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The Reserve Bank of India (RBI) Governor Urjit Patel attends a news conference after the bi-monthly monetary policy review in Mumbai, India April 6, 2017.Reuters

A loan taken by a borrower is supposed to be repaid and not waived. That's the simple and subtle conveyed by RBI Governor Urjit Patel. His statement during a press conference on Thursday (April 6) comes two days after Uttar Pradesh Chief Minister Yogi Adityanath waived off loans worth Rs 36,359 crore — a move that could see other states resorting to similar measures.

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"Farm loan waiver undermines honest credit culture, impacts credit discipline," Patel said after the conclusion of the first two-day meeting of the RBI's Monetary Policy Committee.

The debt waived by the BJP government in Uttar Pradesh comprises Rs 30,729 crore in crop loans and Rs 5,630 crore loans taken by about seven lakh farmers that have since turned non-recoverable.

"There are a total of 2.3 crore farmers in Uttar Pradesh, out of which at least 92.5% farmers, 2.15 crore, are small and marginal farmers who will benefit the most from the decision," Adityanath said after the Cabinet meeting on Tuesday (April 4) where the decision was taken. 

The state government will issue farmers' relief bonds to raise funds for the massive waiver. 

The total exposure of commercial banks in the form of farm loans in Uttar Pradesh stood at Rs 86,241.2 crore, at an average of about Rs 1.34 lakh per farmer, according to Soumya Kanti Ghosh, an economist at State Bank of India.

The amount waived amounts to about 10 per cent of Uttar Pradesh government's estimated revenues for FY2017 at Rs 3,40,255.24 crore. 

"This will definitely cause some amount of stress for the state's fiscal arithmetic in the coming year. The incumbent government in UP has to go beyond the traditional solutions and find innovative ways of adding to its revenues," he wrote in his update on SBI Ecoflash on March 20, 2017.

A better way of tackling the agrarian challenge should involve better techniques and enhanced access for farmers to the formal banking system.

"Agriculture sector in India faces a lot of issues which need attention. Raising farm productivity is one of the areas that should be focused on. Efforts should be made so that the farming community is covered by formal banking system so that they can easily avail crop loans." 

Meanwhile, the RBI's decision to allow banks to invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) is a good move, according to a banker. "Permitting banks to invest in REITs and InvITs are positives for real estate and infrastructure sector as well as banks," Melwyn Rego, MD & CEO, Bank of India, said in a statement.

The RBI had said that norms for the same will be framed soon. "It is proposed to allow banks to invest in REITs and InvITs within this umbrella limit. Detailed guidelines will be issued by May-end 2017," the RBI said on Thursday.