Kharif season in jeopardy as RBI rejects loan waiver

Sop to cost Rs 54k cr to AP, Rs 20k cr to Telangana

After cashing in on the poll promise to waive farm loans, both the Telangana Rashtra Samithi and Telugu Desam Party find themselves in a fix following the Reserve Bank of India’s (RBI) refusal for loan restructuring. 

While this would mean farmers in both Telangana and Andhra Pradesh will have a worst-ever Kharif season, the country’s central bank is categorical in its refusal to restructure loans saying such irresponsible  promises pose “moral hazard” for political parties and would allow indiscipline to set in among farmers willing to repay loans. 

With the Union Government is washing its hands of the loan waiver schemes, the RBI decision has dealt a fresh blow to the two governments’ effort to offer some relief for farmers.  Estimates suggest the loan waiver would cost Andhra Pradesh exchequer Rs 54,000 crore, while the burden on the shoulders of Telangana would be Rs 20,000 crore. 

AP will also have to bear the additional burden of Rs 26,000 crore for the waiver it had promised for women’s self help groups.  To buy time, both the governments appointed expert committees to find resources and ways to meet the extraordinary financial burden on them. 

They tried to limit waiver for just one loan per family in order to reduce the burden, but with the RBI pulling the plugs, the lender banks not only lack permission to waive existing loans, but are also shutting their doors on any farm lending, putting Kharif cultivation in jeopardy.

 Rejecting requests for loan restructuring, RBI Governor Raghuram Rajan said the data from both AP and Telangana showed no signs of distress and provide no justification for loan waiver.