and improve its monitoring and collection technique. Bank of Maharashtra noticed a four.eight for every cent decrease and Central Bank 3.5 for every cent fall in agri loans in FY20. According to a response to a question lifted in Rajya Sabha not long ago, towards the concentrate on of ₹11-lakh crore in FY19, banks lent about ₹12.56-lakh crore in FY20 banks lent about ₹10.33-lakh crore (up to December 2019) towards a concentrate on of ₹13.5-lakh crore.
It will be essential to see whether or not banks were able to overshoot the agri lending targets as in the prior several years. Vital, amid the persistent wariness in the direction of agri lending (to continue to keep NPAs beneath look at), surpassing the formidable ₹15-lakh crore concentrate on for FY21may not be that uncomplicated.