Farm loan waiver undermines fair credit culture, says Urjit Patel

Says liquidity measures undertaken to reduce cost of borrowing by 0.25% for lower segment

Reserve Bank Governor Urjit Patel today cautioned that loan waiver schemes "engender moral hazard", undermining honest credit culture and impairing incentives for borrowers to repay bank loans.

The comment comes against the backdrop of recent decision by the UP government to waive Rs 36,000 crore in farm loans and increasing demand from politicians for similar concessions in other parts of the country.

"I think it (loan waiver schemes) undermines an honest credit culture. It impacts credit discipline. It (impacts) incentives for future borrowers to repay. In another words, waivers engender moral hazard," he said after announcing