NEW DELHI: Waiver of loans, especially those for the farm sector, leads to a fall in credit discipline because those who avail of the waiver tend to expect the same treatment in future as well, according to State Bank of India (SBI) chairman Arundhati Bhattacharya.
Her comments are notable because the Bharatiya Janata Party, during campaigning for the recently-concluded Assembly elections in Uttar Pradesh, had promised to bring in a loan waiver scheme for farmers in the state.
When quizzed if SBI has received any proposal to waive off farm loans in Uttar Pradesh, Bhattacharya replied in the negative. However, she made a point that any form of waiver puts a burden on the banks besides spoiling the credit discipline. “Today, the loans will come back as the government will pay for it but when we disburse loans again, then the farmers will wait for the next election expecting another waiver.”
Bhattacharya said although it is important to support farmers, it has to be done in a way that does not disrupt credit discipline among them.
“When we’re trying to ensure that farmers do well, it is important for us to make credit available to them so that they can leverage and do better and for that it is important to have credit discipline,” she noted.
The country’s largest lender had recently announced a one-time settlement (OTS) scheme worth Rs 6,000 crore in the tractors segment to speed up its recovery.