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RBI, government to work together

Special Correspondent

— Photo: Shanker Chakravarty

In tandem: Finance Minister P. Chidambaram and Reserve Bank Governor Y. V. Reddy at a meeting of the bank’s Board in New Delhi on Thursday.

NEW DELHI: Finance Minister P. Chidambaram on Thursday announced that the Rs. 60,000-crore farm loan waiver scheme, as proposed in the budget, would be implemented in consultation with Reserve Bank of India in such a way that the country’s “banking system is strengthened rather than weakened.”

Briefing newspersons after a post-budget meeting with the RBI Board here, Mr. Chidambaram said: “I explained [the] debt waiver and debt relief scheme to the Board members and, since it was a closed-door meeting, I took them through the contours of the package.”

Mr. Chidambaram said RBI Governor Y.V. Reddy told the Board members that the bank was fully geared to support and help the government in implementing the debt waiver and relief programme.

The banking system, as pointed out by Prime Minister Manmohan Singh in Parliament on Wednesday, would be compensated for the loan write-off in such a manner that the scheme would not be a constraint on banks.

The government, Reserve Bank and banks would work in a way that the scheme’s goals and objectives were achieved, he said.

“The government said Reserve Bank would work closely with it and banks to ensure that the loan waiver scheme is implemented within the announced timeframe so as to serve the interest of farmers and improve the credit flow while subserving the interest of the banking system,” an RBI statement said.

In an interaction with Assocham members, Mr. Chidambaram argued that a $1-trillion Indian economy could afford to bear the burden of farm debt waiver.

While there was a compelling need to go in for a one-time measure to write off loans of the country’s smallest and poorest farmers, the government would provide more details on how the scheme would work on the ground during a debate on the budget, Mr. Chidambaram said.

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