Monday, March 3, 2008

FM Says Writing Down Farm Loans Won’t Weaken the Banking System

by Phillip Horton

As was expected in the union budget the finance minister P. Chidambaram sought to a populist budget which announced a great relief for the affected farmers of India. The rupees 60,000 crore loan waiver announced for farmers has got some experts worrying about a possible break down of the cooperative and scheduled commercial banks in the country which in turn will also deteriorate the banking system in India. On Sunday the finance minister cleared the fears about the possible effects of the loan waiver on the banks. The FM vehemently defended the provisions in the budget and also the sixty thousand crore loan waiver given to farmers. The opposition parties have been saying that the budget has been drafted keeping in view the forthcoming elections and hence the loan waiver was given to farmers in the budget.

The finance minister seemed confident that the budget will encourage growth even if there are fears of a global economic slowdown. When the FM was asked about the possible negative impact of the loan waiver on the cooperative banks and the scheduled commercial banks he said that he did not think so, the FM further reiterated that whatever loans have been waived off the concerned banks will be provided with a comparable liquidity. The FM said that he was sure that this statement of his will be understood and appreciated by Dr. Alagh who is an agriculture expert. The FM added further that he did not have to say anything about A.B. Bardhan who is the CPI leader. These comments by the FM were in response to the question asked by reporters to him that the two had said that the writing down of the loans can result in the down fall of the cooperative banks in the country. Dr. Alagh was a member of the Planning Commission and was also a Minister of State for Agriculture, had expressed that during the V.P.Singh government there was loan waiver of about 10,000 crore which resulted in the closing down of many cooperative banks in the country.

Responding to a question regarding loans which farmers owe to money lenders the FM said that which private money lenders he should compensate. The FM wanted to know why such questions were not asked when the opposition parties and others were asking for the loan waiver for farmers and why such questions are being raised when the loan waiver has been given to farmers.

When asked about the Agriculture Minister, Mr. Sharad Pawar’s comments that farmers should not pay back to private lenders the FM sought to decline but added that that those views are of the Agriculture Minister and he did not want to comment on them. Regarding the loans which will be waived the FM said that it was clear and his budget speech has cleared the confusion. In his parliamentary budget speech the FM had said that the loans which have been given till March 2007 and whose repayment was to take place by December, 2007 but were not repaid up to February 28 this year will be waived.

 

 

 

Stories related to: FM Says Writing Down Farm Loans Won’t Weaken the Banking System

 

 

Visited 1042 times, 1 so far today