Former Reserve Bank of India (RBI) Governor Bimal Jalan said farm loan waivers should be a ‘need based’ one-time decision and should not be turned into a policy.
“As a need based act, farm loan waiver as a one-time effect is all right. But it must not be made as a policy. we must realize the actual and long term impact on economy of the country.” Jalan said on the sidelines of the ‘Economics and Governance’ event. “There are many threats of misuse of public money. Else people will borrow farm loan and may use it for other purposes,” he said.
RBI Governor Urjit Patel and SBI Chairperson Arundhati Bhattacharya have also earlier said farm loan waivers should not become a practice as they result in fiscal slippages.
Touching upon the non-performing assets (NPAs) or bad loans’ resolution mechanism of RBI wherein the banks have been allowed to initiate insolvency procedure against defaulters, Jalan said whatever needs to be done should be done for a speedy recovery.
“We should go fast. Whatever can be done has to be done. Why delay it? We have already delayed NPA action. We need to take timely action,” he said. He added that “genuine business failures” was a different issue.
The former RBI Governor said that for the impact of the Banking Regulation (Amendment) Bill, 2017 to be felt will take some time and hoped that the NPA resolution will come through in another six months’ time.
“It will still take some time. Impact will take time. Lot of things happening in this direction. I hope in six months’ time it is resolved,” he said.
Jalan said the lending activity has also been hit because of the high NPAs.
He further said there was a need to simplify policy making to achieve a better growth rate and added India had all the economic potential required.