Farmers getting benefit under loan waiver scheme turn out to be a victim of it as banks treat them as loan defaulters. Banks deny such farmers any future loans forcing them to approach illegal moneylenders, who charge higher rates of interest.
After Maharashtra government on Sunday decided to waive off loans to farmers, the question that many experts are raising is will this loan waiver solve the problems of farmers permanently? As despite receiving loan waiver in the past, farmers still almost every year ask for it.
Chief Economic Advisor Arvind Subramanian recently said that the recent trend of waiving farmers' loan might cost two per cent of the gross domestic product (GDP) of the country. RBI governor Urjit Patel has warned that loan waivers may create a moral hazard by inducing many other farmers for stopping repayment of their loans. The National Bank for Agriculture and Rural Development (NABARD) has also raised concern on the issue.
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