Banks fear agri NPAs as reservoirs dry up

MONSOON WOES Repayment of agricultural loans likely to be hit in case rains are not evenly spread across the country

Public sector banks (PSBs), which have started giving out agriculture loans to farmers for kharif crops, are keeping their fingers crossed, with several water reservoirs in the country drying up, and many districts experiencing drought-like situation due to lack of rains in the previous years. About 40% of the total agriculture loans go towards kharif crops.

While the Indian Meteorological Department (IMD) has predicted an above-average monsoon for 2016-17, sources said the next few weeks will be crucial as the repayment of agriculture credit could be impacted even in case rains are not evenly spread. That apart, loans given under the Mudra programme, could also come under pressure in case of delayed, or insufficient rains.

“There is no need to press the panic button immediately, but if we get uneven rains, it may turn out to be a big problem… Rains will determine whether water reservoirs are being refilled,” a senior official at a mid-sized government bank told HT.

Farm loans have been one of the main reasons for the rising non-performing assets (NPAs) — loans that do not yield returns— at public sector banks. NPAs are currently over 6% of total advances.

Economists, however, said it was too early to come to any conclusion. “Though most of the lending for the kharif crops take place in March, the current drought-like situation will not add any further pressure to the NPA level... we will wait and watch,” said Soumya Kanti Ghosh, chief economic adviser, State Bank of India.

The RBI has asked banks to set aside provisions for losses on `12,000-crore worth of food grain related loans issued to the Punjab government.