Why is Rs 1.84 lakh crore a "frightening challenge" for banks, but Rs 10.17 lakh crores not?
The great farm loan waiver debate is back. The Congress kicked it off this time with the announcement of waivers in the newly-elected governments of Chhattisgarh, Madhya Pradesh, and Rajasthan.
This was followed up by similar announcements from BJP-ruled Gujarat and Assam. Rahul Gandhi even went onto to demand a nation-wide farm loan waiver from Prime Minister Narendra Modi.
As if on cue, India’s bankers and economists claim to be alarmed.
United Bank of India’s MD, Ashok Kumar Pradhan, said, “It is a deadly poison. It’s a wrong way of addressing the real issue.”
“It is not good for the country’s credit culture,” said Mrutyunjay Mahapatra, managing director at Syndicate Bank.
“Clearly, (this is) a frightening challenge for Indian banks!” said Soumya Kanti Ghosh, SBI group’s chief economic adviser, reacting to the information that the combined waiver amount may be Rs 60,000-70,000 crore.
The government’s think-tank, the NITI Aayog, pointed out that farm loan waivers only benefit 10-15% of all farmers, as the rest do not have access to institutional loans.
Now, a reality check.
How much will the farm loan waivers cost? MP’s waiver will cost around Rs 35,000 crore. Chhattisgarh’s waiver will cost Rs 6,100 crore.
Rajasthan’s waiver will cost around Rs 18,000 crore. All put, about Rs 60,000 crore.
Following this, the Assam government announced a Rs 600 crore waiver in the state. Gujarat also followed suit with a Rs 650 crore waiver of farm electricity bills. Both states are BJP-ruled.
Please click here to read more.