Since the start of the Covid-19 pandemic, agriculture has been the only sector that has seen consistent positive growth. Two years later, agricultural finance in Maharashtra has actually seen an improvement, with banks reporting a decline in non-performing assets (NPA). Bankers and agricultural finance experts said this reflected both the state government’s loan exemption program, higher yields and improved credit behavior among farmers.
Short and long term finance is provided to the sector by banks to help farmers in their agricultural activities. Short-term finance refers to money given to farmers at an interest rate of 7% for 11 months. Called a crop loan, farmers get an interest subsidy from the state and central government of 5-6%, bringing the effective interest rate to 1% if repayment is made on time. Loans for agricultural infrastructure such as drip irrigation, tractors, etc. are granted to farmers at an interest rate ranging from 4 to 9%. The latter has a longer payment period.
As part of the priority sector, lending to the agricultural sector is closely monitored by the State Bankers Conference – the supreme body of state banks. Minutes of the meeting, seen by The Indian Express, showed that over the past two years bankers have reported a reduction in NPA in the sector.
Thus, as of December 31, 2019, the NPA in the sector stood at 19.29% and the outstanding amount was Rs 1.39 lakh crore. A year later, i.e. on December 31, 2020, the NPA was reduced to 18% and the outstanding amount was reduced to Rs 1.3 lakh crores. Agri NPA on December 31, 2021 saw a further reduction to 17.79% and the outstanding amount stood at Rs 1.79 lakh crores. The reduction in the NPA percentage, the bankers said, was a positive sign that showed repayment of loans on time and also repayment of old loans, a senior banker said on condition of anonymity.
Bankers pointed out that the Covid-19 pandemic coincided with the finalization of the Mahatma Jyotirao Phule Farm Loan Waiver scheme where loans worth Rs 20,000 crore were canceled for over 30 lakh farmers. This affected accounts written off from NPA accounts. Also, over the past couple of years, yields of crops like soybeans and cotton, which are staple foods in the state, have been good.
Overall, bankers said the agricultural sector has seen better financial discipline and therefore NPAs have declined.
For his part, Yogesh Thorat, managing director of MahaFPC – the apex body of the Farmers Producers Company (FPC) in the state – said the reduction in NPAs was an indication of better financial literacy and improved discipline among farmers. “Thanks to better yields, farmers are now repaying regularly, which is reflected in the numbers,” he said.