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Farm loan waiver a bad credit culture: Ex-RBI Guvs
With the farm loan waiver pitch getting shriller by the day, former RBI governor Y V Reddy on Monday said the practice is not good for ‘economic or credit culture’ and insisted that ultimately it is a political decision and cannot be justified in the longer run.
New Delhi: With the farm loan waiver pitch getting shriller by the day, former RBI governor Y V Reddy on Monday said the practice is not good for ‘economic or credit culture’ and insisted that ultimately it is a political decision and cannot be justified in the longer run.
Even former RBI governor C Rangarajan took a similar line, saying the alternative is to offer farmers a longer window to pay off. Reddy noted that every political party in India has offered such waiver in some state or the other or at an all- India level.
"Loan waiver is not good for economic or credit culture. Every political party in India has given farm loan waiver in some state or the other or at all-India level. So, ultimately it is a political decision, it cannot be justified in the longer run," he said on the sidelines of the Inclusive Finance India Summit 2017.
Rangarajan observed that instead of waiving farm loans, the government should give longer time to farmers to repay loan or perhaps waive the payment of instalment and rate of interest in that particular year.
"First thing to do is waiver of interest payments during the year of distress, second reschedule the loans so that the farmers will get a longer timeframe for repayment and finally, if all these things don't succeed, then the government should think of farm loan waiver," Rangarajan suggested.
Both the former RBI governors' remarks assume significance, coming in the wake of such announcements by Punjab, Uttar Pradesh and Maharashtra. Recently, Congress leader Rahul Gandhi too tried a similar pitch during his campaign for Gujarat elections by promising farmers loan waivers if his party forms the government in the state. In 2008, the government wrote off farm loans to the tune of Rs 74,000 crore.
