ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Banks and Loan Waiver

The Comptroller and Auditor General (CAG) has exposed various irregularities in the 2008 loan waiver scheme. While both the Union government and the Reserve Bank of India (RBI) have been quite proper in their actions in announcing the scheme and codifying the criteria for eligible farmers, the banks which implemented the waiver have committed blunders on a large scale.

The Comptroller and Auditor General (CAG) has exposed various irregularities in the 2008 loan waiver scheme. While both the Union government and the Reserve Bank of India (RBI) have been quite proper in their actions in announcing the scheme and codifying the criteria for eligible farmers, the banks which implemented the waiver have committed blunders on a large scale.

Immediately after the government’s announcement in Parliament, the RBI sent a circular to all banks in the country with a clear definition and criteria for eligibility. For instance, a farmer cultivating land up to two hectares or five acres would be eligible for a complete loan waiver and those cultivating above five acres would be eligible for a partial waiver. There would be no limit on the amount of the loan to be waived. In the criteria the word “cultivating” was very important. The dictionary meaning of the word is to prepare land for crops. How much land should be under actual cultivation was mentioned in a document which had to be referred to for a decision on whether a farmer was eligible for a total or partial loan waiver.

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