Loan waiver will cost UP government dearly, warns SBI report

The government-owned State Bank of India stated in a report that the BJP government's attempt to fulfill the election promise of waiving off loans of small and marginal farmers in Uttar Pradesh will cost the state government's treasury heavily.

By waiving off farmers' loans, the Uttar Pradesh government is expected to lose Rs 27,420 crore out of a total revenue of Rs 340,255.24 crore in FY17, resulting in a loss of 8 per cent of the total revenue.

The commercial banks in Uttar Pradesh presently have a total of Rs 86,240 crore as credit outstanding from the agriculture sector, representing 31 per cent direct finance infused by the banks in the agriculture sector. The average size of the outstanding loans in the state is Rs 1.34 lakh.

The commercial banks led by SBI are against the loan waiver scheme, fearing disruption of credit discipline as a result of this waiver.

Thus, SBI in its report suggested that the UP government should introduce innovative schemes to raise farm productivity, fast track transfer of benefits to the farmers’ bank accounts, encourage multiple cropping and hike interstate price parity, among other things.