Maharashtra loan waiver to cost at Rs 45,000 crore to 51,000 crore: SBI

Mumbai (Maharashtra) [India], Jan 6 (ANI): The newly-formed Maharashtra government's announcement to waive off loans up to Rs 2 lakh for farmers with a cut-off date of September 30, 2019 and providing relief to non-defaulting farmers who have a loan above Rs 2 lakh can cost at between Rs 45,000 crore to 51,000 crore, State Bank of India said on Monday.
"Even it is assumed that complete loan waiver is unchanged from the last loan waiver, the cost will be at least Rs 45,000 crore," said SBI's Group Chief Economic Adviser Soumya Kanti Ghosh. "The cost can go up to Rs 51,000 crore if the number of farmers covered increases from the current level."
However, the cost can come down by Rs 12,500 crore if the new dispensation decides to postpone payments outstanding under the earlier loan waiver scheme into the new one or decides to limit the coverage of farmers under the scheme.
Ghosh said the politics of loan waivers typically veers around the fact if the banks can write off NPA of the industry, then why not agri farmers. However, such arguments are mischievous and frivolous.
"For example, even though agriculture non-performing assets (NPAs) are Rs 1.1 lakh crore or 12.4 per cent of overall NPAs, we also need to account for Rs 3.14 lakh crore loan waiver announced in the last decade," he said.
Hence, agri NPA burden for the exchequer and banks can be as much as a staggering Rs 4.2 lakh crore. "If we add the potential Maharashtra loan waiver amount, it can be at Rs 4.7 lakh crore or 82 per cent of industry NPAs," said Ghosh adding loan waivers damage the credit culture and increase indebtedness of farmers.
This results in a significant decline in credit growth to farmers through the formal channels in the aftermath of loan waivers, he said.
(ANI)