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The Reserve Bank of India has raised concerns over farm loan waiver as it undermines credit discipline, said a top official.
This observation comes in the context of the likelihood of the newly elected BJP-government in Uttar Pradesh making good its election promise of waiving farm loans and the Opposition in Maharashtra piling pressures on the BJP-Sena government to waive farm loans.
Speaking after inaugurating the branch of a private sector bank, SS Mundra, Deputy Governor, emphasised the adverse impact farm loan waivers have on credit discipline. RBI has not yet heard from the governments on farm loan waiver, he added.
A few days ago State Bank of India chief Arundhati Bhattacharya too had voiced concerns over farm loan waiver.
According to a recent SBI report, the total outstanding credit (2016) for agriculture sector was Rs 86,241.20 crore in Uttar Pradesh with average ticket size of Rs 1.34 lakh.
“According to RBI data (2012), 31 per cent of direct agriculture finance went to marginal and small farmers (landholdings up to 2.5 acres). Taking this as a proxy for Uttar Pradesh as well, approximately Rs 27,419.70 crore will have to be waived off in case loan waiver scheme is implemented for the small and marginal farmers for all banks,” said the report.
The report assessed that UP Government’s total revenue for FY17 was Rs 3,40,255.24 crore as per revised estimates. Thus, the amount of Rs 27,419.70 crore to be waived off is approximately 8 per cent of total revenue.
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