Mumbai: With memories of the farm loan waiver scheme in 2008 — when banks had to wait for three years before they were reimbursed— still fresh, public and private sector lenders are treading cautiously.
The State government recently asked banks to use their own funds to settle farmers’ loans under the ₹34,022-crore farm loan waiver scheme, and promised to reimburse “as soon as possible“. However, banks say it would be hard for them to sustain till they get their money back. A public sector bank official said, “Such disposable capital is available only with public and private sector banks, but the biggest share in crop and term loans given to farmers comes from co-operative banks, which are cash-strapped.”
He added, “A similar method was used in 2008 where the Centre and RBI were involved in loan waiver decisions. All banks in the country operate as per RBI guidelines, so banks used their own capital to settle outstanding loans. But the UPA government took three years to reimburse the banks. So, we are more cautious this time.”
In the present case, the only guarantee of reimbursement is the State government itself. There is no assurance from the RBI or the Union government. In fact, Union Finance Minister Arun Jaitely had clarified on June 12 that States would have to bear expenditure on farm loan waivers from their own coffers. “When we asked how the State government plans to reimburse the amount, we didn’t get a concrete answer from the government. Even the [government’s] letter on October 13, asking banks to use their own capital, had also used the words ‘as soon as possible’ for reimbursement,” a private sector bank official added.
An official of the Maharashtra State Co-operative Bank, the apex bank for all co-operative banks in the State, said, “We have already been treated with suspicion for the last three years, because the co-operative sector is largely in rural areas and we are always considered as inclined towards the Congress. If we are reimbursed after three to four months, we won’t have income.”
