Farm loan recoveries drop, banks stop fresh lending in Punjab
Chandigarh: Banks in Punjab have stopped fresh lending to farmers who are defaulting on repayments in anticipation of a debt waiver, with loan recoveries plummeting by about 60% in the state, bankers said.
After the Punjab government announced a debt waiver for farming sector, growers in several parts of the state have stopped repayment of bank loans in anticipation of relief. “We have witnessed about 60% drop in repayment of farm loans as accounts are turning irregular,” Punjab state level bankers committee (SLBC) convener and Punjab National Bank general manager (Punjab) P.S. Chauhan said on Thursday. “It is happening as farmers are waiting for debt waiver implementation,” he pointed out. Because of accounts turning irregular, banks have stopped fresh lending in such accounts.
“In accounts which have become irregular, we are not making any enhancement in such loan accounts. For example, if a defaulting farmer wants enhancement of Rs1 lakh in his loan account, we are not allowing this,” he said. To speed up recoveries, banks are warning growers that they would not get interest subvention in crop loan if they fail to repay loans. “There will be no interest subvention of 3% available to farmers if he does not repay loan. Moreover he will also not be eligible for fresh lending,” he said. Not only in commercial banks, the recovery of loan has been hit in case of cooperative loans as well, the official said.
A loan of Rs3,600 crore was yet to be recovered from farmers who borrowed from cooperative banks. As part of debt waiver plan, the Punjab government had last month announced a waiver of entire crop loans up to Rs2 lakh for small and marginal farmers (up to 5 acres), and a flat Rs2 lakh relief for all other marginal farmers, irrespective of their loan amount, which would benefit a total of 10.25 lakh farmers, including 8.75 lakh farmers up to 5 acres. A sum of Rs9,500 crore would be required to implement the farm loan waiver scheme, according to the state government’s estimates.
Chief minister Amarinder Singh on Thursday met union finance minister Arun Jaitley in Delhi, seeking a one-time settlement of the Rs6,000 crore worth of loans taken by the state’s farmers from national and private banks. Such a settlement will benefit 4.5 lakh of the state’s beleaguered farmers, the chief minister told Jaitley at a meeting. Amarinder sought the minister’s intervention to convert the Rs6,000 crore loan into term loan by giving requisite directions to the Reserve Bank of India (RBI).
Of the total debt of small and marginal farmers waived by the state, Rs3,600 crore relates to loan from cooperatives, with the remaining Rs6,000 crore coming from banks. These banks, said the chief minister, were giving unethical loans to farmers, pushing them into a vicious cycle of debt. The Punjab government had pegged a sum of Rs9,500 crore which would be required to fully implement debt waiver scheme. It had proposed Rs1,500 crore in the state budget for the debt as state government envisaged to settle farm loans in about four to five years.
At present, the total agricultural debt in Punjab is pegged at Rs85,000 crore. The outstanding debt of small and marginal farmers was Rs36,000 crore including cooperative loan of Rs5,000 crore, bank officials said.