HDFC awaits farm loan waiver details

mumbai — India’s HDFC Bank Ltd said it was waiting for details on farm loan waiver plans announced by several states, after recording higher provisions driven by delinquencies in its agriculture loan book over the first quarter.

Four key Indian states including Uttar Pradesh, which has a population around the same size as Brazil’s, have recently said they would waive off billions of dollars in farm loans to offer relief to farmers reeling from losses caused by bad weather.

While the state governments will absorb the impact of the waivers, industry experts warn this could distort credit culture and pile up pressure on India’s banking sector where bad loans hit a record $150 billion in December.

HDFC Bank, India’s No.2 lender by assets, on Monday said sour loans to the farming sector accounted for about 60 percent of the increase in its gross nonperforming loans during the three months to June, leading to higher provisions.

“We believe that a fair portion of this impact does reflect changed customer behaviour in anticipation of loan waivers which were announced,” the bank’s deputy managing director, Paresh Sukthankar, told reporters at a briefing after the company posted a 20 percent rise in its quarterly profit. Most other loan portfolios remained in line with past quarters, he added. — Reuters