Rajan cautions against debt waiver schemes | Business Standard News

Rajan cautions against debt waiver schemes | Business Standard News

Online comments posted on August 29, 2014:

As one, who was inside RBI when the Agriculture and Rural
Debt Relief Scheme(ARDRS),1990 was introduced and implemented, I am able to
appreciate the anxieties and worries expressed by RBI Governor in the context
of the present demand for more debt waiver schemes.
Major component of banks’ resources is public deposits and
government is dependent on taxpayers’ contribution for meeting financial
commitments. Mentioned this to highlight that both banks and government have
trusteeship responsibilities in regard to the funds they handle.
When crops fail or natural calamities wash off assets of
entrepreneurs, there has to be a transparent support system which will help
those who suffer loss. If nation needs products including agricultural produce
growing/manufacturing which is not commercially viable, subsidizing costs of
production and marketing them becomes necessary. The present support system
which works through subsidies(front-end and back-end), various tax concessions
at different levels and write-offs and waivers of debt is neither transparent
nor scientific. A review and revision of the entire system, factoring in the
following aspects(list not exhaustive) has become overdue:
In agricultural sector, there is need for a
comprehensive and compulsory crop insurance scheme. Those farmers who do not
avail bank credit also should be encouraged to participate. May be an
appropriate disincentive scheme denying any government support in case of crop
loss may be necessary to ensure 100 per cent participation. Initially, the
scheme should get financial support from central and state governments and
banks(as a percentage of agricultural credit provided by the bank)
Rationalise subsidies including interest subsidy. At
present, at least in some states, interest subsidy is working as a disincentive
for improving productivity.
Life insurance and insurance of crops and investments
up to a bench mark level compulsory for all bank loans.

M G Warrier, Mumbai


Popular posts from this blog



The King of Ragas: Sankarabharanam