Maharashtra farm loan waiver: Banks reluctant to advance loans to NPA accounts

Out of 89 lakh farmers, who the government’s claims would benefit from the loan waiver package, loans availed by about 13.88 lakh farmers have turned bad over the years and have been classified as bad loans or NPAs.

Written by Sandeep Ashar | Mumbai | Published:July 6, 2017 3:56 am
Maharashtra farm loan waiver, farm debt waiver scheme maharashtra banks on farm debt waiver scheme, Devendra Fadnavis, NPA accounts, indian express news Out of 89 lakh farmers, who the government’s claims would benefit from the loan waiver package, loans availed by about 13.88 lakh farmers have turned bad over the years and have been classified as bad loans or NPAs.

The Maharashtra government may have extended its farm debt waiver scheme to benefit more farmers, but there is no full clarity yet over the Rs 12,629 crore worth agricultural loans that have turned into non-performing asset (NPA) accounts. As part of its Rs 34,022 crore loan waiver scheme, the Devendra Fadnavis government has proposed use of taxpayers’ money to tackle these bad loans. Out of 89 lakh farmers, who the government’s claims would benefit from the loan waiver package, loans availed by about 13.88 lakh farmers have turned bad over the years and have been classified as bad loans or NPAs.

But sources said that the Reserve Bank of India (RBI), whose prior permission would be mandatory for taking over NPA accounts, has certain reservations in this regard. On Wednesday, senior state government officials from the finance and the cooperation department met RBI officials to discuss the issue. The government had earlier written to the banking sector regulator in this regard, but there had been no response from the regulator’s side.

According to information, commercial banks are reluctant to provide even short term crop loans of Rs 10,000 to those holding the NPA accounts without the RBI’s clarification. With the government still cutting out the final structure for implementation of the debt waiver scheme, the Fadnavis government had on June 20 directed the banks to provide short-term loans up to Rs 10,000 to the defaulting farmers on government’s guarantee for commencement of kharif operations.

But even as the state government has issued a “deed of guarantee” promising to reimburse this amount to the banks, sources said that almost all commercial banks and some of the co-operatives have pointed to RBI’s banking policy, which prohibits banks from advancing further loans to NPA accounts, and are yet to disburse such loans. The commercial banks, in particular, have indicated that they won’t initiate the process without RBI’s clarification, said a senior government official. As a result, barely 2000-odd farmers in the state have so far benefited from the short-term loans from banking institutions.

During the meeting on Wednesday, RBI officials raised certain “technical difficulties” in permitting such transactions. “We represented our case to the RBI. They have raised certain clarifications, which we would look to fulfill,” a senior government official said.

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