NEW DELHI :
In the middle of the general election, with the idea of loan waivers for the distressed farmer is in the air, Vice President Venkaiah Naidu struck a discord on the note.
Speaking at Punjab National Bank’s (PNB’s) 125th Foundation day, Naidu said that waiving off loans will not help farmers in the long-term as it is a temporary solution to their inability to repay debt.
“We have to see that we provide infrastructure, we provide opportunities of better market…(provide) creditors for timely, affordable and cheaper credit available to the farmer. These are the long-term solutions, not short term," Naidu said on Friday.
Naidu’s statement comes after the Congress party last week promised to waive off farmers loans as one of the measures to resolve the agrarian distress, if voted to power. While the ruling National Democratic Alliance (NDA) government has not promised to waive off loans, it has already implemented direct income transfer to select farmers’ accounts, which will be extended to all farmers if they come back to power in by the end of next month.
Debt waiver to distressed farmers, often considered a populist measure, not only puts public sector banks under more pressure, but it is also difficult to lend to such farmers again as their chances of repaying loans diminishes.
Both the parties have promised reforms for revive the agriculture sector that has been under stress. Growth in the agrarian sector has been tepid, even as the ruling party brought several measures such as raising minimum support price (MSP) so that farmers get higher price for their produce.
A sharp fall in commodity prices because of a production glut forced farmers to dump their produce at a price lower than their cost of production.
Naidu further said that banks must re-look at the practice of financing big ticket projects that have a long gestation period and as a result cash flow issues.
He suggested banks to make use of technology and data analytics to identify the early warning signals of loan default and prepare a robust mechanism to identify the hidden non-performing assets (NPAs).
Lenders must focus on nurturing internal skills for credit assessment, undertake forensic audit to understand the intent of the borrower, Naidu added.