The loan waivers and subsidies distort the credit discipline, said a former RBI governor
GN Bureau | January 5, 2018
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
Demobilization, like its predecessor – demonetization, is another decision gone bad in implementation. In both instances a careful public administrative action through its governance systems could have saved the magnitude of impact particularly on the most vulnerable sections of the society. Th
In a bid to break the “chain of transmission” of the deadly Covid-19, India, a country with more than 1.3 billion population, observed a voluntary ‘Janata Curfew’ on March 22. This has been followed by a 21-day, nationwide lockdown from March 24. Prime minister Narendra Modi also re
To take speedy decisions on research and development for Sars-Cov-2 virus and COVID-19, the government has constituted a Science and Technology Empowered Committee. The committee, set up on March 29 and chaired by Niti Aayog member, professor Vinod Paul and professor K Vijay Raghavan, princi
Covid-19 may turn out to be the last straw that broke the camel’s back so far as the real estate sector is concerned. It broke out at a time when pundits were estimating the GDP to be hovering around 2.5% with unprecedent levels of unemployment. This itself was a good indicator that the real estate s
As COVID -19 cases continue to rise amid a 21-day lockdown, the centre and the states are proactively taking measures to provide aid to the underprivileged and the needy during this unprecedented situation. By Sunday morning, India had registered 27
In the thick of battle with the deadly coronavirus, India on March announced a 21-day lockdown till April 14 in its bid to control the spread of virus which has so far led to 10 people’s death and over 600 others falling sick across the country. As per experts, India, which is in the second stage of