India's top private lenders see farm loan defaults rising amid weak rural economy
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The largest five private banks have reported greater bad loan additions in the June quarter, mostly driven by rising dues in agriculture and microfinance loans, which are popular in rural areas.
Microfinance loan disbursal slowed in April-June due to general elections and heatwaves, Sumant Kathpalia, chief executive officer of IndusInd Bank said last week, adding that rural areas were still recovering from impact of the pandemic.
More than 40% of India's 1.4 billion people are dependent on agriculture, which has been hit in recent years by rising temperatures, patchy monsoon rains and policy interventions.
The Indian government subsidies loans to farmers, and banks are mandated to give out farm loans, which have doubled during the last four years to more than 21 trillion rupees ($250 billion).
As of March-end, banks' non-performing farm loans had eased from a year earlier, but remained elevated at 6.5% of total bad loans, as per latest central bank data.
The country's biggest private lender HDFC Bank's farm loan slippage doubled in the three months to June from the previous quarter.
Kotak Mahindra Bank said dues on small-ticket microfinance loans were rising.
Delinquencies are rising in certain states of north and south India, Devang Gheewala, chief financial officer of Kotak Mahindra Bank said earlier this month.
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