UP Government Announces Rs 36,359 Crore Farm Loan Waiver
The newly voted-in Bharatiya Janata Party (BJP) government in Uttar Pradesh (UP) has delivered on a key electoral promise by waiving farm loans in the state worth Rs 36,359 crore. Around 2.15 crore farmers stand to benefit from this move, said U.P. Health Minister Siddharth Nath Singh in a phone interview to BloombergQuint.
The state plans to raise money to fund the loan waiver via Kisan Rahat Bonds. Of the funds collected Rs 30,729 crore will be used towards repaying loans of small and marginal farmers, that constitute 92.5 percent of all farmers in the state. The rest of the funds will be used to repay loans taken by seven lakh other farmers, also struggling to pay back loans, added Singh.
A State Bank of India Ltd. (SBI) research report published in March had said that scheduled commercial banks have an outstanding farm credit of Rs 86,241.20 crore in UP. The average loan size is Rs 1.34 lakh, most of which is to small and marginal farmers the report said, citing 2016 data.
The UP government’s decision will only increase the pressure on other state governments to follow suit including the state of Maharashtra where the BJP government has announced welfare schemes for the farmers in the state, but stopped short of announcing a loan waiver in its Budget.
Not every banker in the country has been in favour of a farm loan waiver with Arundhati Bhattacharya the chairman of the country’s largest public lender SBI saying while the government should help the small and marginal farmers a waiver tends to impact credit discipline of the small and marginal farmers.
The last nation-wide farm loan waiver scheme had been launched by the Congress-led United Progressive Alliance government a year before the general elections in 2009. Under the scheme, called the Agricultural Debt Waiver and Debt Relief Scheme, the government waived off more than Rs 52,000 crore in loans held by 3.45 crore farmers, the Comptroller and Auditor General of India (CAG) said in a report released in August 2015.