Reserve Bank of India (RBI) Chairman Raghu Rama Rajan had confirmed that there are no chances of loans rescheduling in Andhra Pradesh and Telangana States. Rajan said that District collectors have to announce the loss of the crops in their districts when a natural calamity took place. But that did not happen when Philin Cyclone hit. Also RBI had found that the crops did not damage to the extent of doing loans rescheduling or loan waivers during that Cyclone.

Rajan had reiterated that Reserve Bank will not encourage any measures which kill the banking system in the country and Loan Waiver is one of those. He said that Loan rescheduling in Andhra Pradesh and Telangana is more due to the extensive political promises given by both the ruling parties before the elections and they can not be entertained at any cost.

However Rajan said that given state governments provide good proposals in this aspect, RBI will consider rolling out some scheme with out causing ‘Moral Hazard’. In economic terms, Moral Hazard is a situation in which a party is more likely to take risks because the costs that could result will not be borne by the party taking the risk. Experts say the loan rescheduling option is now done with and both the governments have to look up to new options.