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
India is celebrating the 72nd Republic Day on Tuesday. Attendance at the main celebrations in the capital is limited given the pandemic, yet Covid-19 has not dampened the spirit of the occasion. India’s military might, cultural diversity and social-economic progress will be on display at the majestic
How much time do Indians spend talking on phone? It is on average 761 minutes per month, according to a new report from the Telecom Regulatory Authority of India (TRAI). The telecom regulator released its report, titled ‘The Indian Telecom Services Performance Indicators: July-Septemb
Renowned cardiologist Dr Ramakanta Panda has said that the pandemic has exposed the inadequacy of existing healthcare systems and it is wrong to draw comparisons with Korea, a country with the population equal to that of a single Indian state. While speaking to Kailashnath Adhikari, MD, Gove
The committee of experts appointed by the supreme court to deliberate with the stakeholders on the new farm laws held its first meeting here Tuesday, with one of its members saying that all stakeholders, including individual farmers, will be heard. Hearing a petition on the farm laws enacted
The nationwide vaccination campaign launched Saturday, the largest such exercise in the world, has started setting new benchmarks, with vaccines administered to 2,24,301 beneficiaries in the first two days. “India has vaccinated the highest number of persons on Day1 under its COVID19 v
The Maharashtra government has announced a spending of Rs 2,500 crore annually to develop infrastructure of state-owned distribution company Mahavitaran (MSEDCL). Out of the total amount, Rs 1,500 crore will be spent on energisation of conventional agriculture pumps and Rs 1,000 crore