Naidu to raise RBI letter issue with Centre

Chief Minister N. Chandrababu Naidu has decided to take up the issue of the Reserve Bank of India’s letter against the crop loan waiver scheme with the Centre, during his two-day visit to New Delhi on June 25 and 26.

The letter reportedly came up for discussion at a meeting on Tuesday where Mr. Naidu reviewed ways and means of effectively implementing the scheme.

The meeting was attended by top government officials and bankers and Mr. Naidu is believed to have reiterated his commitment to go ahead with the scheme.

Addressing a press conference after the meeting, Agriculture Minister Prathipati Pulla Rao said the State government would give clarity on the loan waiver scheme by June 30 and urged farmers not to get worried.

He said the committee appointed by the government to work out the modalities of the scheme would be submitting its report by June 22. The banks were urged not to issue notices to farmers and asserted that the State government would convince the RBI and the Centre on crop loan waiver. When the banks could agree to one-time settlement for industrialists why would not they agree to crop loan waiver, he asked.

Mr. Rao said the State government would explain to the RBI and the Centre the circumstances under which the decision was taken on loan waiver. He said the committee which was appointed to work out the modalities was also been entrusted with the task of discussing the issue with bankers.

Meanwhile, the RBI in its letter expressed concern that the loan waiver schemes would adversely affect the financial health of the banks and ultimately such decisions would lead to financial instability.

RBI Executive Director Deepali Panth Joshi, in the letter to the State government, said that mass loan waiver schemes would affect the morale of those who repay loans promptly.

Thus it is advisable if the State governments did not encourage such situations. Any loan waiver should be extended only to borrowers who were in deep financial crisis and not in a position to repay due to circumstances which were not in their hands, the official said.

The letter also made it clear that if the State government was determined to extend loan waiver, then it should clear the loan arrears in cash to the bank and the RBI would not accept the securities or bonds with a request to extend loan repayment time. Even if some banks accepted such Government securities, the RBI would be tough with such banks with regard to norms related to provisioning requirements, the letter said.

However both Finance Minister Yanamala Ramakrishnudu and senior officials said here that it was the State government’s decision and it was firm on implementing the loan waiver scheme. “ It is an advice from the RBI. But the State government is free to take its own decision keeping all aspects in view,” highly placed sources said.

Meanwhile, Chief Secretary I.Y.R. Krishna Rao called on various Union Ministries in Delhi on Tuesday for speedy follow up action by the Centre on assurances given to the residuary State in the State Reorganisation Act.