The Government of India, just for the sake of votes (keeping forthcoming elections in mind) has recommended writing-off bank loans to small and middle level farmers of over 60,000 rupees (1US$=40 rupees) in the national budget presentation on 29/02/08 for the year 2008-09. The loans were given by the banks, and nobody knows how the finance minister is going the compensate the banks. The banks though nationalized, is partially owned by the public.
The Taxpayers may not mind if the money really reaches the “Kisans” who work in the fields. May be, the so-called kisans are at the mercy of the middleman and the land owners. To begin with, the kisans would not have received the full loan amount at all. The loan amount sanctioned is reported to be distributed amongst the bank employees, the middleman who arranges for the loan, the land owner (generally politicians) and a small percentage is given to the kisan. By writing off the earlier loan, the kisan becomes eligible to get a small percentage (may be 10-20%) of one more fresh loan to be given by the nationalized banks in the rural areas. Generally, the banks will be pressurized to give such loans by the politicians to get the votes.
As soon as it was declared, the stocks of the banks fell down in the equity market of Stock Exchanges. The entire liability will finally be borne by the shareholders. Who cares? Nobody needs to return the loan amount any way. In the next budget it will again be waived off.
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