RBI cautions public against unauthorised campaigns on loan waivers

RBI

The Reserve Bank of India (RBI) on December 11 cautioned members of the public agaist unauthorised campiagns on loan waivers. The central bank urged public to not fall prey to such false and misleading campaigns and report such incidents to law enforcement agencies.

The RBI caution came after the central bank noticed certain misleading advertisements enticing borrowers by offering loan waivers.

"These entities seem to be actively promoting many such campaigns in the print media as well as social media platforms. There are reports of such entities charging a service/legal fee for issuing ‘debt waiver certificates’ without any authority," the RBI said in a statement.

"Further, it has also come to our notice that in certain locations, campaigns are being run by a few persons, which undermine the efforts of Banks in enforcing their rights over the securities charged to the Banks," the RBI added.

"Such entities are misrepresenting that dues to financial institutions including banks need not be repaid. Such activities undermine the stability of financial institutions and, above all, the interest of the depositors. It may also be noted that associating with such entities can result in direct financial losses,' the RBI said.

Repeated promises of loan waivers by political parties have paued significant risks to the banking system in recent years. Typically, when a loan waiver is announced, borrowers stop repaying their instalments to banks, thus creating a huge jump in the bad loan levels.

Both BJP and Congress parties had promised loan waivers as a poll plank in various states in recent years to attract voters.