The Reserve Bank of India (RBI) has confirmed to Andhra Pradesh government that it does not endorse the Loan Waiver program being promised by the ruling TDP party. RBI stated that loan waiver will only damage the functioning of banks and will destroy the economy. Mass Loan Waivers will only discourage good borrowers and make them bad borrowers. However RBI in its letter to government suggested that loan waiver should be done only to those who are economically shattered and can not repay their loans.
RBI also stated that Andhra Pradesh government can only do the waiver through cash if it wants to go ahead with the loan waiver. It clearly stated that it will not allow security bonds or certificates beyond the permitted time of the loans. RBI also warned banks that it will be stern in income recognition, Assets classification and provisioning requirements if they allow the security bonds. However Chandra Babu wants to take up this issue with Finance Minister and Prime Minister in his visit to Delhi on 26th and 27th of this month.
