The Hindu : Karnataka / Bangalore News : ‘Loan waiver will hit coop. credit system’

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Thursday, Mar 06, 2008
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Karnataka

Karnataka - Bangalore

‘Loan waiver will hit coop. credit system’

Staff Reporter

Societies may not have liquidity

BANGALORE: The waiver announced on farm loans in the Union Budget will ruin the rural cooperative credit system in the country as the primary societies will not have enough liquidity to sustain for three years, Chairman of Regional Institute of Cooperative Management B.S. Vishwanathan has said.

Speaking to presspersons here on Tuesday, he said that instead of announcing the loan waiver scheme, the Union Government should have announced viable minimum support price to farm produce, which would help farmers.

“These loan waivers will benefit wilful defaulters and there is no incentive to prompt payers of the loan, and the State Government has already announced loan waiver on farm loans,” he added. He said that the primary agriculture credit cooperative societies will not have adequate capital to manage their activities and the loan waiver scheme is to be implemented over the next three years.

“The liquidity crunch will affect these primary societies, which will reduce their capacity to lend fresh loans,” he added.

He pointed out that the societies have been receiving unprecedented requests for loans after the loan waiver scheme was announced in the Budget.

“Cooperative societies are meant for the benefit of its members. If the members default on payment of loan, these societies cannot survive.

“The loan waiver will trigger more defaults, as farmers will not want to repay the loan,” he added.

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