Farm loan waiver isn’t a good practice

The loan waivers and subsidies distort the credit discipline, said a former RBI governor

GN Bureau | January 5, 2018


#Farmers   #Agriculture   #Loan Waivers   #RBI  
Representational image. (GN)
Representational image. (GN)

Reserve Bank of India (RBI) has informed that “a former governor of RBI in his letter to the Chief Election Commissioner had mentioned the risk of promising loan waivers by political parties at election time as beneficiaries stop making payment even if they are financially in a position to make them and that this affects the banking sector as well as the state finances”, finance minister Arun Jaitley told the Lok Sabha, without naming the former RBI chief.

RBI has also informed that the ex-governor, while addressing a conference organized jointly by National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank of India (SIDBI), had also stated that the loan waivers and subsidies distort the credit discipline, he said.

Read: Farm loan waivers to lead to deflationary shock: Economic Survey


The minister said that RBI has issued directions for relief measures to be provided by respective lending institutions in areas affected by natural calamities which, inter alia, include, restructuring/rescheduling of existing crop loans and term loans. The benchmark for initiating relief measures by banks has also been reduced to 33% crop loss in line with the National Disaster Management Framework.

As per RBI’s directions, all short-term loans, except those overdue at the time of natural calamity, are eligible for restructuring. RBI has advised the banks that the principal amount as well as the interest due for repayment in the year of occurrence of natural calamity may be converted into term loan. If the loss is between 33% and 50% maximum period of repayment is upto 2 years (including moratorium period of 1 year) and in case the loss is 50% or more maximum period of repayment is upto 5 years (including moratorium period of 1 year).

No financial assistance for loan waiver has been provided to states by union government during the last three years and the current year, said the minister.

Also read: Total cost of farm loan waiver about Rs 130,000 crore: RBI chief

 

Comments

 

Other News

Boost to offshore wind energy projects

In a major decision, the Government has decided to grant waiver of ISTS charges to Off-Shore Wind Projects and extend the waiver to Green Hydrogen/Green Ammonia. This decision has been taken to facilitate wider execution of offshore wind energy initiatives, to promote the expansion of Green Hydrogen / Gree

Duty of stakeholders to provide cost effective, alternate energy fuels: Gadkari

Urging use of alternative and cost effective fuels to reduce pollution caused by vehicles, union road transport and highways minister Nitin Gadkari on Thursday said finding cost-effective fuels is the need of the hour and underlined that use of fuels like bio-CNG and green hydrogen help in protecting the e

Record production of rice, wheat, and sugarcane estimated

The foodgrain production of 3305.34 lakh tonnes is estimated in the current agricultural year 2022-23 – higher by 149.18 LMT as compared to the previous year, according to the Third Advance Estimates of production of major crops released by the ministry of agriculture and farmers welfare.

India`s ‘AIRAWAT’ ranks 75th in top 500 Supercomputing List

The AI Supercomputer ‘AIRAWAT’, installed at C-DAC, Pune, has been ranked 75th in the world. It was declared so in the 61st edition of Top 500 Global Supercomputing List on Tuesday at the International Supercomputing Conference (ISC 2023) in Germany. It puts India on top of AI S

Ocean Dialogue a great opportunity for G20 members

The ongoing third Environment and Climate Sustainability Working Group G20 meeting (May 21-23) has focused on three aspects: land degradation and reclamation of mining areas, Blue Economy and sustainable ocean management and resource sufficiency and circular economy. Leena Nandan, secretary,

Semi hi-speed trains, buses could be primary alternative to cars

We are not paying sufficient attention to the rapidly growing oil imports (from pre-Covid-19 to post-Covid, in 2022). They surged from 102 million tons (MT) in 2019-20 to 168 MT in 2022-23, an increase of 68%.   India is the largest importer of oil in the world, and, at current rate, we

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter