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Maharashtra government asks banks to use own funds for loan waiver, assures reimbursement later

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Mumbai: The Maharashtra government, which is implementing an ambitious Rs 34,000 crore farm loan waiver scheme, has asked the banks to use their own funds to settle farmers’ loans, and promised them a reimbursement later.

As it has not specified a timeline for reimbursement, the state cooperation department has received queries from banks, seeking clarity on the issue, a senior government official said. The cooperation department, in a letter on October 13, asked the banks to use their own capital for settling the loans of eligible farmers and close their loan accounts.

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Banks should then submit a consolidated report to the government and the government will reimburse them as soon as possible, said the letter. The government will provide the banks a list of loan accounts of farmers who have been found eligible for waiver. A senior official of the cooperation department confirmed to PTI that he has received several calls from bankers, seeking clarification about the letter.


“As long as the government doesn’t reimburse the banks, a huge amount of funds will be stuck and the banks are not going to earn any interest over delayed payment by the government…banks are highly suspicious about this mode of implementation,” said the government official, speaking on the condition of anonymity.

“We cannot use our entire capital for the implementation of loan waiver scheme which is being executed in phases. Once we get reimbursed for the first phase, we will go for the next one,” said a senior official from the banking sector. On October 18, the BJP-led Maharashtra government announced that Rs 4,000 crore would be deposited in farmers’ accounts in the first phase of the loan waiver scheme.

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The same procedure had been adopted by the government when a nationwide farm loan waiver was announced during the UPA regime in 2008. The Union government had then taken three years to complete reimbursement to banks, said a senior official of a public sector bank. The cooperation department is also facing the task of scrutinising the list of farmers who have registered for loan waiver.

While chief minister Devendra Fadnavis had said that around 89 lakh farmers would benefit from the scheme, actual number of registered farmers on the government portal `Aapale Sarkar’ has touched one crore. Which indicates that in some cases, more than one member of a farmer family has applied for loan waiver. The scheme is limited to only one member per household. “This scrutiny is going to take some time, hence the government decided to go for a phase-wise implementation of the scheme,” said an official.