IBA opposes farm loan waiver by Andhra Pradesh, Telangana govts

Written by Press Trust of India | Hyderabad | Updated: Jun 18 2014, 07:33am hrs
Indian Banks Association (IBA) on Tuesday opposed the farm loan waiver schemes announced by the Andhra Pradesh and Telangana governments, expressing fear the move would create ill will in the community.

IBA chief executive officer MV Tanksale said such schemes would dent the financial discipline and opined that instead of providing resources for such schemes, the governments should concentrate on long term development of farming community.

No banker is absolutely comfortable with the debt waiver schemes. It totally vitiates the payment culture in the industry. And everyone feels that sometime or the other government will come with a waiver and why they should really pay.

It creates ill will among those who are prompt payers, because debt waiver goes to only those who default the payment, said Tanksale, also ex-chairman of Central Bank of India.

As part of fulfilling poll promises, Andhra Pradesh CM N Chandrababu Naidu and his Telangana counterpart K Chandrasekhar Rao have initiated a process to implement loan waiver schemes for farmers.

While Rao has announced waiving of loan up to R1 lakh, Naidu has set up a committee to work out the total amount and modalities to implement the scheme. Though the exact loan amount of the farmers of the state that would be waived in Andhra Pradesh has not been worked out, it is estimated to be in thousands of crores of rupees. Andhra Pradesh, which virtually has empty coffers, is expected to have over R15,000 crore deficit budget in the current financial year.

Sources in Telangana government said a sum of R20,378 crore was distributed as crop loan till March 31, 2014, in Telangana. Of this, R19,600 crore was the aggregate for loans up to R1 lakh. Term loans amount to R600 crore (up to R1 lakh) out of a total of R3,332 crore.

K Nageshwar, an independent member of Andhra Pradesh Legislative Council and professor in the journalism department, Osmania University, said though farmers need relief from the debt traps, the governments must look at providing long-term solution the problems of the farmers.

It is not banks that would waive loans, the governments would do that. So if the governments have will to implement it, they can do it. At the same time, the governments should also look at improving income to meet these kind of challenges," Nageshwar said.