Election Season Promises - Understanding Loan Waivers
As election season approaches, self proclaimed social activists often try to drive people’s sentiments with empty commitments to create their space or bargaining power. One popular promise is about loan waivers, which can be especially appealing to marginal farmers and the population from EWS, who are dealing with debt. While the idea of waiving off loans sounds attractive, it’s absolutely critical to consider the implications of these promises.
Why Loan Waivers Sound Attractive
For the large population from EWS or LIG, the thought of having their loan waiver is very appealing. With challenges like poor crop yields, fluctuating market prices, and rising living expenses, many individuals find themselves overwhelmed by debt. The promise of loan waiver can seem like a quick solution during election campaigns.
Are the Promises Genuine?
Firstly let’s look at the tradition of loan waiver so far in the country. Wherever there have been loan waiver schemes announced, those are only announced for farm loan/agri loan and that too in extraordinary situations of prolonged drought etc. Never ever, any other type of loan has been waived off. If one looks at the timing of these loan waiver movements/promises, these are often done right before elections. Further, one should also check the effectiveness of such movements/promises whether any of such things has actually been implemented. This can give one sufficient confidence to conclude that these are just gimmicks to achieve personal agenda. None of the persons involved in such movements/promises has done anything to truly address the underlying issues faced by borrowers.
Economic Implications
While loan waivers can provide immediate relief, they can also have long-term effects on the economy. Loan waiver can put a strain on government finances, possibly leading to cuts in essential services or higher taxes. Additionally, it creates a question mark on the loan repayment capacity of that individual for future loans, some borrowers also use these situations as an opportunity to not pay/delay their ongoing loans without necessarily qualifying for the waiver scheme. This damages the culture of timely loan repayment which essentially puts huge pressure on the overall credit cycle, resulting in the overall development of the country. Such schemes or the false movement of loan waiver creates NPAs on Financial Institutions books, which in turn increases their cost of borrowing, which naturally will pass onto the other customers by way of higher interest rates for any type of loan. There have been instances when Financial Institutions have withdrawn from offering loans in certain geography because of the severity of such loan waiver movements. This ultimately creates a huge gap in overall economic development of a large section of population.
Conclusion
Loan waivers are a complex issue that requires careful consideration. While they may offer short-term relief to those in need, it is vital to understand their broader implications. As we think about the promises made during election campaigns, let’s focus on supporting policies that promote long-term financial stability and empower individuals to make informed decisions about their finances. True progress comes from finding sustainable solutions rather than quick fixes.
