Lok Sabha Question No. 362 (STARRED), answered on 2017-08-11
Subject: Wilful Defaulters of Farm Loans
Ministry: FINANCE
Asked by: KIRIT SOMAIYA

## Government of India Ministry of Finance Department of Financial Services

## LOK SABHA Starred Question No. *362

To be answered on Friday, August 11, 2017/Shravana 20, 1939 (Saka)

## Wilful Defaulters of Farm Loans

*362. DR. KIRIT SOMAIYA:

Will the Minister of FINANCE be pleased to state:

- (a) the quantum of farm loans waived/ written off since 2014 till date, State/UTwise;
- (b) whether the Government has noticed that expectation of loan waiver has prompted the farmers across the States to stop repayment of loans granted to them by financial institutions and become wilful defaulters;
- (c) if so, the details thereof;
- (d) whether due to loan waiver, the default rate has increased by up to 50 per cent in some States in recent months and if so, the details thereof, State/UT-wise; and
- (e) the action taken/being taken by the Government to address this issue?

## Answer

The Minister of Finance (Shri  Arun Jaitely)

- (a) to (e): A statement is laid on the table of the House.

Statement referred to in reply to parts (a) to (e) of Lok Sabha Starred Question No. *362 to be answered on 11.08.2017 regarding Wilful Defaulters of Farm Loans tabled by Dr. KIRIT SOMAIYA.

(a) to (e): There has been no scheme of farm loan waiver by the Union Government since 2014.

The Reserve Bank of India (RBI) vide its circular dated July 28, 1995, had advised that each bank  should  have  a  loan  recovery  policy  duly  vetted  by  the  Board  of  Directors,  inter-alia, prescribing  the  manner  of  recovery  of  dues,  targeted  level  of  reduction,  norms  of  permitted sacrifice/waiver,  factors  to  be  taken  into  account  before  considering  waivers,  decision  levels etc.  Thus,  writing  off  a  loan  is  a  commercial  decision  of  banks  as  per  their  board  approved policy  formulated  in  conformity  with  the  regulatory  guidelines  of  RBI.  Information  relating  to quantum of farm loans written off, is not centrally maintained. However, RBI has reported that the  reduction  in  Non  Performing  Asset  (NPA)  due  to  write  off  (including  compromise)  for agriculture and allied activities during FY 2016-17 in respect of Scheduled Commercial Banks (SCBs) is to the tune of Rs. 7,548 crore.

Data  on  total  outstanding  Gross  Non  Performing  Assets  (GNPAs)  and  GNPA  ratio  for Agriculture & Allied Activities, in respect of Scheduled Commercial Banks (SCBs) for the last three years, as reported by RBI, is as under :

| Agriculture and Allied Activities - GNPAs (in Rs. Crore)   | Agriculture and Allied Activities - GNPAs (in Rs. Crore)   | Agriculture and Allied Activities - GNPAs (in Rs. Crore)   | Agriculture and Allied Activities - GNPA Ratio (in Per cent)   | Agriculture and Allied Activities - GNPA Ratio (in Per cent)   | Agriculture and Allied Activities - GNPA Ratio (in Per cent)   |
|------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------|----------------------------------------------------------------|----------------------------------------------------------------|----------------------------------------------------------------|
| March 31,2015                                              | March 31, 2016                                             | *March 31, 2017                                            | March 31, 2015                                                 | March 31, 2016                                                 | *March 31, 2017                                                |
| 37,853                                                     | 51,964                                                     | 62,307                                                     | 4.60                                                           | 5.44                                                           | 5.61                                                           |

*Provisional

As  per  RBI  Master  Circular  dated  July  01,  2015,  a  'default',  to  be  categorised  as  'wilful default', must be intentional, deliberate and calculated. A "wilful default' would be deemed to have  occurred  if  it  is  noted  that  default  in  meeting  payment/repayment  obligations  is accompanied  by  any  of  the  events  mentioned  in  the  said  Master  Circular  which,  inter  alia, includes diversion and siphoning of the borrowed funds, disposal or removal of the movable fixed assets or immovable  property given as security without the knowledge  of the lender/bank, etc. The said Master Circular requires Banks and Financial Institutions to put in place a transparent mechanism for identification and penal action to be taken against wilful defaulters as per the relevant provisions therein.

RBI has issued guidelines (July 1, 2015, available on RBI's website) on willful defaulters to disincentivise borrowers who have money and do not pay or have diverted the funds or siphoned off  funds  or  removed  assets  given  as  security,  indicting  action  that  includes;  (i)  restricting additional facilities to such defaulters from banks and financial institutions, (ii) barring of such borrowers  from  institutional  finance,  (iii)  criminal  action,  (iv)  removal  of  directors  of  such companies  from  boards  and  (v)  change  in  management.  Further,  banks  and  financial institutions are required to report suit-filed/non-suit filed wilful defaulter accounts of Rs 25 lakhs and above to the four Credit Information Companies (CICs) on at least a monthly basis. CICs have been advised to publish this information on their respective websites. RBI vide circular dated  September  29,  2016,  has  provided  a  mechanism  to  publish  photographs  of  wilful defaulters in newspapers as per board approved policy of respective financial institution.