₹2.5 lakh crore farm loan waivers announced – half received and 80% didn't even need them

• In Chhattisgarh, all the 100% eligible farmers have received the loan waiver.
  
• In Telangana, a mere 5% of the 9 lakh intended beneficiaries have received, the report says.
  
• Claim rejection by state governments, limited or low fiscal space, and change in government could be reasons for low payout.
  

Indian farmers have been granted ten loan waivers in the last eight years, but only half of the intended beneficiaries – at 37 million farmers – have received it. But like many distribution schemes, it’s not uniform across states, according to an SBI special report on agriculture.

In Chhattisgarh, all the 100% beneficiaries have received the waiver, and the state which failed the most is Telangana, where a mere 5% of the 9 lakh intended beneficiaries have received, the report says.

Jharkhand and Madhya Pradesh too rank among the lowest but at 13% and 12% respectively – but the payout is twice over Telangana.

Status of farm loan waivers since 2014


Source: SBI Research

Maharashtra however is an aberration. There were two instances of farm loan waivers, one in 2017 and one in 2020. While the payout for the former is at 68%, the second one is at 92%. Since the waivers were announced by the state governments, political will plays a major role in distribution.

“Possible reasons for low percentage could be rejection of claims by state governments, limited or low fiscal space, and change in government in subsequent years,” the report which analyzed the performance of ten farm loan waivers based on SBI & ASCB data.

This surge in loan waivers is entirely driven by state governments - states have announced loan waivers aggregating ₹2.5 lakh crore since 2014.



Farm waivers – to accounts which have been paying on time

While most farm waivers don’t reach the beneficiaries, the report also raises questions like what kind of beneficiaries it serves. For one, in seven of the nine states in the list, most of these loans waived were standard accounts – which are bank accounts in good standing and not turned into NPAs or non-performing assets.

It takes three months of nonpayment to turn a loan account into an NPA, which means standard accounts are on time with their payments.

In Jharkhand, Uttar Pradesh and Andhra Pradesh – farm loan waivers aided over 90% of standard accounts. Only in two states, it was lower than 50% – 46% in Karnataka and 43% in Maharashtra in its 2020 edition.

“Loan waivers destroy the credit culture which may harm the farmers’ interest in the medium to long term and also squeeze the fiscal space of governments to increase productive investment in agriculture infrastructure. This indicates that farm loan waivers essentially and ultimately serve a self goal,” the report.

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