Mumbai: Reserve Bank of India (RBI) governor Raghuram Rajan on Monday cautioned state government bureaucrats against debt-waiver schemes. He was speaking at the 27th conference of state finance secretaries in Mumbai.

Rajan said debt-waiver schemes have an “adverse impact on the financial health of the banks whose capital needs have gone up due to enhanced prudential requirements and deterioration in asset quality and the macro economy in general."

Rajan’s comments comes after the new government of Andhra Pradesh announced loan waivers of Rs35,000 crore.

“The governor emphasised the need to strengthen the State Level Coordination Committees (SLCC) by ensuring participation at the higher level, conducting meetings at more frequent intervals and ensuring and sharing of quality information among all the stakeholders including the state government agencies, RBI, Securities and Exchange Board of India (Sebi) and Ministry of Corporate Affairs (MCA)," RBI said in a statement.

Chief secretaries of 15 states, and finance secretaries of 27 states and nine Union Territories participated in the conference, which also included Sebi chairman U.K. Sinha, RBI deputy governors H.R. Khan, R. Gandhi and S.S. Mundra and officials from the finance ministry, Comptroller and Auditor General of India (CAG), Planning Commission, and the Insurance Regulatory and Development Authority (Irda).

Close