BANKING Content

SBI PO 2017 RC Test 2

Instructions

Read the following passage carefully and answer the questions given below it. Certain words have been printed in bold to help you locate them while answering some of the question.

Political ploys initially hailed as master-strokes often end up as flops, The Rs. 60, 000 crore farm loan waiver announced in the budget writes off 100% of overdues of small and marginal farmers holding up to two hectares, and 25% of overdues of larger farmers. While India has enjoyed 8%-9% GDP growth for the past few years, the boom has bypassed many rural areas and farmer distress and suicides have made newspaper headlines. Various attempts to provide relief (employment guarantee scheme, public distributions system) have made little impact, thanks to huge leakages from the government’s lousy delivery system. So, many economists think the loan waiver is a worthwhile alternative to provide relief.

However the poorest rural folk are landless labours, who get neither farm loans nor waivers. Half of the small and marginal farmers get no loans from banks and depend entirely on moneylenders, and will not benefit. Besides, rural India is full of the family holdings rather than individual holdings and family holdings will typically be much larger than two hectares even for dirt-poor farmers, who will, therefore, be denied the 100% waiver. It will thus fail in both economic and political objectives. IRDP loans to the rural poor in the 1980’s demonstrated that crooked bank officials demand bribes amounting to one-third the intended benefits. Very few of the intended beneficiaries who merited relief received it. After the last farm loan waiver will similarly slow down fresh loans to deserving farmers. While overdues to co-operative may be higher, economist Surjit Bhalla says less than 5% of farmer loans to banks are overdue i.e overdues exit for only 2.25 million out of 90 million farmers. If so, then the 95% who have repaid loans will not benefit. They will be angry at being penalized for honesty.

The budget thus grossly thus overestimates the number of beneficiaries It also underestimates the negative effects of the waiver-encouraging willful default in the future and discouraging fresh bank lending for some years. Instead of typing to reach the needy, through a plethora of leaky schemes we should transfer cash directly to the needy using new technology like biometric smart cards, Which are now being used in many countries, and mobile phones bank accounts. Then benefits can go directly to phone accounts operable only by those with biometric cards, ending the massive leakages of current schemes.

The political benefits of the loan waiver have also been exaggerated since if only a small fraction of farm families benefit, and many of these have to pay bribes to get the actual benefit, will the waiver really be a massive vote-winner? Members of joint families will feel aggrieved that, despite having less than one hectare per head, their family holding is too large, to qualify for the 100% waiver. All finance ministers, of central or state governments, give away freebies in their last budgets, hoping to win electoral regards. Yet, four-fifth of all incumbent government are voted out. This shows that beneficiaries of various are not notably grateful, while those not so favoured may feel aggrieved, and vote for the opposition. That seems to be why election budgets constantly fail to win elections in India and the loan waiver will not change that pattern.

Question 1

Why do economists feel that loan waivers will benefit farmers in distress? 

Question 2

What message will the loan waiver send to farmer who have repaid loans? 

Question 3

What is the author’s suggestion to provide aid to farmers? 

Question 4

What was the outcome of IRDP loans to the rural poor? 

Question 5

What are the terms of the loan waiver? 

(A) One-fourth of the overdue loans of landless labourers will be written off.
(B) The Rs. 60, 000 crore loan waiver landless labourers will be written off.
(C) Any farmer with between 26 per cent to 100 per cent of their loan repayments overdue will be penalized.

Leaderboard
#NameOverall Score
1Vishal Bhatia15
2Mohini Krishnan15
3alekhya15
4Karmveer singh15
5Aadil Aman15
6Swapnil Sawaimul15
7Subrudhi Joshwa15
8Piyush Varshney15
9Kunwar Madhur Kushwaha15
10Arijit Mukherjee15

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