Farm loan waiver

In News: The SBI study flags poor implementation of Farm loan waiver in Telangana, M.P., Jharkhand, Punjab, Karnataka and U.P.

Findings

• Only about half of the intended beneficiaries of farm loan waivers announced by nine States since 2014, have actually received debt write-offs
• As of March 2022, the poorest implementation of farm loan waiver schemes in terms of proportion of eligible farmers who had received the announced benefits, were in Telangana (5%), Madhya Pradesh (12%), Jharkhand (13%), Punjab (24%), Karnataka (38%) and Uttar Pradesh (52%).
• By contrast, farm loan waivers implemented by Chhattisgarh in 2018 and Maharashtra in 2020, were received by 100% and 91% of the eligible farmers, respectively.
• Since 2014, out of approximately 7 crore eligible farmers, only around 50% of the farmers received the amount of loan waiver till March 2022
• Farm Loan waivers by States have failed to bring respite to intended subjects, sabotaging credit discipline in select geographies and making Banks and financial institutions wary of further lending

Possible reasons

• The report identified rejection of farmers’ claims by State Governments, limited or low fiscal space to meet promises, and change in Governments in subsequent years, as the possible reasons for the low implementation rate of these loan waivers.
• The report also raised the benefits not reaching the targeted farmers
• Of the total accounts eligible for farm loan waiver, most of the accounts were in standard category, begging a question whose interest rampant waivers actually serve.

Loan waivers destroy the credit culture which may harm the farmers’ interest in the medium to long term and also squeeze the fiscal space of governments to increase productive investment in agriculture infrastructure.

Source: The Hindu