How election promises of farm loan waivers hurt India's banking sector

Many bankers are complaining about deteriorating credit culture. The villain is farm loan waivers, often a promise of political parties ahead of elections

A few months ago, in the run-up to the general elections, a large bank could not continue with the recovery process of bad loans given to farmers and micro, small and medium industrial units in one region of an Indian state. The recovery agents were denied entry in that region by the workers of a political party. That’s not the end of the story. The party even worked out a loan-waiver formula, with the help of a chartered accountant, and circulated it among the borrowers, explaining who wouldn’t have to pay how much.

 

Later, at a state-level bankers’ committee (SLBC)