Farm loan waivers can lead to fiscal slippages, cautions RBI Governor Urjit Patel

His remarks come in the backdrop of a slew of farm loan waivers granted or promised by various state governments in the run-up to the 2019 Lok Sabha elections in the country.

By: Express Web Desk | New Delhi | Published: June 7, 2017 4:16 pm
urjit Patel, Reserve bank of India, Farm loan waiver, RBI farm loans, Urjit patel farm loan waiver, RBI farmers loans, RBI farmer loans, RBI news, Banking news RBI Governor Urjit Patel. (File Photo)

The Reserve Bank of India on Wednesday cautioned against rushing to provide farm loan waivers as it could lead to ‘fiscal slippages’ and inflationary spillovers. In a statement to the media, RBI Governor Urjit Patel struck a cautionary tone when he said farm loan waivers can undo work on fiscal deficit done over the last two years. “Farm loan waivers can lead to fiscal slippages, undo work on fiscal deficit done over last two years,” said Patel. In fact, in April earlier this year, Patel drove home the point that a farm loan waiver “undermines an honest credit culture” and could “affect the national balance sheet”.

His remarks come in the backdrop of a slew of farm loan waivers granted or promised by various state governments in the country even as protests by farmers in Maharashtra, Tamil Nadu and most recently, Madhya Pradesh are underway. The most recent farm loan waiver came from Uttar Pradesh Chief Minister Yogi Adityanath who decided to waive loans amounting Rs 36,359 crore taken by around 94 lakh small and marginal farmers in the state, thus fulfilling one of BJP’s main pre-poll promise. Maharashtra Chief Minister Devendra Fadnavis also affirmed that the state government will introduce a farm loan waiver before October 31, 2017. According to Maharashtra government’s waiver plan, nearly 1.07 crore farmers who own less than five-acre land holding would be eligible for the same.

READ: Madhya Pradesh farmers’ protest: Don’t politicise the issue, Venkaiah Naidu tells Congress

Last year, former chief minister of Tamil Nadu J Jayalalithaa had also waived off loans of at least 16.94 lakh small and marginal farmers who own less than five acres of land. The decision, in effect, imposed a financial burden to the tune of Rs 5,780 crore on the state government.

READ: Farm loan waivers by states might hit Rs 2,57,000 crore by 2019 elections: BofA-ML Report

According to a report released by a global banking group, various state governments are likely to waive off at least USD 40 billion, or Rs 2,57,000 crore of farmers’ loans in the run up to the 2019 Lok Sabha elections. As per the Bank of America Merrill Lynch (BofA-ML) report, farm loan waivers will amount to at least 2 per cent of gross domestic product (GDP) by the 2019 polls.

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  1. M
    Jun 7, 2017 at 8:41 pm
    The govt is enacting policy after policy which are anti-people. Is this achhe din all about that 50 lac Crore of NPA are given as handouts to the richest while just 1 lac cr. of farmer loan will cause fiscal slippage? It's very sad that how inequality and divide are being perpetuated systematically for the sake of keeping iron grip on power!
    1. D
      Jun 7, 2017 at 5:59 pm
      No one spoke from RBI at the time of notebandi !!! Now looking at the position and opinion of central and state govts the RBI has opened its mouth!!!! Loan waiving is one the biggest promises given by govt to the public !! Govt can waive off loan and can manage the matters if it has will power and sense of welfare of farmers !!! In democracy govt is govt and RBI is RBI !!!!! Loans waiving to corporate sector, NPA, and other big establishment can be managed , why not farmers loan????
      1. K
        Keiky M
        Jun 7, 2017 at 5:47 pm
        It all started with BJP's bonanza to Farmers in UP many of whom were not genuine deserving cases! It will snowball now and again middle cl bank depositors who earn meager interest rates suffer in silence due to such bad debts to the rich and such write offs!
        1. Shridhar Shettigar
          Jun 7, 2017 at 5:24 pm
          Farm loan waiver will lead to fiscal problems, then what about write-off of NPA to Industry...??? All are corrupt system working against Hardworking common man..
          1. Shine Kumar
            Jun 7, 2017 at 5:22 pm
            Farm loan waiver is bad for Indian economy but loan waiver for ambani and adani is good for Indian economy
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