Banks in Karnataka reported a 26% increase in non-productive assets (NPAs) in priority sectors, including agriculture, a consequence of the economic distress caused by the Covid-19 pandemic and the situation of drought and d flooding in the state.
Loans worth Rs 7,375 crore have been added to the NPA category as the fiscal year ending March 2021 approaches. These are loans to agriculture, MSMEs, housing and education – four priority areas with the most credit activity.
Agricultural NPAs account for 61% of all bad debts in priority sectors, although the agriculture sector is the only sector to have seen growth during the 2020-21 pandemic.
“Karnataka has had to deal with repeated episodes of drought. And, last year there was flooding, ”said State Level Bankers’ Committee (SLBC) Chairman B Chandrasekhara Rao, who is also the managing director of Canara Bank. “Also, in some districts, people think another loan waiver will come, which will impact repayment,” he added.
State banks have already restructured loans worth Rs 820 crore due to natural disasters.
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Finance ministry sources said there was no proposal to announce another loan waiver, although the one implemented when the Congress-JD (S) coalition was in power is still open. However, the Cooperation Department is pushing for a waiver of harvest loans from farmers who have died due to Covid-19, but the government has not yet made a decision on this.
During the second wave of Covid-19, the previous BS Yediyurappa government decided to bear the interest amount for three months in the form of small and medium-sized cooperative bank loans that benefit farmers, which amount to around Rs 134.38 crore. The loan repayment date has also been extended from May 1 to July 31.
The Covid-19 pandemic has been tough on small businesses, with the lockdown preventing any form of business or economic activity. As a result, new bad loans worth Rs 3,226 crore were added to the state’s MSME sector.
“The MSME sector has faced a lot of stress, which has led to stressed assets and NPAs,” Rao said. “This sector was stressed anyway. The pandemic has made the flow of funds difficult, ”he said.
The industries have asked the state government for a waiver of license fees, electricity bills and other such concessions. Home loan repayments have also been affected due to job losses and wage cuts.