Loan waivers negative for banks, MFIs: Analysts

Apart from banks, loan waivers could impair the repayment behaviour of microfinance borrowers

A farm loan waiver following the Bharatiya Janata Party’s win in Uttar Pradesh could exacerabte the issue of bad loans, particularly for public sector banks. They have higher exposure to this segment and are already struggling to stay afloat at a time of low capital, anaemic credit growth and high bad loans.

Punjab National Bank would have a big impact, given its strong exposure in the Indo-Gangetic belt; so will State Bank of India, given its scale of business, believe analysts at Kotak Institutional Equities.

It is not clear if such waivers will be implemented and if such loans will be repaid