RBI yet to take a final view on farm loans issue in both states

Reserve Bank of India (RBI) is still to take a final view on farm loans issue of Andhra Pradesh and Telangana as the governments of the respective states are yet to get back to the regulator with concrete plans as to how they would guarantee the repayment.

“We had some initial rounds of discussions with the state governments. But they still have to come back with a full scheme,” RBI deputy governor, R Gandhi, said on Monday.

As a proxy to the farm loan waiver both the governments had requested the RBI to permit the banks to reschedule the short term agriculture loans in a bid to avoid the immediate repayment obligation either by the borrowers or by them. Senior officials of AP and Telangana met with RBI Governor, Raghuram Rajan, separately on the issue.

 Recently, Andhra Pradesh chief minister, N Chandrababu Naidu, and his senior ministers stated that in principle the RBI had agreed for rescheduling of loans and the specific guidelines in this regard were expected very soon.

When the reporters sought response on these claims, Gandhi said that the matter was not just about the rescheduling of loans.

“There are certain standing instructions already available for banks on how to deal with natural calamities based on which they will restructure the loans. That mechanism is already there. If there are other things beyond that then... ,” he said while citing the relevance of the earlier discussions.

The two governments have been maintaining that the RBI permission  was required for this specific instance as the existing guidelines do not entertain a delayed request for loan recast, the RBI deputy governor said a ‘full scheme’ was awaited from the states to take a decision. However, he refused to elaborate on what that meant.

Earlier in the day Telangana, finance minister, Etela Rajender, said the state government would take a decision on the farm loan waiver scheme  at a Cabinet meeting scheduled on Wednesday.

The agriculture loan outstandings in both the states are very large even though the governments of AP and Telangana have hinted at waiving off loans only of up to Rs 1.5 lakh per family and Rs 1 lakh per family respectively. Even this could put a burden of Rs 35,000 crore and Rs 19,000 crore respectively, according to the earlier reports.