Bitter harvest: The rise of bad loans in the agriculture sector

The RBI released its biannual Financial Stability Report (FSR) on December 31.

- Roshan Kishore and Sreedev Krishnakumar

Data on bad loans, or non-performing assets (NPA), shows that bank balance sheets are healthier than they have ever been in the last decade, with gross NPAs as a share of total advances falling to just 2.2% in September 2025.However, there is one statistic in the FSR which should set off alarm bells for policy observers. Agriculture accounts for the highest share of bad loans and this share has been rising for quite some time now. A further examination also shows that agriculture's share in bad loans is disproportionately larger than its overall share in bank credit in the country.

Bad loans have moved from non-farm businesses to farms and households

The Centre for Monitoring Indian Economy (CMIE) database has sector-wise NPA share data from the quarter ending March 2015. Back then, industry and services accounted for more than 80% of the total NPAs of scheduled commercial banks (SCBs). The situation remained broadly unchanged for five years but started changing steadily after that.