BENGALURU: With the state government set to announce farm loan waiver in the July 5 budget, banks are yet to receive any proposal from the state regarding the modalities of the waiver. While data on farm loans is being collected from the bank headquarters, State Level Banking Committee officials say that there has been no clarity yet on the quantum of waiver. Banks expect the state to come up with a proposal about the quantum by next week. Despite the State’s keenness for the waiver, the Reserve Bank of India (RBI) might come into the picture to assess whether the State has the capacity to waive the repaid loan. M Mohan Reddy, convener of State Level Banking Committee (SLBC) said that the State government has collected data regarding outstanding farm loans from more than 50 banks in the state.
“As the State has been provided with the required data by the banks, we are expecting the government to come up with a proposal,” he said. Everything revolves around the quantum of loans to be waived. Next week, the state government is expected to come with a proposal to the banks, regarding the extent of loans to be waived, he said. Though the banks are expected to undergo a lot of stress due to the waiver, the banks had no choice but to abide by the policy decision of the State, said a banking official under the condition of anonymity. “Banks want their money back and each bank has demands on how soon the waived loans have to be repaid,” the source said.
RBI TO ANALYSE STATE’S CAPACITY TO REPAY
Jairaj K, retired IAS officer said that the RBI will play a role in the loan waiver episode, as it has to analyse the State’s capacity to repay the loan to the banks. “Earlier, there was an overdraft option for the states, which was stopped following the Fiscal Responsibility Act,” he said. As surplus in the State revenue was only K600 crore annually, the State will either have to exercise austerity to ensure that the loan waiver is implemented or cut down on the funds allocated to social welfare schemes. The State’s power to borrow is limited, so how it plans to pull this through, remains a mystery, he said.