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Farm Loan Waiver: Only 50% Farmers Benefitted from The Scheme, Finds Study

The SBI study flags poor implementation rate in Telangana, M.P., Jharkhand, Punjab, Karnataka, and U.P.

Shruti Kandwal
Of the total accounts eligible for farm loan waiver, the majority of the accounts were in standard category.
Of the total accounts eligible for farm loan waiver, the majority of the accounts were in standard category.

According to a study by researchers at the State Bank of India, only around half of the intended beneficiaries of farm loan waivers declared by nine States since 2014 have actually got debt write-offs.

As per the percentage of eligible farmers who had got the benefits as of March 2022, Telangana (5%) Madhya Pradesh (12%) Jharkhand (13%) Punjab (24%) Karnataka (38%), and Uttar Pradesh had the worst farm loan waiver scheme implementation (52%).

On the other hand, the farm loan waiver schemes introduced by Chhattisgarh in 2018 and Maharashtra in 2020 were accepted by 100% and 91% of the eligible farmers, respectively. According to SBI researchers, a similar waiver issued by Maharashtra in 2017 for 67 lakh farmers, totaling 34,000 crores, has been implemented for 68 percent of the beneficiaries.

The results of ten farm loan write-offs totaling roughly 2.53 trillion rupees declared by nine States, beginning with Andhra Pradesh and Telangana in 2014, formed the basis for the SBI analysis. In Andhra Pradesh, 92% of the 42 lakh farmers who qualified for loan waivers have benefited, compared to just 5% in Telangana.


"Since 2014, only around 50% of the approximately 3.7 crore eligible farmers have received the number of debt waivers through March 2022... Farm loan waivers by States, despite much hype and political favoritism, have failed to provide relief to intended subjects, sabotaging credit discipline in some regions and making banks and financial institutions wary of further lending, according to the SBI report, which called it a "self-goal" inflicted by the State on its citizens.

Possible reasons

The report identified rejection of farmers’ claims by State Governments, limited or low fiscal space to meet promises and change in Governments in subsequent years, as the possible reasons for the low implementation rate of these loan waivers, whose frequency and scale have seen an unprecedented surge in the past eight years.

The analysis raised questions on whether benefits help farmers who are in true need, in addition to benefits not reaching the targeted farmers. "Of the total accounts eligible for farm loan waiver, the majority of the accounts were in standard category, posing the question whose interest widespread waivers genuinely serve," it was noted. This represented more than 80% of the accounts in several States.

The percentage of standard accounts—loans that are timely serviced by borrowers—that were covered by the farm loan waiver was very high in Jharkhand (100%), Uttar Pradesh (96%), Andhra Pradesh (95%), Punjab (86%) and Telangana (84%).

However, just 43% of the farmers in Maharashtra who received the loan waiver announced in 2020 and 46% of the farmers in Karnataka who received a loan waiver scheme worth 44,000 crores in 2018 had standard accounts.

The report's conclusion was that loan waivers "destroy the credit culture, which may affect farmers' interests in the medium to long term and also restrict governments' fiscal space to enhance productive investment in agriculture infrastructure."

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