Loan waiver and loan recovery are two polar opposites. They don't have a meeting point. They cannot converge as they are divergent. The bankers' task now is, how to achieve these both ends meet. The obnoxious and oft-repeated press statements by the Chief Minister instructing police authorities to arrest the bank officers if they issue the notice of recovery of loan has set the cat among the pigeons. This is a grave and extraordinary situation in the state which is unprecedented. This has devastated their morale. The loan waiver is spereheaded by the head of the government with all the pomp and public gaze where as the recovery has to be made by a poor official at the branch level without any support or protection from his superiors. Will he be left to fend for himself, is my fear. The poor fellow has a daunting task on hand.
Loan waiver is fraught with long term implications which will breed the culture of non repayment. It is a very negative and dangerous indulgence. No Economist hitherto has advocated waiver as a remedy for the farmers'distress. Government /economists /planners can think of alternative ways of ameliorating the hardship of the farmers. Unfortunately for the political class, farm loan waiver is a low hanging fruit in vote bank politics. Indian farmer is frequently affected by the vagaries of the monsoon and uncertain market conditions. When such is the case, waiver is not the panacea. It is rubbing salt to the wound for the banks which are already saddled with unacceptable level of bad loans. At a time when banks are struggling to bring down the NPAs, the announcement of loan waiver is a big jolt to their efforts.
The top executives are also in a great dilemma. Neither they can issue any written instructions to the branch functionaries not to issue the notices to the farmers nor have the gumption to say to the Chief Minister not to issue statements like the way he is doing. If the bankers do not issue the notices, they are liable to be made accountable by the Bank for the lapse and if they issue, the situation is any body's guess. The officials are in such an unenviable position that they are damned if they do, damned if they not. Whatever may be the constraints of the management, time has come to sit up and take notice of creation of a very negative and hostile atmosphere for the grassroot level officials of the bank.
There is an urgent need to educate the the Chief Minister of the immense damage his statements cause to the safety and morale of the bankers and the long term negative impact it will have on the entire farm credit dispensation. Loan waiver is a double edged sword, it cuts both ways. While on one side, it incentivise the defaulter on the other it demotivates the honest borrower and makes him become a wilful defaulter. In short, it vitiates the repayment culture of the borrowers and make life difficult for the banker.
State Level Bankers Committee's (SLBC) role now assumes importance. It has its task cut out if at all it is serious of the situation. The present situation demands lot of education, persuation and perseverance on the part of all the stake holders - the bankers, the government and the farmers. It is just not the waiver per say that is involved in the issue but the whole perception and attitudes has to be corrected.
What can be done?
1. All the heads of the banks affected by this should meet the Chief Minister and protest his remarks in the media. Loan waiver is one thing and giving dangerous and irresponsible statements is another. (But will anybody bell the cat is a million dollar question).
2. Explain him the negative impact it is creating on the credit discipline and the potential it has to breed a culture of non repayment.
3. Arrange a discussion in the electronic media by a panel consisting of RBI representatives, bankers and raitha sangha leaders and explain the intricacies of the issue and the advantages/benefits for prompt repayer. This should be done periodically for certain periods of time.
4. Publicize in daily local vernacular press the Rinn samaadhan (OTS) its details and benefits in bold captions and in front pages.
5. Conduct townhall meeting type of gathering in Agri intensive areas and play a suitably designed / tailored videos mounted on mobile vans that inspire and instill repayment.
6. These mobile vans should tour the Agri intensive pockets.
And in all these, the ghosts of Vijay Mallya, Nirav Modi, the Essars, the Videocons etc will definitely haunt the bankers. The thousands of crores of Corporate loans written off will stare in the face of the bankers. This is something that will weigh on the spirit and drive of the banker in this marathon.
K N Krishnan, 94496 12446
Vice President, SEWA, Bangalore.