In a major shock to the Andhra Pradesh government, the Governor Raghuram Rajan-led Reserve Bank of India (RBI) has said that it did not see any reason to concede the former's request for rescheduling of agricultural loans as a precursor to the proposed loan waiver.
The RBI's fresh missive sent to Chief Secretary I Y R Krishna Rao on July 26, in response to the state government's July 17 letter, will push Chief Minister N Chandrababu Naidu into an awkward position as he went to town claiming credit for "achieving" the loan rescheduling as a first step in implementing his promise of total loan waiver.
Chandrababu had announced last week that all crop loans and gold loans (taken for agriculture) up to Rs 1.5 lakh would be waived as the state government would carry the entire debt burden costing a whopping Rs 35,000 crore.
As the state government was left with empty coffers, post bifurcation, Chandrababu desperately sought rescheduling of loans ostensibly to buy time from the RBI.
He had spoken to RBI Governor Raghuram Rajan at least twice and also wrote letters on the issue stating that farmers in the state were in "great distress" due to a series of natural calamities.
The RBI, in turn, had asked the state government to furnish details about the distressed caused by the calamities to make a case for rescheduling of loans.
The RBI obtained inputs from the state government, the State-Level Bankers Committee, major banks in the state and also its Hyderabad regional office.
Besides, it also secured details on crop yield from the AP Directorate of Economics and Statistics and compared the farm output of Kharif 2013 with the average of last four years and also the maximum yield in a best single year.
"It does not appear feasible for us to conclude that distress is widespread warranting rescheduling of loans in the form and manner in which it has been asked for," RBI Executive Director Deepali Pant Joshi observed in a letter to Chief Secretary Krishna Rao on Saturday.
RBI also noted that "farmers' distress is not the key issue" in non-repayment of loans because balances in the farmers' savings bank accounts in rural and semi-urban areas increased.
"Data received from major banks functioning in the state revealed that before April 2014, the number of Kisan Credit Card renewals was similar