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RBI Governor Shaktikanta Das has a word of caution for governments propagating farm- loan waiver. “Any generalised kind of write-off obviously has an adverse effect on the credit culture and future credit behaviour of the borrowers,” he said.
Das was speaking to the media after his meeting with the trade bodies on issues concerning Micro, Small and Medium Enterprises (MSME) here on Monday.
His remarks come at a time when three new State governments — Madhya Pradesh, Chhattisgarh and Rajasthan — have announced a farm-loan waiver.
Earlier, BJP-ruled governments in Maharashtra and Uttar Pradesh had also decided to go for a loan write-off.
Das felt that though elected governments have the constitutional mandate to take decisions with regard to their finances, every State government, before taking decisions on any kind of farm-loan waiver, has to carefully examine its fiscal space and whether there is any room for manouevring.
“It is for the individual governments to examine whether they have the fiscal space to meet the requirements and release the money to the banks then and there,” he added.
Meeting with MSMEs
On his meeting with representatives from the MSME sector to elicit their views on the implementation of the restructuring scheme announced by the RBI earlier, Das said, “the mood is certainly of confidence and I think they are looking forward.”
He said that banks have been asked to look at the viability of the individual MSME before restructuring.
“We do hope that banks and MSME units will work together to see that the scheme is implemented in letter and spirit, so that the benefits are maximised,” he said.
Liquidity Vs loose money
When asked about overall liquidity, Das said that the RBI is constantly monitoring the situation and will take steps whenever a deficit is noticed.
“At the same time, I must also add that the RBI would not like a situation wherein the liquidity becomes kind of loose money. Any infusion of liquidity will have to be very carefully considered and has to be need-based,” he said.
He further added that caution and care have to be exercised by the RBI so that excess liquidity, which sometime has certain adverse consequences, is not created. He refused to name sectors, which are facing a liquidity problem.
Das will meet representatives of non-banking financial companies on Tuesday.
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