Farm loan waiver affects credit discipline: RBI

Echoing State Bank of India chief Arundhati Bhattacharya`s views, Reserve Bank of India (RBI) Deputy Governor S.S. Mundra on Thursday expressed concern over farm loan waiver affecting credit discipline.

"The RBI`s views has always been that farm loan waiver affects credit discipline," Mundra told reporters at the launch of Bandhan Bank`s branch here.

On March 15, Bhattacharya had expressed reservation over assurances and demand for complete farm loans waiver, coming from different quarters. The following day, Congressmen staged a protest outside the SBI headquarters at Nariman Point in Mumbai to protest. 

Those making the demand for loan waiver include Maharashtra`s opposition parties and the ruling ally Shiv Sena, besides the Karnataka government, while assurances to this effect have been made in Punjab and Uttar Pradesh.

Bhattacharya too said it will disturb credit discipline among borrowers, since they will keep expecting more such waivers in future and then those (future) loans will remain unpaid.

On resolution of the non-performing assets (NPAs) issue, Mundra said discussions were on in this regard.

"A number of resolution mechanisms have been given to banks from time to time. Variety of cases will require use of different instruments," the RBI senior officer said.

"Valuation of stressed companies need to be transparent," he added.