At a time the Narendra Modi-led government at the Centre is looking to waive farm loans in Uttar Pradesh, State Bank of India chairperson doesn't seem to be in favour of such a move. The head of the country's largest lender said this disrupts credit discipline as these farmers would wait for similar loan waivers in the future, too, leading to an unhealthy lending culture.
“If loans of farmers are waived off, the credit discipline gets disrupted. For today, the loan will come back as the government will pay the money, but in future when we lend to the farmers, again they will wait for the next election,” Arundhati Bhattacharya, said on the sidelines of a CII session on governance.
During campaigning for the Assembly elections in Uttar Pradesh, Prime Minister Narendra Modi had in a rally said the government will waive farmers' loans after the Uttar Pradesh polls.
“In case of a waiver, there is always a fall in credit discipline because the people who get the waiver have expectations of future waivers as well. Future loans given often remain unpaid,” said Bhattacharya.
She added no proposal to waive off farm loans has so far reached the bank.
While she supported the cause to help the farmers, this should not be at the cost of credit discipline, she said.
“When we are trying to ensure the farmers do well, it is important for us to make credit available to them, so that they can leverage and do better. For that, it is important to have credit discipline,” she pointed out.
SBI's agriculture loan book in Uttar Pradesh is likely to be around Rs 12,000 crore, officials had said earlier.
The previous UPA government, too, had taken up wide-scale farm loan waivers back in 2009.
On Tuesday, the bank announced a one-time settlement scheme amounting to almost Rs 6,000 crore for tractor and farm equipment loans. The lender is willing to take a 40 per cent haircut on the outstanding balances as of September 30, 2016, on such loans that are categorised as doubtful or loss making.
The SBI chairperson also commented on the recent boardroom battles at two big corporate houses (Tata Group and Infosys) saying such differences between promoters and the management should be addressed before they spill over into the public domain.
“In India, there is a strange syndrome where promoters consider their companies to be dearer to them than even their children. So, if you are not able to keep that arms length between the company and the main promoter, then there are bound to be frictions,” Bhattacharya said without naming any specific company. “ However, in these cases, both parties need to be aware of these frictions and need to work to resolve them in private rather than public.”
She also talked on the need for having skills as well as gender diversity on boards of companies.
