Govt. decides to write-off Rs.1.2bn unpaid loans by small-scale paddy farmers

• Says it would allow farmers to access credit facilities required for upcoming Maha season

The government has decided to write-off unpaid agricultural loans worth Rs.1.24 billion given to small-scale paddy farmers through State-owned banks in order to ensure access to credit facilities in the upcoming Maha cultivation season. 

Prime Minister Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation and National Policies on Monday sought the approval of the Cabinet of Ministers to write off the agricultural loans granted to paddy farmers with less than two hectares of farmlands by State-owned banks, which have fallen into the non-performing loan (NPL) category.

Around 95 percent of the country’s paddy farmers cultivate small-scale farms less than two hectares. 
According to Cabinet Co-Stockperson, Minister of Transport and Highways and Minister of Mass Media, Bandula Gunawardena, the State-owned banks which include Bank of Ceylon, People’s Bank, National Savings Bank and Regional Development Bank (RDB) have granted Rs.1.996 million worth agricultural loans to small-scale paddy farmers as of May 31,2022 and around Rs.1.24 billion of this outstanding amount has fallen into NPL category due to non-payment.
The Department of Government Information cited the short-lived ban on chemical fertilisers as a key contributory factor which caused the farmers to default on these loans. “Farmers have to face further difficulties due to the decision to resort to organic fertilisers instead of chemical fertilisers. Due to this situation, farmers have defaulted in repayment of loans taken for paddy cultivation. Banks have classified those loans as non-performing loans. Due to this reason, many farmers may be ineligible for the loans required for paddy cultivation in the upcoming season. Therefore, it is essential to provide relief to them through the intervention of the government,” it said. In addition, Gunawardena revealed that other farmers growing other crops have defaulted Rs.1.5 billion worth loans extended by these State-owned banks.