If the new Uttar Pradesh government fulfils its farmer loan waiver promise, banks are likely to take a hit of ₹27,420 crore and the scheme will lead to some stress on the State’s fiscal arithmetic, warns a report. The BJP had, in its UP election manifesto, promised to waive farmers’ loans if elected to power. The party and its allies won 325 seats in the 403-member House.
Outstanding farm credit
An SBI Research report on Monday said scheduled commercial banks together had outstanding farm credit of ₹86,241.20 crore in UP with the average ticket size of ₹1.34 lakh, as of 2016, most of which is to small and marginal farmers.
According to RBI data (2012), 31 per cent of the direct agriculture finance went to marginal and small farmers (landholdings up to 2.5 acres).
“Taking this as a proxy for UP as well, around ₹27,419.70 crore will have to be waived in case the farm loan waiver scheme is implemented for the small and marginal farmers, for all banks,” the report said.