RBI rejects Andhra's request for farm loan waiver

The Reserve Bank of India (RBI) communicated the Andhra Pradesh government that there was no case for considering its request for restructuring of agricultural loans in the state.
A refused to consider the request even before the state government could prepare clarifications the apex bank had sought from it on crop yields for year 2013.
RBI, on its own, examined crop yields and bank savings patterns during the period the state government said farmers were under stress. The central bank found no parameter that justified a loan restructuring.
As per RBI, crop yields should be less than half the normal for banks to consider farm loan relief. RBI found no evidence of a drop in crop yields to that level in areas declared as calamity-hit by the Andhra Pradesh government. This conclusion was based on data generated by state government bodies like the Directorate of Economics and Statistics.
RBI scrutinized the waiver request in detail since the government was trying to use rescheduled loan payments as a proxy for its promise of farm loan waivers. Rescheduled farm loans were routinely implemented by banks in the past.
Following the Cabinet meeting, CM N. Chandrababu Naidu announced his government would waive over Rs 40,000 crore of loans at Rs 1.5 lakh per farming family and Rs 1 lakh per self-help group.
Farm loans overdue in Andhra Pradesh are pegged by banks at Rs 87,000 crore. As per banks, these dues surged after the Telugu Desam Party made loan waiver a manifesto promise in the recently-concluded state elections.
RBI Chief has spoken to the Chief Election Commissioner on how to prevent political parties from making such promises in future polls.

Month: Current Affairs - July, 2014