Better to give donation than to lend and then waive

Government has been using banks as convenient method for mobilization of rural votes since long. They are for this purpose announcing waiver of loan frequently. This time they have extended repayment period further for six months because they know very well that farmers have developed a habit not to repay the dues of the bank till government comes forward with new scheme of either waiver of loan or compromise scheme for delayed repayment. Gradually small traders have also developed this tendency not to repay the loan availed by them from banks.

As a result banks have either to waive the loan given to farmers and small traders or treat the bad account as standard account till government announces new relief scheme. There is no repayment culture and I am unable to understand how long this vicious circle of reckless and blind lending and then waiver of credit may help banks survive. How long concocted and window dressed balance sheet may help banks in portraying attractive picture in balance sheet.

To add fuel to fire government has allowed private banks to be established in all districts to act as local banks. Already numerous Regional Rural Banks and Cooperative banks are actively participating in rural credit and suffering from huge loss due to non-repayment culture created by vote bank politics of ruling party. Health of these cooperative banks is so bad that government has to keep interest free fund in these banks in many states and also prove capital to them to ensure survival of these banks on ventilator. Many cooperative banks have declared bankruptcy during last two three decades. Now addition of rural banks will add fuel to fire. Either these local banks will exploit the rural people by charging high interest rate or by keeping their properties or gold in mortgage as they used to do before nationalization of banks. Both ways it is farmers who will suffer and ultimately they will either leave farming or migrate to towns in search of labour oriented unskilled job or commit suicide or make the banks sick by not repaying the bank's loan.

I fail to understand why politicians of this country do not understand the ground reality and try to please farmers and banks by jeopardizing their health and killing them through slow poison. At present they talk of Indian growth story and speak with pride that Indian government is decoupled with sub prime crisis of America. They should know that due to high standard of living and low earning capacity most of the American used to take loans from banks for consumption and there were many bankers (Indian government is also increasing number of banks in rural areas through addition of newly conceptualized private local banks) who were ready to lend them though at higher rate of interest. But consequence of this unhealthy practice ultimately precipitated Sub prime crisis when banks started falling like playing cards and poor American started committing suicide or selling their blood for survival

Danendra Jain
Ganaraj Choumuhani Agartala 799001
1st march 2010