Former RBI deputy governor R Gandhi on Thursday cautioned governments, including the Centre, against frequently using "administrative tools" of farm loan waivers, as he stressed on maintaining credit discipline.
"Whether it is farmers and industrial loan waiver, it has an impact. The governments have to utilise this kind of tool sparingly and rarely.
Former RBI deputy governor R Gandhi on Thursday cautioned governments, including the Centre, against frequently using "administrative tools" of farm loan waivers, as he stressed on maintaining credit discipline.
"Whether it is farmers and industrial loan waiver, it has an impact. The governments have to utilise this kind of tool sparingly and rarely.
Otherwise, it completely disturbs thecredit discipline, and in worst case scenario, financial institutions will not be able to survive," Gandhi told PTI here.
The governments had to definitely look at the desirability of waivers at regular intervals, he added.
Many states have waived agriculture loans, the latest being Karnataka, where chief minister H D Kumaraswamy announced a mega loan waiver scheme in the budget that would cost Rs 34,000 crore to the state exchequer.
In addition, Kumaraswamy had later announced waiver of another Rs 10,700 crore in respect of cooperative banks.
Rajasthan has also unveiled a Rs 8,500 crore waiver scheme.
Uttar Pradesh was the first state last year to announce Rs 36,359 crore farm debt waiver for small and marginal farmers.It was followed by Maharashtra and Punjab.
Asked if Rs 2.11 lakh crore capital infusion for NPA-hit public sector banks over a period of two years is inadequate, Gandhi said there is no such issue because the governmentrevises the size of capital infusion according to their fiscal performance every quarter.
"For now, the government has announced Rs 2.11 lakh crorecapital infusion, but going forward the government may infusemore or less capital, based on banks fiscal performance everyquarter.
I definitely think banks and government, as also RBI, will be alive to look at revising the size of capital infusion," he said.
Asked if he has felt any predictable shift in how world looks at India even as the Narendra Modi government is nearlycompleting its term, Gandhi said post-reforms all governments ruled by various parties had never reversed their steps tostrengthen country's economy.
(PTI)