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No plan to waive farm loans, says Finance Ministry

FE Bureau

The government on Tuesday ruled out a farm loan waiver, even as various states have announced such plans in the build-up to the general election this year. In a written reply in the Rajya Sabha, minister of state for finance Shiv Pratap Shukla said: No farm loan waiver scheme was implemented by the Union government during the last two years. Further, the Union government at present is not considering any loan waiver scheme for farmers.

Several state governments have declared farm loan waiver worth Rs 1.88 lakh crore since April 2017, with analysts predicting a total waiver of Rs 2.75-3 lakh crore by 2019 general election. The latest to announce such debt relief were Congress-led Madhya Pradesh, Chhattisgarh and Rajasthan. This has raised the risk of fiscal slippage by states unless they prune expenditure, especially capital spending.

RBI governor Shaktikanta Das on Monday cautioned against farm loan waivers, saying that generalised write-offs distorted credit culture and states should weigh their fiscal space before announcing such a relief.

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No tweaking of RBI power
The government has no plan to tweak the powers available to the RBI, the minister said in a separate reply, in a sign that the central bank is unlikely to get more teeth, especially to regulate state-run banks. The powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks. No proposal with regard to change in RBI s powers in respect of public sector banks is presently under consideration/consultation, the minister said. Improvement in regulatory functioning being an ongoing process, government engages with stakeholders, including RBI, and discusses issues as they evolve.