Debt is destroying families in Kashmir. Ziraat Times analyses how serious the problem is

By: Basit Gulzar and Ambreen Khan

Srinagar: A silent crisis is unfolding across J&K as more and more people find themselves caught in a web of debt, struggling to repay loans taken for businesses, agriculture and personal needs.

From farmers and small entrepreneurs to individuals financing weddings and luxury purchases, many have mortgaged their land, gold, and homes — only to face financial ruin when their ventures or plans failed.

Abdul Rashid, a farmer from Pulwama, took a ₹5 lakh loan to set up a high-density apple orchard but saw his investment collapse.

In Srinagar, Khalida Bhat borrowed ₹8 lakh against her gold for her daughter’s wedding but now struggles with repayment.

Businessmen like Firdous Ahmed from Sopore and Faheem Ahmed Srinagar took loans of ₹45 lakh and ₹2 crore, respectively, but their failed ventures have left them on the brink of losing their assets.

In Anantnag, Javed Ahmed had just returned to his homeland after completing his MBA degree in Punjab and demanded from his parents to buy him a new car costing ₹16 lakh. His father had to mortgage a piece of their family land. Just after two years, the loan turned into a nightmare as his father fell ill, their family business vanished and now faces the loss of his family land due to the unpaid ₹16 lakh loan.

These are not isolated incidents but part of a larger pattern of financial distress in Kashmir, where economic uncertainty, rising aspirations, and easy access to credit have led to an increasing number of people falling into debt traps.

How big is the problem?
Jammu & Kashmir’s economic landscape in 2024-25 is marked by a paradox: while formal credit access has expanded dramatically since 2019, the state faces mounting concerns over unsustainable debt levels across households, farms, and businesses.

Data from the Economic Survey Report 2024-25, internal bank memos and public sources analysed by Ziraat Times reveal a staggering Rs 1.25 lakh crore in outstanding loans in J&K by December 2024 — an increase from Rs 1.07 lakh crore in 2022-23.
These liabilities mainly span personal, agricultural and business sectors.
Stories collected by Ziraat Times suggest that this escalating debt burden among households, fueled by Covid19 pandemic, the post-2019 economic policies and ambitious lending is silently breaking families apart.

The breadth of indebtedness in J&K is vast, touching nearly every economic segment. Personal loans, including home and consumption loans, account for 40% of the total credit, agricultural loans (notably Kisan Credit Card or KCC loans) 30%, and business/industrial loans another 30%, according to official data estimates.

Gross NPAs for banks, though reduced to 4.8% in 2024 from 5.2% in 2023, remain a red flag, with agriculture and small business loans showing disproportionate stress.

Status of ten key categories

Small business loans: Estimated at Rs. 15,000 crore, these loans support MSMEs, hoteliers, and handicraft units but carry a high NPA rate of 6%. MSMEs are the worst hit, while the tourism ventures which have relied heavily on bank loans, but have not been able to generate adequate business, follow second.

“While tourism is booming, hundreds of families have taken loans from banks to develop guest houses or hotels. What they didn’t do is a proper risk analysis. They were not able to generate the kind of sustained revenue needed to repay the monthly EMIs. These families have collapsed and are now looking for buyers for their guest houses and hotels”, said Naseer Ahmed, a senior banking executive.

Industrial loans: There are an estimated Rs 10,000 crore in industrial sector loans in J&K today. Although the exact percentage from four major J&K banks could not be obtained, anecdotal accounts suggest that at least 40% of these loans have turned bad. The result is closure and bank settlement pressures on the individuals who have taken these loans in the first place.

Agricultural Term Loans are another major area of farmer indebtedness in J&K today. Data suggests that Rs. 8,000 crore worth of loans have been taken from banks on big farming initiatives, especially on transitioning to horticulture. While some farmers have been successful and are repaying their EMIs regularly, many others are struggling and are now facing loss of their mortgaged lands.

Then are the KCC (Kisan Credit Card) loans. Estimates obtained from five major banks by Ziraat Times indicate there is a massive Rs. 25,000 crore burden on 7 lakh farming households today. And the incidence of NPAs is between 5 -7%.

Home loans account for about Rs. 20,000 crore, reflecting the current urban growth. However, data suggests that these loans have largely been secured by government employees or well established businessmen. NPAs in this category are reportedly as low as 2-3%.

Consumption loans are also staggering. Today, Rs. 10,000 crore in personal loans for durables and emergencies in J&K faces a 5% default risk.

Microfinance loans are low in quantum but their numbers are huge across J&K. Estimates suggest there are about Rs. 5,000 crore worth of loans disbursed through various government schemes aiding 1.16 lakh youth via 40,778 self-employment units. Although these youth also avail government subsidies, repayment of the loan component is facing major challenges.

When it comes to Education Loans, there are estimates of Rs. 2,000 crore worth of loans. However, this category of loans are reportedly facing 6% NPAs.

Trade and commerce loans are to the extent of Rs. 5,000 crore for retail and exports are another big sector. The extent of NPAs in this segment could not be ascertained.

Will indebted people be able to repay their debts?

This Rs. 1.25 lakh crore debt pile — equivalent to over half of J&K’s nominal GSDP projected at Rs. 2.36 lakh crore for 2024-25 – signals a difficult situation. Small businesses, horticulture farmers, and urban youth bear the brunt, their livelihoods increasingly tethered to loans they struggle to repay.

The repayment capacity of J&K’s loanees paints a grim picture. The Economic Survey 2024-25 highlights an improved credit-deposit ratio (58% in 2024 vs. 53% in 2019), yet volatility in industries, agriculture and small business incomes undermines repayment consistency. Salaried borrowers with home loans fare better, but inflation (4.5%) and unemployment erode capacity for consumption and education loans.
KCC loanees, managing Rs. 25,000 crore in debt, epitomize this struggle.

With national KCC loans at Rs. 10.05 lakh crore in 2025, J&K’s horticulture farmers—particularly apple growers—face NPAs of 5-7%. Post-harvest losses and price drops, despite a raised loan limit to Rs. 5 lakh and 3% interest subsidies, leave many unable to service debts. “The weather last year ruined my crop, and the market didn’t pay enough to cover my KCC dues,” lamented Abdul Rahim, a farmer from Shopian.

How about J&K Bank’s One-Time Settlement (OTS) scheme?

The scheme extended into 2025, targets Rs. 2,000 crore in stressed assets. By March 2025, 25,000 loanees —mostly small borrowers with loans under Rs 10 lakh—settled Rs 500-700 crore, achieving 60-70% principal recovery. Yet larger defaulters, including industrial and KCC borrowers, lag due to higher dues and weaker cash flows. “The OTS helps, but it is a band-aid on a deeper wound,” said a senior J&K Bank official, speaking anonymously.
Why are people in Kashmir taking such much debt?

Comparing 2025 to two and three decades ago reveals five striking patterns of indebtedness and growing poverty in Kashmir.

Decades ago, debt was agrarian or survival-based. Now, Rs. 10,000 crore in consumption loans reflects urban lifestyle pressures, tying poverty (15-18% vs. 30-35% in 1995) to non-productive borrowing.

Youth debt trap: Youth borrowing was rare in the 1990s; today, 32% urban unemployment drives education and consumption loans, shifting poverty from rural to urban youth.

Tourism debt reliance: Negligible in the militancy-hit 1990s, tourism loans (Rs. 8,000-10,000 crore) now support recovery (2.36 crore visitors in 2024). Aspirations are going sky high, but not all are able to repay their debts.

Agricultural debt escalation: Small cooperative loans (<Rs. 50,000) dominated decades ago; now, KCC loans (Rs. 25,000 crore) dwarf them, with repayment stress like never seen before.

In the final analysis, J&K’s debt crisis is a paradox of progress and peril. Post-2019 stability spurred lending and tourism, yet the Rs. 1.25 lakh crore burden—coupled with 4.8% NPAs and uneven repayment capacity—threatens to unravel gains. Horticulture farmers gamble on weather, small businesses on tourists, and youth on elusive jobs, all while inflation gnaws at their resilience.
Experts warn of a tipping point. “If tourism dips or agriculture falters, defaults could spike, destabilizing banks and households,” said Dr. Naseer Ahmed, an economist.

While the OTS scheme offers temporary relief, but structural fixes—job creation, industrial growth, and climate-resilient farming—are urgent. Decades ago, J&K battled poverty with scant credit; today, it battles both with too much. Without intervention, this debt spiral could echo the economic fragility of the past, casting a long shadow over J&K’s future.