Agricultural Bad Loans Surge: A Growing Concern for India's Economy
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The Reserve Bank of India's Financial Stability Report has raised alarm bells with a sharp increase in bad loans in the agriculture sector, accounting for a staggering 36% of scheduled commercial banks' non-performing assets (NPAs) as of September 2025. This is the highest share of bad loans in agriculture on record. While the overall NPA ratio for banks has fallen to 2.2% in September 2025, the agriculture sector's increasing share of bad loans is a cause for concern. Unlike other sectors, the agriculture sector's share of bad loans has risen disproportionately, suggesting a potential issue of distress or delinquency. A closer look at the data reveals that smaller ticket-sized loans in agriculture contribute significantly to the rising share of bad loans. In contrast, retail loans, which have seen a significant increase in credit allocation, have a relatively low share of bad loans. The rise in agricultural bad loans raises questions about growing agrarian distress and the potential for increased political pressure for farm loan waivers. While more granular data is needed to determine the root cause of the issue, policymakers must take urgent notice of the situation to prevent further escalation. The RBI's data highlights a worrying trend that warrants immediate attention. As the agriculture sector is crucial for mass livelihoods, it is essential to address the issue of bad loans and understand the underlying factors driving this trend to prevent any potential crisis in the sector.
