Agriculture, MSME bad loans rise in FY21 even as banks report overall fall in NPAs

Farm sector NPAs now represent 17.4 per cent of the whole NPAs of the banking sector whereas in the earlier 12 months it was 15.07 per cent, in line with Reserve Bank of India (RBI) knowledge. The rise additionally coincided with the farmers’ agitation in the nation in opposition to the introduction of farm legal guidelines in the Parliament.

Even as whole NPAs of banks declined by 7.1 per cent to Rs 780,085 crore in the course of the 12 months, agricultural NPAs rose by 7.38 per cent, indicating the stress in the section. Public sector banks accounted for Rs 1,15,281 crore of agri loans as in opposition to Rs 1,11,571 crore in the earlier 12 months. Private banks’ NPAs in the section rose to Rs 18,900 crore from Rs 14,462 crore beforehand.

An NPA is a mortgage or advance for which the principal or curiosity cost remained overdue for a interval of 90 days.

Total farm sector mortgage excellent was Rs 13.84 lakh crore in FY21. Credit to agriculture and allied actions continued to be strong at 10.4 per cent in November 2021 as in comparison with 7.0 per cent in November 2020, as per the most recent RBI knowledge. The share of co-operative banks in floor degree credit score to agriculture has been declining constantly as SCBs made inroads in this section. Credit prolonged by non-banking finance firms to the agriculture sector has been declining. It declined from Rs 62,722 crore in FY19 to Rs 49,012 crore in FY20 and Rs 37,892 in FY 21.

“Covid pandemic could have played a part in the rise in farm sector bad loans as the economy declined and demand for goods also fell. Besides, write-offs in other loans and restructuring proposals were higher when compared to farm loans,” stated a banking supply.

On the opposite hand, signalling the rising stress in the medium, small and micro enterprises (MSMEs), gross NPAs in the sector shot as much as Rs 1,28,502 crore in fiscal 2021 from Rs 1,08,704 crore in the earlier 12 months, a rise of Rs 19,798 crore. Thousands of MSMEs had downed shutters when the primary Covid wave hit the nation in March 2020.

The Financial Stability Report of the RBI stated MSME portfolio of public sector and personal banks signifies accumulation in NPA and SMA-2 classes in September 2021 relative to March 2021. NPA degree was 18.5 per cent as of September 2021 as in opposition to 16.8 per cent in March 2021.

Credit to the MSME section slowed down (year-on-year) by the top of September 2021 vis-à-vis March 2021. The decline was significantly noticeable in the sub-Rs 25 crore ticket measurement throughout main financial institution teams. Under the Emergency Credit Line Guarantee Scheme (ECLGS), loans amounting to Rs 2.82 lakh crore had been sanctioned until November 12, 2021, of which Rs 2.28 lakh crore was disbursed (Rs 1.94 lakh crore by scheduled business banks, forming 20.6 per cent of the incremental credit score in the course of the interval), it stated.

The rise in MSME NPAs is regardless of the federal government launching the ECLGS scheme for MSME sector to supply aid to the sector amidst the Covid-19 pandemic in May 2020. “We estimate almost 13.5 lakh MSMEs accounts were saved due to ECLG scheme (including restructured). Almost 93.7 per cent of such accounts are in micro and small category. In absolute terms, MSME loan accounts worth Rs 1.8 lakh crore were saved from slipping into NPA during the period. This is equivalent to 14 per cent of the outstanding MSME credit being saved from becoming NPA,” says a analysis report from State Bank of India.