Subbarao concerned over rising NPAs in farm loans
By Vaibhav Aggarwal
Jul 13, 2012
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RBI Governor D. Subbarao has raised concern over rising nonperforming assets, which touched 47% for the last fiscal, while the growth in the agriculture loans for the same period was 40%. Mr. Subbarao suggested that lagging economy and "lagged effect of double-digit growth" of loans to agri-sector and priority sector are the main cause for the rise. 

Agriculture loans have always been a matter of concern for the banks, specially public sector banks like State Bank of India, Punjab National Bank,IDBI Bank,et al who are mandated by the RBI to contribute to the priority sector. State Bank of India is the worst hit bank in the agri-sector NPAs.

The Agriculture sector have always contributed more to NPAs than the non-agri loans, apart from 2009-10, when the union government waived off farm loans worth Rs. 76,000 crore.

The banks have total agricultural loan books worth Rs. 5.1 trillion against Rs. 4.5 trillion a year ago. The Planning Commission has pegged agriculture sector's growth at 4% for the current 5 year plan, up from 3.3% in the 11th plan. Agriculture and allied sector provides employment to more than half of the country's population and contributes to 15% of the GDP.

"We cannot raise agricultural growth consistently to 4% per annum without a focus on research and agricultural credit in rain-fed areas. There is also need for more robust weather insurance and agricultural extension services to target diversified livelihood options in the rain-fed areas," Subbarao added.

Mr. Subbarao was also wary of some of the low cost farm credit being drifted to non-farm purposes. He also stated, "On visiting some States' bank branches, it was not clear that the credit being shown as lent to farmers was actually used for agriculture purposes."

Mr. Subbarao was present at the 30th anniversary of National Bank for Agricultural and Rural Development (Nabard).


(Comments Posted : 3) Post Your Comments
1. close/penalise such Bank branches which have exceded the all India average NPAs as was done in respect of
Non Banking companies during 2000-2003 when thousands of nBFCS were closed and corers depositers lost their deposits. NBFCS deposits had no Gurantee and now Banks have credit garanntee only upto one lakh only. or entrust recovery task to Post offices-postal Banks who can know the lonee and resort to easy recovery.Pay commission to postal bank,

Sasikumar k G .
Sasikumar K G (Posted: Jul 13, 2012)
2. No worries Dr Subbaro. Elections are on the horizn soon. All agricultural loans that are NPA will be written off!!! Why worry?
Peter James (Posted: Jul 13, 2012)
3. Iagree the views of Dr.Subbarao.It is
true that farm loans being diverted to
other activities.Some stringent guidelines has .to be framed.otherwise
NPAs in psbs may rise
parameswararao.T (Posted: Jul 13, 2012)
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