Banks have reported an alarming rise in non-performing assets (NPA) in the agricultural sector, indicating grave farm distress in the drought-hit state, and the crop loan waiver scheme has added to this by making debt recovery difficult.
Agri NPAs constitute 36% of all bad loans in the state and experts fear this will impact further lending, posing a challenge to Chief Minister B S Yediyurappa who has vowed to make farmers’ lives better with measures including a loan waiver.
Agri NPAs saw a 40% increase in the financial year to March 2019, the period when former Chief Minister H D Kumaraswamy rolled out his pet crop loan waiver scheme.
A lion’s share belonged to Karnataka’s five major lenders — Canara Bank, Corporation Bank, Syndicate Bank, State Bank of India and Vijaya Bank — and they are in the forefront in asking the government’s help to reduce NPAs by supporting their debt recovery efforts.
Even before Kumaraswamy’s scheme was implemented, farmers stopped repaying loans anticipating the waiver.
While the government delayed the waiver rollout, banks could not proceed with debt recovery under the Karnataka Public Moneys (Recovery of Dues) Act and the Karnataka Agricultural Credit Operations and Miscellaneous Provisions Act.
“The crop loan waiver is among the reasons for the increase in agricultural NPAs,” Chief Secretary T M Vijay Bhaskar told DH. “But we hope the NPAs will come down as the loan waiver scheme is almost complete.”
Till date, the government has paid banks Rs 9,157 crore towards crop loans borrowed by 16.41 lakh farmers in cooperative and commercial banks.
A further six lakh farmers are due to get a similar amount waived, including 1.89 lakh farmers who are suspected to have submitted wrong Aadhaar, land survey and ration card details.
Former cooperatives minister Bandeppa Kashempur of the JD(S) blamed nationalised banks over rising NPAs vis-a-vis the crop loan waiver. “The government was ready to extend the waiver to cover NPA loans up to Rs 2 lakh, but we didn’t get cooperation from the banks,” he said. It was only recently the government ordered waiving NPA crop loans worth Rs 965 crore, after parleying with banks for several months.
The bloating NPAs are a challenge for the Yediyurappa regime, according to former Institute for Social and Economic Change (ISEC) director R S Deshpande. “It is a psychological thing for farmers, who expect that successive governments will waive loans,” he said. “But a loan waiver ultimately benefits the bank, leaving the farmer wherever he was. This linkage between polity and banking is dangerous.”
Meanwhile, the government has asked banks to conduct an internal audit of data from 22 lakh loan accounts that has been entered into the crop loan waiver software from the core banking system. Banks have been asked to “take necessary corrective steps on the anomalies, if any”. This is to identify if ineligible farmers have claimed the loan waiver benefit.