With Opposition leader Rahul Gandhi challenging PM Narendra Modi to waive farm loans across the country, bankers believe it is a danger if implemented. Newly-appointed Congress government is forcing banks to mortgage their assets to sponsor this hasty political promise of farm loan waiver.<\/p>\n
The newly-appointed Rajasthan government released an order on Wednesday, December 19, to the national and co-operative banks that the government waives of the farm loans up to Rs 2 Lakh taken before 30th<\/sup> November 2018.<\/p>\n Other than Rajasthan, Madhya Pradesh, and Chhattisgarh, as well as Assam, have waived loans of farmers. Three Hindi heartland states- Rajasthan, Madhya Pradesh, and Chhattisgarh have outstanding farm loans amounting to Rs 1.1 Lakh crore.<\/p>\n Now, the possibility of many more state governments announcing such waivers is scaring bankers, who believe that even those who pay on time would be tempted to delay payments in the hope of such hasty waivers.<\/p>\n Here is what some bank MDs have to say about the waiver which has been announced in haste to just grab the vote bank-<\/strong><\/p>\n United Bank of India\u2019s managing director Ashok Kumar Pradhan said, \u2018It is a deadly poison, It\u2019s a wrong way of addressing the real issue.\u2019<\/p>\n Mrutyunjay Mahapatra, managing director at Syndicate Bank said, \u2018Undoubtedly, farmers\u2019 expectations of loan waivers are going up. It is not good for the country\u2019s credit culture.\u2019<\/p>\n According to the former deputy governor of RBI HR Khan, there should be both political and technical solutions to this farm loan problem. HR Khan says, \u2018Farm loan waivers are only curing the symptoms. But there are structural issues. Production has increased but marketing has not. Moreover, Pradhan Mantri Fasal Bima Yojana (PMFBY) needs to be implemented in right earnest. Post-harvesting financing should be provided.\u2019<\/p>\n Bankers believe there are better ways to cure farm distress than doing away with farmers\u2019 loan liabilities.\u00a0Banks don\u2019t lose money in such waivers as they are fully compensated by the state exchequer, which bears the burden. But banks believe such promises will destroy credit culture and force bankers to reduce loans to farmers and agricultural groups.<\/p>\n If defaults become the norm, fresh lending to these farmers would be stalled because banking regulations do not allow disbursement of fresh loans to defaulters unless the loan is restructured.<\/p>\n Further, among the states which are due for elections next year are Andhra Pradesh, Haryana, and Odisha, and if these states also announce debt relief packages, the combined waiver would be worth at least Rs 60,000-70,000 crore, said a study by State Bank of India. SBI has suggested an income support scheme for small and marginal farmers along with the debt waiver.<\/p>\nWhat if the govt head to more solutions?<\/strong><\/h2>\n