CHENNAI: The waiver of crop loans taken from cooperative institutions, one of the election promises of the TVK, is facing significant implementation challenges, as the new RBI guidelines that came into effect in November last year mandate governments to settle dues owed to co-op banks within 45 to 60 days whenever a loan waiver is announced.
Given the state’s debt condition, the norms not only constrain the government but also discourage political parties from making large scale crop loan waiver promises in future elections. Conventionally, state governments settled the loan dues to the cooperative banks at the rate of 20 % per annum, senior state government officials told TNIE.
In its election promise, TVK had announced a waiver of crop loans taken from cooperative societies and banks for farmers owning less than five acres of land. For landholdings larger than five acres, a 50% loan waiver was promised.
While the AIADMK also promised a waiver of agricultural loans without any ceiling, the DMK refrained from promising waiver of any category of loans in its poll manifesto. “At present, implementing TVK’s poll promise would require around Rs 15,000 crore, and the entire amount would have to be settled within 60 days from the date the loan waiver is given effect,” said a cooperatives department official.
The crop loan waiver of Rs 6,100 crore announced by former Chief Minister J Jayalalithaa in 2016 was reimbursed to cooperative banks in five annual installments. Similarly, the Rs 12,800 crore crop loan waiver announced by former Chief Minister Edappadi K Palaniswami just three months before the 2021 Assembly election was repaid by the subsequent DMK government in five annual installments of around Rs 2,100 to Rs 2,400 crore each.
After assuming office in May 2021, the DMK government paid Rs 4,376 crore to NABARD, while the remaining Rs 8,823 crore was settled in installments to cooperative institutions. Additionally, the DMK government also waived jewel loans of up to five sovereigns, amounting to Rs 4,904 crore, benefiting around 11 lakh people. It also waived loans availed by SHGs to the tune of Rs 2,117 crore, benefiting 10.56 lakh members.
“In total, the DMK government settled dues of nearly Rs 19,000 crore to NABARD and cooperative institutions from 2021-22 to 2025-26 to implement the crop loan, jewel loan and SHG loan waivers. The incumbent TVK government would have to repay around Rs 15,000 crore within 60 days if it chooses to implement its poll promise, which would not be an easy task for any government,” the official said.
On May 25, the state government announced a waiver of crop loans up to Rs 50,000 for marginal farmers, and a 50% waiver on crop loans up to Rs 50,000 for small farmers. Additionally, large farmers who had availed crop loans of up to Rs 1 lakh were granted a waiver of Rs 5,000 each. The scheme was estimated to benefit 14.22 lakh farmers and entail an expenditure of Rs 2,044.46 crore for the government.
Officials recalled that ahead of the 2026 Assembly election, when there was widespread expectation that the DMK would announce a jewel loan waiver in its manifesto, a large number of borrowers pledged jewellery of up to 5 sovereigns with cooperative banks.
As a result, the outstanding jewel loan portfolio in cooperative institutions swelled to nearly Rs 40,000 crore. However, after examining the loan data from the cooperation department, the DMK manifesto preparation committee chose not to include jewel loan waiver promise in its election manifesto.
A senior official said, “The government is exploring various options to assess whether any further relaxations can be extended under the crop loan waiver scheme, taking into account the state’s financial position. However, no decision has been taken so far.”
A TVK spokesperson who did not want to be named said they were unaware of the RBI regulations at the time of preparing the election manifesto. “Our intention was to give a full loan waiver to the farmers, but we did not know the practical difficulties at the time of preparing it. Still, we would stand by the farmers,” he said.
Quick check
The crop loan waiver of Rs 6,100 crore
announced in 2016 by then CM J Jayalalithaa was reimbursed to cooperative banks in five instalments
Similarly, the Rs 12,800-crore
crop loan waiver was announced in February 2021 by then Chief Minister Edappadi K Palaniswami was also settled over a five-year period
To implement the TVK promise, the full Rs 15,000 crore
would have to be paid within 60 days