Agriculture, MSME unhealthy loans rise in FY21 whilst banks report general fall in NPAs

While the banking sector managed to deliver down general non-performing belongings (NPAs) within the monetary yr 2021, the agriculture phase and the MSME sector reported an increase in unhealthy loans. Agriculture NPAs rose by 9,355 crore to Rs 1,36,019 crore through the fiscal from Rs 1,26,664 crore within the earlier yr.
Farm sector NPAs now represent 17.4 per cent of the full NPAs of the banking sector whereas within the earlier yr it was 15.07 per cent, based on Reserve Bank of India (RBI) knowledge. The rise additionally coincided with the farmers’ agitation within the nation towards the introduction of farm legal guidelines within the Parliament.
Even as whole NPAs of banks declined by 7.1 per cent to Rs 780,085 crore through the yr, agricultural NPAs rose by 7.38 per cent, indicating the stress within the phase. Public sector banks accounted for Rs 1,15,281 crore of agri loans as towards Rs 1,11,571 crore within the earlier yr. Private banks’ NPAs within the phase 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 newest RBI knowledge. The share of co-operative banks in floor stage credit score to agriculture has been declining constantly as SCBs made inroads on this phase. 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,” mentioned a banking supply.
On the opposite hand, signalling the rising stress within the medium, small and micro enterprises (MSMEs), gross NPAs within the sector shot as much as Rs 1,28,502 crore in fiscal 2021 from Rs 1,08,704 crore within the earlier yr, an increase 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 mentioned MSME portfolio of public sector and personal banks signifies accumulation in NPA and SMA-2 classes in September 2021 relative to March 2021. NPA stage was 18.5 per cent as of September 2021 as towards 16.8 per cent in March 2021.

Credit to the MSME phase slowed down (year-on-year) by the tip of September 2021 vis-à-vis March 2021. The decline was notably noticeable within the sub-Rs 25 crore ticket dimension 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 through the interval), it mentioned.
The rise in MSME NPAs is regardless of the federal government launching the ECLGS scheme for MSME sector to offer 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.