Workers place mangoes in a sack at an orchard in Kuchesar, Uttar Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)

No Impact On NPAs Due To Farm Loan Waivers By States, Says Urjit Patel

There are no implications on non-performing assets of banks because of farm loan waivers provided by various states, Reserve Bank of India Governor Urjit Patel today said. Many states have waived agriculture loans, latest being Rajasthan which launched a Rs 8,500-crore waiver scheme last week.

“Farm loan waiver has been given through Budget of individual state governments so far. Therefore, implications on banks’ NPA directly are not there,” he said after unveiling the second bi-monthly monetary policy review for the current financial year.

Karnataka Chief Minister HD Kumaraswamy has also announced a farm loan waiver. In his meeting with leaders of farmers’ organisations on May 30, the new CM said the government intends to waive loans borrowed after April 1, 2009.

Uttar Pradesh was the first state last year to announce a Rs 36,359-crore farm debt waiver for small and marginal farmers. It was followed by Maharashtra and Punjab.

According to a report, the farm debt waivers announced by the five large states together will widen the fiscal deficit of the states by Rs 1,07,700 crore or 0.65 percent of gross domestic product in the ongoing financial year.

Also read: In Charts: Farm Loan Waivers May Destabilise State Finances, Hurt Capex

The combined fiscal deficit of the states for 2017-18 has been budgeted at 2.7 per cent of GDP or Rs 4.48 lakh crore.

“With several states announcing farm loan waivers, there is a fear that the combined fiscal deficits of the states could be much worse than the budgeted figure,” India Ratings said in a report.