Punjab agriculture loans as Non-performing assets mostly over 11%
After the financial year 2019-20, Non-performing assets in Punjab Agriculture loans over 11 % mostly. Usually, micro and small enterprises avail loans from state-owned banks as commercial banks are reluctant to offer loans to small businesses due to the fear of Non-performing assets.
Since FY 2019-20, Non-performing assets in Punjab Agriculture Loans have been over 11 %.
According to a study on the performance of banks during the pre-covid period and covid period, it has been found that during the First lockdown quarter, i.e., April’20 – June’20, Non-performing assets were actually lower at 10.68% compared to the 11% before the covid period.
Most of the bank branches in Punjab are located in rural areas (44%), then semi-urban areas (29%), followed by urban areas (27%) as of September 2020.
The study conducted by Satish Verma, RBI chair professor, also shows that banking in Punjab fell sharply in the lockdown quarter. In rural areas, the recovery was fast but had a terrible fall in the urban areas. Geographically, banking in Punjab is more rural oriented, and in keeping in mind the deposits and advances, it is seen by urban areas more. There are around 10.8 lac farmers in Punjab.
The proportion of agricultural advances in Punjab recovered quickly during the covid-19 period. (Till September 2020). However, according to the same study, the Kisan credit card (KCC) loans remained subdued in the June’20 quarter and remained almost the same in September’20.
The impact of Coronavirus on medium level business was not so striking in Punjab but was more hard on micro, small, and medium business.
However, it was particularly in the Coronavirus March 2020 quarter when the number of accounts across the MSME sector dipped. Punjab has over two lac MSMEs. The study also shows that the commercial banks were reluctant to extend loans, particularly to micro and small businesses, mainly because of the fear of NPA.
The Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector has been slow in Punjab. The ECLGS provided government-guaranteed and collateral-free loans to the MSME sector— the accounts disbursement was just 54% of the net eligible ones and 65% of the sanctioned ones as of December 7, 2020. According to the study, “The share of Punjab is usually the lowest of all. There are very few MSMEs that are eligible for loans under the scheme (maximum 11%). That is why the share of Punjab is the lowest”.
Under the ECLGS scheme, Ludhiana’s performance was poor. The performance of the banks in a lot of districts of Punjab has not been consistent in relation to the indicators of the number of accounts sanctioned as a part of the net eligible portion for which the reasons are yet to be found. The amount disbursed per loan by public sector banks under the ECLGS scheme clearly points out that most small loans were disbursed under this scheme, commercial banks mostly dispersed corporate loans. “This trend is not welcomed by the public sector banks. The state-level bankers’ committee (SLBC) must definitely look into the matter as soon as possible,” added the study.