Tamil Nadu Chief Minister Edappadi K Palaniswami on Tuesday wrote to PM Modi opposing the Reserve Bank of India’s recent master directions for priority sector lending. In respect of Tamil Nadu, it covered all its district in the dis-incentive framework for priority sector lending.
Urging Modi to prevail upon the RBI to reverse its decision and restore the earlier weightage system for the free flow of priority sector credit, he said, “In no other state have so many districts been covered in the dis-incentive framework. Tamil Nadu appears to have been singled out for particularly adverse treatment in the master directions.”
“While attempts can and should be made to increase credit flow to districts where it is low, such efforts ought to be by increasing the overall credit flow and not by attempting diverting credit from other districts / states. The overall size of the pie needs to be increased alongside greater financial penetration,” he said.
Palaniswami argued the RBI policy was “unfair and regressive”. Good borrowers should not be penalised for having abided by rules.
Citing the adverse impact of Covid-19 on the economy, he said, under these circumstances no retrograde action, “affecting the flow of credit, should be taken. Dis-incentivising good borrowers who repay on time is a short-sighted and counter-productive strategy, for not just the overall economic well-being of the nation, especially when the nation is combating the impact of Covid, but also for the health of the banking system, which is struggling with rising non-performing assets.”