Farm loan waivers: States will have to bear cost on their own, says FM Arun Jaitley

“I have already made the position clear that states which want to go in for these kind of schemes (farm loan waivers) will have to generate them from their own resources. Beyond that Centre has nothing more to say,” Jaitley said

By: ENS Economic Bureau | New Delhi | Published:June 13, 2017 2:32 am
Arun Jaitley, Farm loan waiver, Maharashtra, Devendra Fadnavis Arun Jaitley. (Express photo by Prem Nath Pandey) 

A day after the Maharashtra government announced a blanket loan waiver for farmers, finance minister Arun Jaitley reiterated that states will have to bear the burden of such announcements and the Centre will not fund states from its coffers for such waivers. “I have already made the position clear that states which want to go in for these kind of schemes (farm loan waivers) will have to generate them from their own resources. Beyond that Centre has nothing more to say,” Jaitley said.

The Maharashtra government on Sunday provided farm loan waiver to 31 lakh farmers not exceeding Rs 35,000 crore. Earlier, Uttar Pradesh had waived off Rs 36,000-crore loan on April 4. The decision led to similar demands in states like Maharashtra Madhya Pradesh and Punjab. The Reserve Bank of India (RBI), in its second bi-monthly monetary policy review for 2017-18, had warned of fiscal slippages and rise in inflationary expectations following farm loan waivers by states.

After taking stock of the fiscal performance of public sector banks in a review meeting, Jaitley said that the RBI is at an advanced stage of preparing a list of bad loans where resolution is required under the insolvency and bankruptcy rule. “The RBI is at a fairly advanced stage of preparing a list of those debtors where a resolution is required through the IBC (Insolvency and Bankruptcy Code) process and you will shortly be hearing about it,” Jaitley said.

The finance minister also said that there are challenges to credit growth and speedy resolution for all pending NPA cases is the need of the hour. “There is a challenge in industry with regards to credit growth, which was discussed in the meeting and the state of resolution of NPAs also came up for consideration,” he said. The finance minister said that banks are making best efforts through the available infrastructure to provide credit when they are asked for.

Jaitley also said that the government is “actively working” towards consolidation of state-owned banks. “Consolidation of banks was not on the agenda as far as this present meeting is concerned. But I can tell you, we are actively working in that direction,” he said.

Jaitley pointed out that a few top bankers expressed apprehensions about the infrastructure available for enforcement under the NPA ordinance. He, however, did not go into the specifics. According to RBI Deputy Governor S S Mundra, who participated in the meeting, said that following the ordinance on NPAs, an internal advisory committee has been formed for identification of large accounts. “One of the important components was to enhance the size and scope of oversight committee… identification of the accounts which can be actively taken up under the process,” Mundra said.

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