NPAs on the rise, agriculture sector leads charge

SLBC analysis shows NPAs in farm loans have gone up by nearly 900% since June 2010

With nearly 24 lakh loans defaulting, non-performing assets (NPAs) in banks in the State have reached an all-time high of over ₹48,000 crore. Data reveals that NPAs have risen drastically over the past two years, and leading the charge is farm loans.

An analysis of the State-Level Banking Committee (SLBC), a committee that monitors banking schemes in the State, shows that NPAs have risen by 483% since June 2010. However, NPAs in agriculture loans have gone up by nearly 900% in the same time, arguably becoming the worst performing sector in the State when compared to medium and small-scale industries, priority sectors (service, retail among others), and non-priority sectors (MUDRA scheme, gold loans, personal loans, and others).

“While NPAs have been rising across the country and across all sectors, the growth in the past two years is definitely a concern,” said a former SLBC official and veteran banker.

Drought and polls

For the agriculture sector, there were two hits that affected repayment of loans: droughts and election. “Consecutive droughts saw the farming sector decline, and by 2017, there was a sense that elections will see announcement of loan waivers,” said the former SLBC official.

He added that it is only if the loan waiver process by the State government leads to speedy disbursal of credit, can the NPAs reduce.

The bulk of these NPAs, around 58% of the total defaulting amount, lie with the “lead banks” of Canara, Corporation, Syndicate, Vijaya, and State Bank of India. After NPAs shot up, Corporation Bank and Dena bank were prohibited by the RBI to disburse more loans under the Prompt Corrective Action. The fear is now striking other banks.

Dena and Corporation Banks have NPAs of more than 18% of their advances. By June this year, eight other banks have seen NPAs cross 10% of their advances, including SyndicateBank and SBI, while another seven banks have crossed the 6% threshold.

“There is a crisis for sure, and the slow response of the State government towards loan repayment is making things worse,” said an SLBC member, who requested anonymity.