Fewer Kisan Credit Card borrowers as banks grapple with NPAs in farm sector

Agriculture loans under Kisan Credit Card( KCC), the key channel of banking sector farm credit, has witnessed a fall in the number of active borrowers. 

According to banks, while KCC loans continue to account for a large chunk of agriculture credit, the rising non-performing assets ( NPA) in the sector over the years has been a concern. Several public banks are now focusing on agriculture infrastructure credit, like warehouses and cold storages, while the growth in KCC loans remains muted.  

According to data from Reserve Bank of India, the number of active KCC borrowers fell from nearly 71.52 million in FY17 to nearly 69.21 million in FY18. For commercial banks, the loan outstanding fell from Rs 4,35,000 crore in FY17 to about Rs 4,33,100 crore in FY18. Driven by growth from cooperative and regional rural banks, the total outstanding loans under KKC, however, showed an increase from Rs 6,49,600 crore in FY17 to Rs 6,70,900 crore in FY18.

 “While KCC remains the main source of agriculture funding, the number of active borrowers have come down. Because of various debt waiver schemes, defaults have risen in the segment. We will focus on agriculture value chain creation, as there is a big demand in areas like storage, food processing, warehousing etc,” said Mrutyunjay Mahapatra, Managing Director and CEO of Syndicate Bank.  As on 31st December 2018, about 16 per cent of advances to agriculture turned into NPAs, against 7.15 per cent in December 2017.

For State Bank of India, the percentage of NPAs to total agriculture lending stood at 11.01 per cent as on December 2018, against 9.97 per cent in the year-ago period. In terms of percentage this was second-highest among sectors, next only to corporate lending. For Bank of India, the gross NPA in agriculture increased from Rs 5,094 crore at the end of December 2017 to nearly Rs 7,816 crore at the end of December 2018.

A senior banker with a public bank said agriculture loans under KCC often involve increasing the credit limit for successive years, which essentially means a restructuring of existing loans. As a result, while the loan outstanding might show marginal growth, the number of borrowers remains the same.

In the last quarter, about 30 per cent of fresh slippages for Allahabad Bank was on account of agriculture. According to SS Mallikarjuna Rao, MD and CEO of Allahabad Bank, the bank plans to shift towards agriculture investment lending, for which it has identified 20 branches, and deployed officials with special skillset.

The overall agriculture growth has also been lackluster over the last two years. Credit growth in agriculture and allied activities so far this financial year (from April 1 to 21 December 2018) has been a mere 5 per cent.

In April 2017, Uttar Pradesh gave a farm loan relief amounting to about Rs 36400 crore. In May 2017, Maharashtra announced a farm loan waiver of Rs 30500 crore. In June 2017, Karnataka announced a farm loan waiver of around Rs 8,200 crore. In October 2017, Punjab’s farm loan waiver was about Rs 10,000 crore. Other states that have announced a farm loan waiver or relaxation include Tamil Nadu, Andhra Pradesh, and Telangana.

 According to priority sector lending norms, scheduled commercial banks have to extend 40 per cent of their loans or adjusted net bank credit (ANBC) to identified priority sectors. Of this, 18 per cent is earmarked for the agricultural sector, within which a target of 8 per cent of ANBC is prescribed for small and marginal farmers.