Farm loan waiver leads to MP farmers skipping payment: NPAs to 24%
Recently, the BJP government provided farm loan waiver in a few states. That idea was a really bad one. It is clear that this step was taken not for the welfare of the farmers. The real motive of this decision was to combat the growing influence of the Congress party beating them at their own game. The Congress, too, with their promises of loan waiver is indirectly prompting farmers to skip repayments.
This has resulted in farmers of other states stopping payment to banks. They too are hoping for a farm loan waiver. This is bad not only for banks but also for the farmers. The farmers skipping repayments is impacting the bank finances. Banks, in turn, are going slow on fresh loans until state governments reimburse the amount written off. This procedure often takes several years.
This slows down the credit supply of farmers. It also might push some of them to non-banking sources of a loan. And everyone knows how well those go for farmers.
Latest data shows that farm-related non-performing assets in Madhya Pradesh doubled to 10.6 per cent. In just a one-year period, NPAs on farm loans in the state rose to 24 per cent. A senior banker posted in the state said, “It is natural for borrowers to stop paying once they anticipate relief. We are seeing a similar trend in Rajasthan too.”
NPAs in the farm loan segment were estimated at around 5.1 per cent at the end of March 2018. But load defaults is only one part of the problem. Banks too become wary of lending money to farmers. That is because states often take a lot of time to clear the loan amount that is waived. For instance, Tamil Nadu announced a Rs 6041 scheme in 2016. It will clear dues of Rs 3169 crore over a period of five years.
Thus, we see that farm loan waivers harm not only the banks but the farmers in the long run as well. What do you think?
