Horses more preferable than economists.

2019 started with the news that the Reserve Bank of India (RBI) is to allow restructuring of loans to micro, small and medium sized enterprises (MSMEs) not exceeding Rs 250 million or $3.6 million. The sudden cancellation of high denomination notes in 2016, known as demonetization, put MSMEs under stress, as most of them deal in cash, and resulted in Rs 1.3 trillion ($18.7 billion) debt to banks turning into non-performing assets. Restructuring means that banks will not have to make provisions for these as bad loans for another 15 months which will free up their balance sheets so that they can lend to new businesses. "The biggest concern with such forbearance packages is the risk that such schemes could end up vitiating the repayment culture of honest MSME borrowers by encouraging defaults," said ASV Krishnan. First this government hounded out Raghuram Rajan, then his successor Urjit Patel resigned 9 months before his contract expired because his position was made untenable. Both were economists, highly experienced and determined to put banks on sound financial footing by rooting out corrupt lending practices. The government wanted the RBI to use its contingency fund, of around Rs 9 trillion, to write off bad loans which would get rich industrialists off the hook. The government quickly appointed a retired IAS officer Shaktikanta Das as the Governor of the RBI, suspected by many as a kind of Trojan Horse. Correctly, as it transpires. One horse is not enough to make a herd, so another retired IAS officer UK Sinha has been appointed as head of a committee that will expedite loans to MSMEs. Loans to MSMEs amount to 13% of total bad loans "But now that the RBI has started flip-flopping, it'll become that much easier for the tycoons to rewind the credit culture -- back to the debtor friendly show it always was," wrote A Mukherjee. If the government is writing off loans to industrialists, why not to farmers who are really suffering, but loan waivers are a short time measure which do not alleviate long term suffering, wrote Prof S Rajagopalan. "The competitive policies of farm loan waiver is killing the banking industry. It provides incentives to people to default. It's a wrong way to address the real issue," said AK Pradhan. "Delinquency in agricultural loans is already on the rise, even as banks brace for big write-offs following the string of farm loans waivers recently announced by several state governments," wrote A Iyer. Banks are wary of lending to farmers. Politicians of all parties in India believe that depositors' money in public sector banks, policyholders' money in the Life Insurance Corporation of India, and especially taxpayers' money belong to them to do as they please. But, how to loot the RBI? Hence the horses, instead of economists.