Farm loan waiver schemes would dent financial discipline: Bankers

It opposed to such packages by AP, Telangana govt expressing fear that the move would create "ill will" in the community

Indian Banks' Association (IBA) today opposed the farm loan waiver schemes announced by the Andhra Pradesh and Telangana governments expressing fear that the move would create "ill will" in the community.

IBA Chief Executive Officer M V 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," Tanksale, also former Chairman of Central Bank of India, told PTI.

As part of fulfilling poll promises, Andhra Pradesh Chief Minister 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 Rs 1 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 so far, it's estimated to be in thousands of crores of rupees.

AP, which virtually has "empty coffers", is expected to have over Rs 15,000 deficit budget during the current financial year.

Official sources in Telangana government said a sum of Rs 20,378 crore was distributed as crop loan till March 31, 2014 in Telangana. Of this, Rs 19,600 crore was the aggregate for loans up to Rs 1 lakh. Term loans amount to Rs 600 crore (up to Rs 1 lakh) out of a total of Rs 3,332 crore.

K Nageshwar, an independent member of Andhra Pradesh Legislative Council and professor in the Department of Journalism, Osmania University, said though farmers need relief from the current debt traps, the respective governments should look at providing long term solution the problems of the farmers.

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