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After Farm Loans, Will Govts Waive Off Mudra Loans Next?

Jun 19, 2017


A few days back I suggested on Twitter that people with outstanding home loans should organise themselves and ask the government to waive off their loans.

This idea basically came from several state governments waiving off loans given to farmers It was started by Andhra Pradesh and Telangana, the two states to come out of the erstwhile Andhra Pradesh.

Then it was followed in Uttar Pradesh, where the newly elected government decided to waive off farm loans of around Rs 36,359 crore. It was followed by Maharashtra. There is a clear trend here. Maharashtra chief minister Devendra Fadnavis recently explained his decision to waive off loans to farm loans by saying: "Neighbouring Telangana and Andhra did it first. It created pressure and then UP announced the waiver. The demand had been there but it became very strong after UP's decision."

The idea also came from the fact that banks were busy treating large corporates which had defaulted on their loans, with kids gloves, by restructuring their loans and giving them a longer time to repay. This was basically happening because the corporates owed a large amount of money to banks. And any default would hit them hard.

Now as a home loan borrower, try going to a bank and ask for the postponement of payment of EMI to repay the home loan and see how a bank reacts. Obviously, different kind of borrowers get treated differently.

What has helped the cause of the farmers is that they are numerous in number and the fact that they are organised, which helps them carry out protests at a level so that the government registers it. What has helped the corporates is that their average loan amounts are very large and any default would hit the banks hard.

These factors are missing in case of individuals who have taken on home loans. They are not many in number. They are spread across the length and breadth of India. And they are not organised. In 2013, the number of outstanding home loans stood at 46.43 lakh. I couldn't find a more recent number. Over and above this, there would be home loans given by housing finance companies, as well.

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Typically, the outstanding home loans (in value) are around 60:40 (scheduled commercial banks: housing finance companies). Taking the housing finance companies into account, as well as the fact that the total outstanding home loans may have gone up from where they were in 2013, it is safe to say that the total number of outstanding home loans will be still less than 1 crore.

Also, the individuals who have taken on these home loans would be spread across the length and breadth of the country. Hence, it is difficult for them to get together and protest that the government waive off their home loans, like has been the case with farm loans. The same stands for other kinds of retail loans which have smaller average ticket value, in comparison to the home loan, which is usually the largest loan that an individual ever takes on.

Over and above this, the average loan amount owed by them is very small and that ensures that they are likely to face the full legal wrath of the bank, if they default on their home loans, which is not the case with corporates.

Having said that, there is a precedent of a government waiving off home loans as well. In December 2016, the Telangana government had announced a waiver of home loans of around Rs 3,920 crore to individuals who had benefitted from the housing schemes for economically weaker sections of the society over the years.

So, if individuals with home loans, can get themselves organised they might also be able to get a loan waive off.

But there is one particular kind of borrower, who is in a position to organise himself, protest and ask for a loan waive off.

In 2016-2017 and 2015-2016, the total amount of loans extended under the Pradhan Mantri Mudra Yojana (PMMY or better known as Mudra loans) stood at Rs 3,17,977.81 crore. The total number of borrowers over the two-year period stood at around 7.46 crore. A bulk of these loans have been made to women.

Taking cue from farmers, if these borrowers can manage to organise themselves and protest and demand a waive off of their loans, there is a good chance that they might get it. Assuming that only one individual in one household has got a loan under PMMY, we are looking at 7.46 crore households. At five members per household, we are looking at more than 37 crore individuals, on whom these loans have had some impact. And that is a large vote bank.

If these individuals can get themselves organised they are in a very good position to demand and get a waive off on their PMMY loans. Also, the governments have already set a precedent and will find it very difficult to say no.

This will be especially true for states where elections are scheduled before the Lok Sabha election of 2019. On a totally different note, they might not even need to take it up as an issue, some lazy politician might just do the job for them, by promising a waive off.

And that is the problem with these waive offs. They are unlikely to stop in a hurry.

Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

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14 Responses to "After Farm Loans, Will Govts Waive Off Mudra Loans Next?"

Anirban De

Jun 24, 2017

India has waived farm loans in the past, but never Indian economy has collapsed or anything like that. Today the economy is much stronger than ever before, so while this is not a good step, the doom's day scenario is far from reality. Most countries like India are only progressing, and things are getting better each decades.

Like (1)


Jun 21, 2017

Comparing poor farmers with Home loan borrowers shows bankruptsy of thought and intellect.Its another kind of terrorism i e financial terrorism.

Like (1)


Jun 20, 2017

Many many years ago, when we started as banking trainee officers, in connection with lending risks and consequences, we were advised, part in jest and part in earnest: "If your customer owes you 10 lacs and cannot repay it - he has a problem. But if he owes you 10 crores and cannot repay it - YOU have a problem". That is why huge corporate loans mean the banks have a problem - not the Mallyas!

Like (1)

Yogesh Sheth

Jun 20, 2017

Dear Sir,

Nice analysis and may be reality of the future to attain own goal. Sir iam surprised that many of our co-reader is showing too much of sympathy for farmer, and to inform them that Sir are you aware of the ground reality of farmers position. If anybody who is well wisher of farmers should insist government for good support price which will prevent them from borrowings from Banks and moneylenders.

Like (1)


Jun 20, 2017

You cannot compare outstanding Home loans with agriculture loans. In case of home loan, an asset has been purchased which normally appreciates in value and there should be any problem to borrower to repay the loan or for the bank to recover the outstanding loan amount.
Against this, in case of agriculture loan, the farmer at the mercy of weather and fluctuation of market rates which are in the hands of traders. Therefore farm loan waver needs to be looked into right perspective and not mixed with home loans or industrialists loans.

Like (2)

S. Parikh

Jun 20, 2017

Dear Vivek,

You have made a nice suggestion.
Unless every borrower comes with demand for loan waiver then only Central & State governments will realise the consequences.
I love your frank columns.


Like (2)


Jun 20, 2017

Dear Vivek,

Your are good writer on regarding general issue

what know about farm loans? what former's are doing? what is position to day and forty year back and what is the paddy rate forty years back and today why people always taking about form loans what about BABBA BABUS loans (NPA) what base your taking about MUDRA Loans for waive?

Like (1)

Prof. N K Jain

Jun 20, 2017

This trend is very very dangerous. I doubt if our deposits are safe with the banks. I think this trend will alert the international credit rating agencies and they may downgrade Indian sovereign credit rating.

Like (1)

Satyadev Verma

Jun 19, 2017

Dear Mr Vivek Kaul,
I dont understand your intention whether U want to help Mudra borrowers or politicians.Anyway,you have shown both a way to raise pressure on Indian Govt & economy.Your suggestion will definitely reach both of these & I will not b surprised if it assumes reality.I hope you fill b happiest & satisfied with 'I forcasted it long back !'
Can you clarify on your intention ?

Like (1)


Jun 19, 2017

Nice article.Thanks for informing the huge amount of Mudra loans and the number of borrowers.If the government indeed waives them off and follows it up with other loan categories , then it won't take long for India to become Greece of Asia.But sadly there is no EU or Germany to come to our rescue !

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