Farm Debt Waiver May Dent India Credit Growth, Moody's Unit Says
- Banks will try to tighten norms for future lending: ICRA
- Loan forgiveness lowers repayment incentives in future: RBI
Indian loan growth may fall to the lowest level since 1992 as lenders tighten underwriting standards for advances to farmers, after waivers by state governments raised the risks on billions of dollars of such debt, according to the local unit of Moody’s Investors Service.
Uttar Pradesh and Maharashtra, the country’s largest states by population, have announced waivers on more than 665 billion rupees ($10.3 billion) in agricultural loans since April, raising the possibility of farmers holding back on payments in other poll-bound states. About three-fourth of the loans to Indian farmers are in places where such waiver programs have been announced or where public pressure increases the odds of one being announced, a Nomura Holdings Inc note on June 13 showed.