Lok Sabha Question No. 262 (STARRED), answered on 2018-01-05
Subject: Farm Loan Waiver
Ministry: FINANCE
Asked by: J.C. DIVAKAR REDDY, KONAKALLA NARAYANA RAO

## Government of India Ministry of Finance Department of Financial Services LOK SABHA

Starred Question No. †*262

To be answered on Friday, January 05, 2018/Pausha 15, 1939 (Saka)

## Farm Loan Waiver

†*262 SHRI J.C. DIVAKAR REDDY: SHRI KONAKALLA NARAYANA RAO:

Will the Minister of FINANCE be pleased to state:

- (a) whether the farm loan waiver is not a good practice for economic or credit culture which ultimately cannot be justified in the long run according to former Governors of the Reserve Bank of India;
- (b) if so, the details thereof;
- (c)  whether  the  Government  proposes  to  offer  farmers  a  longer  window  to  pay  off their loans and if so, the details thereof; and
- (d) the financial assistance provided/ being provided to each State by the Government for the purpose during the last three years and the current year?

Answer The Minister of Finance (Shri Arun Jaitley)

- (a)  to (d) : A Statement is laid on the Table of the House

Statement referred to in reply to parts (a) to (d) of Lok Sabha Starred Question No. †*262  to  be  answered  on  05.01.2018  regarding  Farm  Loan  Waiver  by  SHRI  J.C. DIVAKAR REDDY and SHRI KONAKALLA NARAYANA RAO:

(a) & (b): Reserve Bank of India (RBI) has informed that a former Governor of RBI in his  letter  to  the  Chief  Election  Commissioner  had  mentioned  the  risk  of  promising loan  waivers  by  political  parties  at  election  time  as  beneficiaries  stop  making payment even if they are financially in a position to make them and that this affects the banking sector as well as the state finances. RBI has also informed that the ex Governor,  while  addressing  a  conference  organized  jointly  by  National  Bank  for Agriculture  and  Rural  Development  (NABARD)  and  Small  Industries  Development Bank of India (SIDBI), had also stated that the loan waivers and subsidies distort the credit discipline.

(c):  RBI  has  issued  directions  for  Relief  Measures  to  be  provided  by  respective lending institutions in areas affected by natural  calamities which, inter alia, include, restructuring/rescheduling of existing crop loans and term loans. The benchmark for initiating  relief  measures by banks has also been reduced to 33% crop loss in line with the National Disaster Management Framework. As per RBI's directions, all shortterm  loans,  except  those  overdue  at  the  time  of  natural  calamity,  are  eligible  for restructuring.  RBI  has  advised  the  banks  that  the  principal  amount  as  well  as  the interest  due  for  repayment  in  the  year  of  occurrence  of  natural  calamity  may  be converted into term loan. If the loss is between 33% and 50%  maximum period of repayment is upto 2 years (including moratorium period of 1 year) and in case the loss  is  50%  or  more  maximum  period  of  repayment  is  upto  5  years  (including moratorium period of 1 year).

(d):  No  financial  assistance  for  loan  waiver  has  been  provided  to  States  by  Union Government during the last three years and the current year.