Rajan’s remarks on farm loan writeoff flayed

The remarks of RBI Governor Raghuram Rajan on the farm loan waiver proposals in Andhra Pradesh and Telangana have come in for criticism from leaders and representatives of farmers’ organisations as well as some political parties. The RBI Governor was reported to have remarked on Tuesday that there was no merit in farm loan waiver schemes and there was also no case for loan rescheduling, either in AP or Telangana, as there was no report of over 50 per cent crop damage in any district in the two States.

The two States promised farm loan waiver schemes during the elections. The RBI Governor was also said to have remarked that the culture of non-payment of loans should not be encouraged as it would adversely affect the banking system.

Y Sivaji, the former member of the Rajya Sabha and the honorary president of the AP Tobacco Growers’ Association, said here on Wednesday that the RBI Governor “seems to be unaware of who is really playing havoc with the banking system in the country. I wish to draw the attention of the RBI Governor that a handful of infra companies - ten to be precise - owe the banks a whopping ₹6,31,000 crore and of them three are Hyderabad-based companies which owe the banks more than ₹1 lakh crores. To recover these debts from these Hyderabad-based companies, a separate debt recovery tribunal is being set up in Hyderabad.”

He said that the RBI was offering the corporate sector relief in the name of debt restructuring, or one-time settlement, or in some other form and “when a political party or a State Government seeks to do the same for the small farmers it is dubbed as a cheap populist measure and bad economics. Rajan seems to be living in an ivory tower. We will provide him the list of corporate defaulters and we hope he will show the same alacrity in recovering those debts.”

Sivaji said the total lending to the farm sector in the country amounted to ₹7,30,000 crore or so and the bulk of it was also being grabbed the agri processing companies and export companies rather than the small and marginal farmers. “Therefore Rajan's remarks are highly deplorable,” he said and added that the AP Government should make some budgetary provision to facilitate loan rescheduling and fresh lending to farmers during the kharif season.

Ch Narasinga Rao, the CPM leader, also condemned the remarks of Rajan and said “the relief offered to the small and marginal farmers would in no way ruin the banking system. Such remarks are misleading and we would like to know from Rajan what steps he is taking to recover the debts from corporate defaulters and how he is going to restore the health of the banking system in the country.”

He criticised the AP State Government for not doing the homework properly on the issue and he urged the Government to take immediate steps for disbursement of farm loans during the kharif season.