The Loan Waiver schemes going in Telangana and Andhra Pradesh state will prove more than costly for the country. Banking experts say this schemes will not only cost 1000s of Crores but will also do damage to the banking culture. The loan waivers always do help the bad borrowers and do not reward the good borrowers. Over a period of time, good borrowers are forced in to becoming bad borrowers in the anticipation of getting their loans waived.
People who have really kept up the banking discipline by working hard to return the money to the bank don’t get any benefit from these kinds of loan waivers at all. Ultimately, Banks or the governments doing the waiver will go bankrupt and kill the economy. Experts say the Central government should lend any kind of help to these schemes in both the states as it will set a bad example to other states. However banks will have short term benefits of this scheme since government also pays the bad loans which they usually fail to recover but in long term, the banks will really find tough time.
