(PTI file photo)

NEW DELHI: Expectation of loan waiver has prompted farmers across states to stop repayment of money owed to financial institutions. This adds pressure on banks that are already grappling with a record pile of bad corporate debt.

Several bankers TOI spoke to confirmed that there was a rising trend of farmers refusing to clear dues, an issue that was also flagged at a meeting on Monday convened by the finance ministry. The total farm loans are estimated at a little under Rs 10 lakh crore.

While it is early to quantify the extent of loan delinquency by farmers, bankers say that in some states, the default rate has increased by up to 50% in recent months. “Farmers are emptying their bank accounts so that we cannot deduct the payment due from them,” the head of a large bank told TOI. The chief of a public sector bank headquartered in the south said that in some places loan defaulters have come together to demand relief.

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“If I expect someone to write me a cheque of Rs 1 lakh to take over my loan, I am going to stop repaying. This is exactly what is happening in many states,” said a Mumbai-headquartered bank’s CEO.

Andhra, Telangana, UP and Maharashtra have announced farm loan waivers. Other states, especially where polls are due, are under pressure to follow suit.

At least two bank chairmen said they were finding it tough to get dues from Andhra, which had waived loans of over Rs 40,000 crore after N Chandrababu Naidu won the assembly polls in 2014. Loan waivers or relief from governments help clear our books as far as defaults are concerned but it impacts the overall payment culture badly in the long run,” said a bank head. SBI chairman Arundhati Bhattacharya, too, had recently warned: “Support to farmers is necessary but not at the cost of credit discipline.”



In Video: Farm loan waiver hopes spikes pressure on banks