Farm Loan Waiver in India-Bank Managers are happy

I am sure thousands of Bank Managers in India are saying thanks to the Finance Minister for announcing loan waiver to small and marginal farmers amounting to $15 billion.

These loans have caused much headache and footwork for the Bank Mangers tasked with recovering them. The Indian banking and legal system being what they are, these loans had to be meticulously documented,and the loan documents kept alive by regular acknowledgements from the borrowers. The loan servicing was a big job, with regular visits and writing of reports. Many of the loans had to be first classified as difficult then doubtful and annually audited with voluminous reports. Then the individual banks had to claim reimbursements for these doubtful loans from another Government Organisation. The carrying cost of these small loans was much more than the original loan amount and the process took a few years.

Now with a single step, the Finance Minister has enabled the Banks to remove these loans from the Banks' books and give immense relief to the Bank Managers.

There are similar loans to other small sectors like small businesses which may also have to get similar relief in future.

In fact there was a joke doing the rounds when such loans were given under political pressure in Loan Melas: 'why not disburse the loans directly by debiting the Profit and Loss A/c, saving trouble all around and also get tax relief'.

It is great to see that the Finance Ministry has realised this atleast now and has taken the first step.

Also, it is only just that the economic prosperity that many sectors in India are experiencing in the last few years be shared with the small and marginal farmers, who are not able to otherwise participate in the boom, by leaving their farms and joining call centres.

The Congress Party came back to Power because of the disaffection of marginalised populace who could not benefit immediately from the booming economy, so it is right that the Party gives something back to its consitituents.

In the process the Banking sector gets a much needed clean-up and the Bank Managers have been made happy.

Win-Win for all concerned.
Bravo, Mr Chidambaram.