Loan Wavier Schemes



  • G.S. Paper 2
  • Drawbacks of Loan Wavier Schemes
  • Measurements to solve the issue


What are the drawbacks with loan waiver schemes?

  • Out of the indebted agricultural households, about 40% borrowed only from non-institutional sources.
  • It provides only a partial relief to the indebted farmers as about half of the institutional borrowing of a cultivator is for non-farm purposes.
  • All such households are outside the purview of loan waiver.
  • Loan waiving excludes agricultural labourers who are even weaker than cultivators in bearing the consequences of economic distress.
  • In many cases, one household has multiple loans either from different sources or in the name of different family members, which entitles it to multiple loan waiving.
  • The scheme is prone to serious exclusion and inclusion errors.
  • It severely erodes the credit culture, with dire long-run consequences to the banking business.

Measurements to solve the issue

  • The sustainable solution to indebtedness is to raise income from agricultural activities and enhance access to non-farm sources of income.
  • Implementing long-pending reforms in the agriculture sector with urgency is required.
  • Regulation on remunerative prices for farm produce is to be done.
  • Identifying vulnerable farmers based on some criteria and giving them financial relief is needed.
  • Strengthening the repayment capacity of farmers by improving and stabilising their income is required.
  • Improved technology, expansion of irrigation coverage, and crop diversification towards high-value crops are appropriate measures for raising productivity and farmers’ income.


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