Bound to support loan waivers2 min read . Updated: 05 Mar 2008, 12:03 AM IST
Bound to support loan waivers
Bound to support loan waivers
The finance minister has made farmers who repaid their loans promptly in the last five years big fools! (“Poll bonanza: Rs60,000 crore loan waiver for farmers", Mint, 1 March). Given the status of public sector bank chiefs, it is not surprising they welcomed the move. They are at the mercy of the finance ministry for their current positions and assignments after retirement. Analysts disagreed with their views. Despite knowing the implications of such loan waivers, the banks’ top management supported the announcement. The government may reimburse the banks, but it’s unfortunate that bank leadership has lost its freedom to express professional opinion.
You put the role of moneylenders in the rural economy in the correct perspective. (Re: Quick Edit, “Don’t miss the woods...", Mint, 3 March). Union agriculture minister Sharad Pawar has been foolish in warning farmers against borrowing from “unauthorized" moneylenders. I volunteer with a non-governmental organization that monitors rural microfinance lending and have seen the very important role that these moneylenders or “banias" (as they are referred to among locals) play in the village economy.
No doubt they can, more often than not, be ruthless in their dealings, but in the absence of a proper, working, rural banking system in place, there is no alternative. The need of the hour therefore is not a ban on these “banias", but a friendly, non-intrusive, mechanism to monitor (rather than regulate) such “non-banking" financial transactions between farmers and “banias". For example, the monitoring mechanism should, inter?alia,?take?care?of?exigencies arising?from?the?inability?of the?borrower to re-pay the loans owing to crop failures, etc., maybe a suitable insurance cover could be one of the answers.
The finance minister is to be thanked for giving comfort to some taxpayers and for bringing out a popular Budget. But the one fatal thing he has done is waivering Rs60,000 crore due from farmers. Some 40 million farmers are expected to benefit from this measure. One wonders whether the Budget is an exercise in planning the collection of funds required for demands of national security and economic growth vis-à-vis the fiscal measures for achieving those demands, or is there any other purpose.
The waiver, a kind of charity or a donation or a bribe to win the votes of the farmers for the ruling party, is against budgetary principles. If a donation is to be given to the voter, let the Prime Minister or the finance minister ask their partymen to contribute to a fund meant for distribution of money to purchase votes of farmers.
Money, which has been collected from taxpayers of all ranks through various taxes, should not be squandered for the benefit of the ruling party and that too for winning votes in elections.
The finance minister should have thought of some other scheme for spending Rs60,000 crore, such as generating employment opportunities for farmers and their family members. This could include creating small industries so that families of poor farmers could get employment and repay bank loans, apart from securing their future. The finance minister has not only weakened the banks by writing off these loans, but has also caused long-term damage to government finances and small investors due to loss of dividend.
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