RBI has written a letter to the government of Andhra Pradesh saying that it was against waiver of loans as it would result in the banks incurring financial losses.
It said such moves would set a bad precedent and lead to lack of discipline among borrowers which can adversely impact the morale of people who repay their loans on time.
However, Andhra Pradesh Chief Minister Chandra Babu Naidu signed the file on loan waivers committe immediately after being sworn in as that was the primary reason for his being voted to power.
It is said that he was rattled after receiving the RBI’s letter and is said to have personally spoken to the Governor of RBI Raghuram Rajan over the phone.
During the conversation, Babu is said to have explained to the Governor why it was important to waiver the loans and how many farmers lost their lives due to loan burden. Babu apparently gave a clear picture of how the plight of farmers had deteriorated in the past 10 years.
Latest news is that the RBI Governor is said to have given positive assurances to Babu on this sensitive issue. However, an official statement from RBI or Babu’s government hasn’t been released yet.
It has to be observed that Babu has put the entire blame on the Congress government which was in power for the past 10 years with regard to the plight of farmers.
