Concerned over the debt waiver by the state governments, the Reserve Bank of India (RBI) said on Wednesday that such a move would increase the risk of financial losses and inflationary hikes.

RBI governor Urjit Patel told reporters, "It is said in the proposal of the Monetary Policy Committee (MPC) that if the loans of farmers were waived largely, it would increase the financial losses.

He said that till the state's budget does not have the capability to bear financial losses, then farmers should refrain from waiving the debt. He said that this could reduce the financial benefits of the last 2-3 years.

He also said that due to the increase in fiscal deficit, inflation will start rising soon. Patel said that earlier it has been seen that the inflation has increased due to forgiveness of the farmers.

He said, "Therefore, we should take very cautious steps before the situation gets out of control."

Following Uttar Pradesh, Maharashtra Chief Minister Devendra Fadnavis has also announced the largest agricultural debt waiver in the history of the state.

On the other hand, the monetary policy committee of the Reserve Bank of India (RBI) rejected the request to discuss the finance ministry before the policy review. RBI Governor Urjit Patel disclosed this on Wednesday. While stating the expectation of the government, RBI has kept the chief interest rate at 6.25 per cent in the fourth monetary policy review continuously.

Patel, while announcing the second bimonthly monetary policy review of the current financial year, told reporters, "As far as the finance ministry issues to the MPC members the invitation given for the meeting. So all members of the MPC rejected the request of the Finance Ministry."

However, Patel did not tell when the invitation was received from the Finance Ministry. Patel was asked whether the Ministry had attacked the independence and autonomy of the RBI. He said, the committee did not accept this invitation. Six-member MPC has started deciding on rates from October last year. This is for the first time that unanimous decision has not been taken between the members. Five members voted in favor of keeping rates and one member voted against it. Three of the six MPC members have been nominated by the government, while three members belong to the RBI.

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