A former RBI Governor had flagged the risk of promising loan waivers by political parties during a poll campaign to the Election Commission, noting that the beneficiaries stopped making payments even if they were in a financial position to repay loans, Finance Minister Arun Jaitley said today.
He told the Lok Sabha in a written reply during Question Hour that a former Governor of the Reserve Bank of India had written to the Chief Election Commissioner mentioning "the risk of promising loan waivers by political parties at election time as beneficiaries stop making payment even if they are financially in a position to make them and that this affects the banking sector as well as the state finances."
He neither named the former RBI governor, nor the date on which the letter was written to the poll panel chief.
The minister said the former RBI governor, while addressing a conference organised jointly by Nabard and SIDBI, had also stated that loan waivers and subsidies "distort the credit discipline".
Responding to supplementaries, Jaitley said in a democracy, various views keep emerging on issues.