Karnataka banks' bad loans up by Rs 7,000 crore

Agriculture NPAs constitute 61% of all the bad loans in the priority sectors, despite the farm sector being the only that recorded growth in the pandemic-hit 2020-21

Banks in Karnataka have reported a 26 per cent rise in non-performing assets (NPA) in priority sectors, including agriculture, a fallout of the economic distress caused by the Covid-19 pandemic and the drought-flood situation in the state.

Loans worth Rs 7,375 crore were added to the NPA category in the run-up to the financial year ending March 2021. These are loans disbursed to agriculture, MSMEs, housing and education sectors — four priority areas that witness the most credit activity.

Agriculture NPAs constitute 61 per cent of all the bad loans in the priority sectors, despite the farm sector being the only that recorded growth in the pandemic-hit 2020-21.

“Karnataka faced repeated spells of drought. And, last year, there were floods,” said State Level Bankers’ Committee (SLBC) convenor B Chandrasekhara Rao, who is also the Canara Bank general manager. “Also, in some districts, people think one more loan waiver will come, which impacts repayment,” he added.

Banks in the state have already restructured loans worth Rs 820 crore due to natural calamities.

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Sources in the Finance Department said there was no proposal to announce another loan waiver, even as 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 crop loans of farmers who died due to Covid-19, but the government is yet to decide on this.

During the second wave of Covid-19, the previous BS Yediyurappa government decided to bear the interest amount for three months in small and medium cooperative bank loans availed by farmers, which amounts to around Rs 134.38 crore. Loan repayment date was also extended from May 1 to July 31.

The Covid-19 pandemic was harsh on small businesses, with the lockdown preventing any form of business or economic activities. As a consequence, new bad loans worth Rs 3,226 crore have been added to the MSME sector in the state.

“The MSME sector faced a lot of stress, leading to stressed assets and NPAs,” Rao pointed out. “This sector was anyway stressed. The pandemic made fund-flow difficult,” he said.

Industries have asked the state government for a waiver in licence fees, power bills and other such concessions. Repayment of housing loans also took a hit due to job losses and salary cuts.