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

A walk down the rich history of Ayurveda

The Indic Quotient: Reclaiming Heritage through Cultural Enterprise By Kaninika Mishra Bloomsbury India, 230 pages, Rs. 499    Over the past decade, India has seen a significant rise in passion for enterprise as well as pride in her

Is China gearing up for prolonged conflict with India?

International observers will keenly watch the Chinese Communist Party Central Committee meeting next month. The central committee is the highest organ of the CCP with a mandate to execute the decision of the National Congress which is convened once every five years.   Besides economy, r

TRP-driven model bred irresponsibility: Sudhir Chaudhary

News profession is organic in nature, requires responsibility and discipline, and there is no room for mistake. To maintain high standards of accuracy you need discipline and hygiene in the newsroom. Sudhir Chaudhary, editor in chief of Zee News, Zee Business and Wion, has said that a TRP-driven business m

This Mumbai NGO empowers children with skills

When Dharmendra Pandey, a fruit-seller had to leave Mumbai after the imposition of the lockdown during the Covid-19 pandemic, and return to his village in Uttar Pradesh, he was staring at economic uncertainties ahead. Little did he know that his 16-year-old son, Mahavir, had acquired skills that would come

Masks: Awareness: near-total, compliance: half-way

Wearing a face mask is the first line of defence against the novel coronavirus, along with maintaining social distance and frequently washing hands with soap. More than six months after the outbreak of Covid-19, nearly 90 percent of people in India have become aware of the necessity of wearing a face mask,

Covid-19: Daily recoveries cross 1 lakh mark, new cases far fewer

Is India finally gaining an upper hand over the Covid-19 pandemic? After weeks of new cases hitting 90,000-plus every day, the tide seems to be turning, as the number came down to 75,083 on Tuesday, and the recoveries were not only higher than that but crossed the 1 lakh mark too. The countr

Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter