'Loan waiver promise can impact debt recovery in Punjab'

With major political parties in the state promising farm debt waiver during state assembly polls, Punjab's State Level Bankers Committee (SLBC) today apprehended that promises like loan waiver could "vitiate" banks' farm loan recovery process.
"Promises like debt waiver can vitiate banks' loan recovery process which is not good for the banking industry," SLBC (Punjab) Convener and Punjab National Bank (PNB) General Manager P S Chauhan said today.
However, the banks, as per RBI guidelines could give some relief to borrowers in deserving cases, he reporters here.
His statement was in reply to a comment (sought from him) on farm loan waiver promise made by major political parties in Punjab polls 2017.

Debt waiver for farmers have been a major issue during Punjab poll with Congress, Aam Aadmi Party and even Akali Dal promising debt relief for farmers, if voted to power during 2017 assembly elections.
Congress, besides promising loan waiver, also vowed to enact a law to prevent sale and 'kurki' of farmers' land by lending agencies.

AAP promised to waive off the debts of poor and marginal farmers, besides announcing to make Punjab farmers debt-free by the end of 2018.
Shiromani Akali Dal also promised to waive debt of small farmers in its election manifesto.
Notably, in Punjab, the non-performing assets (NPA) in farm sector stood at Rs 5,150 crore which was 6.63 per cent of total agriculture advances outstanding and 2.12 per cent of total advances as on December 31, 2016.

Meanwhile, the banks' credit growth in Punjab has also been affected with growth in advances shrinking to just 5.91 per cent as on December 31, 2016 as against growth of 11.88 per cent in corresponding period.
In absolute terms, the total outstanding credit was Rs 2.31 lakh crore as on December 31, 2016 as against Rs 2.18 lakh crore in December 2015.
In Punjab, banks overall credit deposit (CD) ratio also plummeted to 65.29 per cent in December 2016, from 76.38 per cent in December 2015, as per SLBC report.
Growth in priority sector advances was just 1.50 per cent in December 2016 as against growth of 19.60 per cent in December 2015, as per SLBC report.

Advances to the farm sector grew by just 6.54 per cent as compared to 29.82 per cent in December 2015. Banks posted negative growth in advances to micro, small and medium enterprises at 7.21 per cent.
SLBC Convener P S Chauhan attributed decline in credit growth to the "less availability" of cash during demonetisation.
"Enough cash was not available during demonetisation and the demand for credit also came down," said Chauhan.
Moreover, borrowers like farmers deposited old notes in their loan accounts as payment which also brought down the outstanding loan figure for banks, he said.
He also said that now the demand for credit was picking up and special credit camps were being organised in rural areas to disburse more credit to growers.