Reserve Bank of India (RBI) governor Urjit Patel last year said that farm loan waivers distort the credit culture and impair the national balance-sheet, but if you look at the figures the quantum of farm loans waived is minuscule compared to loans to India's corporate sector. Indian banks wrote off Rs 1.18 lakh crore of loans to corporate India in 2017-18, about 56% higher than in 2016-17, when they had written off Rs 81,683 crore. The farm loan waivers and other compromises made to agriculture and allied sectors were only Rs 10,345 crore in 2017-18, about 45% higher than the previous financial year when banks are written of Rs 7,091 crore.

Patel has been consistently highlighting the impact farm loan waivers not just on bank balance-sheets but also on the national balance-sheet.

Probably that is why Urjit Patel said in July this year, "Farm loan waiver has been given through Budget of individual state governments so far. Therefore, implications on the banks' NPA directly are not there."

Compare this with what the governor said a year before in April 2017 on farm loan waivers. "Waivers undermine an honest credit culture... It leads to crowding out of private borrowers as high government borrowing tend to (impose) an increasing cost of borrowing for others."

Patel said after the monetary policy announcement earlier this month: "I think we need to create a consensus such that loan waiver promises, otherwise sub-sovereign fiscal challenges in this context could eventually affect national balance-sheet."

Banks have been writing off loans to clean up their balance-sheets, with efforts getting stronger after the asset quality review of RBI in 2015 when the regulator forced banks to reclassify many accounts as stressed. State Bank of India (SBI) wrote off the largest number of corporate loans of Rs 39,151 crore, followed IDBI Bank, which waived off corporate loans of Rs 12,515 crore in 2017-18 followed by Indian Overseas Bank, which wrote off Rs 6,908 crore.

While SBI wrote off Rs 2,972 crore of loans to the agriculture sector, followed by Bank of India, which wrote off loans worth Rs 1,332 crore and Union Bank of India, which wrote off Rs 1,133 crore of agri loans.

However, even in write-offs the banks pursue their recovery efforts. After providing 100% for these loans that is after taking maximum hit the loans are taken off the balance-sheet. Borrowers of written-off accounts are liable to repayments.

Bankers say write-off does not mean banks will not go after the borrowers. Recovery of dues continues in written off accounts under the Securitsation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and debt recovery tribunals.

"Industry is getting advantage of a waiver while agricultural loan waivers are announced by the ruling class as an obligation to be enchashed in the elections. If agriculture and industry genuinely need government support it should come in the form of tax exemption or subsidy or incentives, but write-offs or debt waiver vitiates recovery climate in the banking and paralyses banking activities," Devidas Tuljapurkar, joint secretary, All India Bank Employees Association.