Subbarao says loan waiver schemes 'not a good thing'

Former RBI governor says the money which the govts are spending on loan waiver schemes belong to tax payers

Former Reserve Bank Governor D Subbarao today said that he is not in favour of farm loan waiver schemes being implemented by the governments of Andhra Pradesh and Telangana.

"My response is that it (farm loan waiver) is not a good thing. You have to understand the farmers' plight. You have to understand their economics. But loan waiver has negative consequences," Subbarao said in an interactive session with students at the ICFAI campus here.

He said the money that both the governments are spending on loan waiver schemes belong to tax payers of this country.

"You are going to give loan waiver to farmers. Whose money is that? Whose money is going to support the farmers to write off their loans? It is my money and your money, tax payers' money throughout the country. We are part of this country and it is borne by all of us," he added.

As part of the poll promises, N Chandrababu Naidu and K Chnadrasekhar Rao, chief ministers of Andhra Pradesh and Telangana respectively started implementing farm loan waiver schemes in their respective states.

While it costs over Rs 17,000 crore for Telangana exchequer, the scheme is expected to dent AP government's coffers by tens of thousands of crore.

"One thing in public policy is that losers do not know that they are losing. Winners know that they are winning. Farmers know that they are getting the money and they are benefited. The 100 crore people of this country who bear the cost of loan waiver do not know (that they are paying the money).

"It is not a good thing because people who do not know that they are paying the cost of this loan waiver scheme are actually paying it," he said.

Recently AP Government said it has credited Rs 4,664 crore into farmers' accounts towards loan waiver scheme while its counterpart in Telangana sanctioned Rs 4,250 crore towards the scheme.