The RBI's fresh missive sent to Chief Secretary I Y R Krishna Rao on July 26, in response to the state government's July 17 letter, will push Chief Minister N Chandrababu Naidu into an awkward position as he went to town claiming credit for "achieving" the loan rescheduling as a first step in implementing his promise of total loan waiver.
Chandrababu had announced last week that all crop loans and gold loans (taken for agriculture) up to Rs 1.5 lakh would be waived as the state government would carry the entire debt burden costing a whopping Rs 35,000 crore.
As the state government was left with empty coffers, post bifurcation, Chandrababu desperately sought rescheduling of loans ostensibly to buy time from the RBI.
He had spoken to RBI Governor Raghuram Rajan at least twice and also wrote letters on the issue stating that farmers in the state were in "great distress" due to a series of natural calamities.
The RBI, in turn, had asked the state government to furnish details about the distressed caused by the calamities to make a case for rescheduling of loans.
The RBI obtained inputs from the state government, the State-Level Bankers Committee, major banks in the state and also its Hyderabad regional office.
Besides, it also secured details on crop yield from the AP Directorate of Economics and Statistics and compared the farm output of Kharif 2013 with the average of last four years and also the maximum yield in a best single year.
"It does not appear feasible for us to conclude that distress is widespread warranting rescheduling of loans in the form and manner in which it has been asked for," RBI Executive Director Deepali Pant Joshi observed in a letter to Chief Secretary Krishna Rao on Saturday.
RBI also noted that "farmers' distress is not the key issue" in non-repayment of loans because balances in the farmers' savings bank accounts in rural and semi-urban areas increased.
"Data received from major banks functioning in the state revealed that before April 2014, the number of Kisan Credit Card renewals was similar to the previous year. From April 2014, however, possibly in anticipation of loan waiver, KCC renewals declined sharply.
"Commensurately, the balance is SB accounts in rural and semi-urban branches have increased, reflecting the marked performance of farmers for making deposits in their accounts rather than repaying loans. Indeed the SB deposits were coming down in June as farmers required funds for the new (crop) season," the RBI Executive Director observed.
"This suggests that farmers' distress is not the key issue in non-payment (of loans). In view of the above, it does not appear feasible for us to conclude that distress is widespread warranting rescheduling of loans," Joshi pointed out.
"Data analysis, based on comparison of crop yield of Kharif 2013 with the average of previous four years as well as the single year maximum yield, suggested that the indicative guidelines of crop yields being lower than 50 per cent of normal yield as per RBI Master Circular on guidelines for relief measures of area affected by natural calamities are not satisfied," the RBI executive added.