Mumbai: Even as Andhra Pradesh and the newly created Telangana continue with the demand of farm loan waivers, Reserve Bank governor Raghuram Rajan on Monday asked the states to refrain from seeking such concessions.
“Governor Rajan cautioned against debt waiver schemes announced by some states, pointing out their adverse impact on the financial health of banks, whose capital needs have gone up due to enhanced prudential requirements and deterioration in asset quality and the macro economy in general,” a release from the RBI said.
Dr Rajan on Monday addressed the chief secretaries from 15 states and finance secretaries of 27 states and nine UT at the 27th conference of the state finance secretaries here. AP and Telangana are seeking debt waiver to the tune of Rs 1.3 trillion citing damage inflicted by cyclone Phailin last year. He also referred to “the dec-line in financial savings and consequential challenges to debt management when growth and private sector credit would pick up.”
