Landlord Waiver: Fill & Download for Free

Philosopher George Santayana once said, “Those who cannot remember the past are condemned to repeat it.” Experience tells us that loan waivers have not been successful in solving the Indian farmers’ problems, so why should this time be any different? The root causes – lack of access to institutional credit, rising cost of inputs like seeds and pesticides required for farming, and the inability to receive remunerative prices – are not being addressed.What is the difference between a loan write-off and a loan waiver?Loan write-offs are not the same as loan waivers. A loan write-off is an accounting entry which banks make when they have determined it is unlikely a particular loan will be repaid. In this case, the loan is said to have become a non-performing asset (NPA) which no longer generates any income.For more accurate reporting of income from period to period, banks maintain a contra-asset account in the balance sheet known the loan loss reserve. The value of the loan loss reserve is based on the amount that is not expected to be recovered in the future, and is determined with reference to historical information on loan defaults. Loan loss provisions are recorded in the income statement as an expense to adjust the loan loss reserve so that it is sufficient to cover expected defaults. This reduces pre-tax income.When the loan is finally written off at the end of this process, only balance sheet accounts are affected, namely the loan loss reserve and outstanding loan. This is recorded as a debit to the to loan loss reserve and a credit to the outstanding loan. Consequently, the net portfolio on balance sheet is unchanged. From this, it can be seen that the primary purpose of a loan write-off is to remove NPAs from the books and keep things tidy.On the other hand, a loan waiver is a promise by the bank not to insist on its strict legal right to recover the loan according to the original terms of the loan contract. Therefore, once the bank has waived a loan, it cannot turn around and insist that the borrower should pay because it has already relinquished its right to do so and will be estopped by the court if it tries to do so. By contrast, a loan write-off does not amount to a waiver, and the bank can continue to pursue the borrower.Why are people upset about the loan waiver?Firstly, banks ostensibly benefited more than farmers from the 2008 Agricultural Debt Waiver and Debt Relief Scheme (“2008 waiver”). The Indian government provided banks with Rs 60,000 crore reimbursement over three years in the midst of the global financial crisis. This allowed them to recover otherwise unrecoverable non-performing agricultural loans, many of which had been given out to meet the priority sector lending requirement but had gone bad because of, inter alia, the risks inherent in agriculture.[1][1][1][1]Yet, the 2008 waiver did not benefit small and marginal farmers greatly, as they relied more on informal sources of credit like moneylenders, landlords or relatives. A 2005 report by the NSSO on farmer indebtedness based on 2003 data showed that only 23% of farmers with ownership holdings of land less than 0.01 hectares had access to formal credit, and this figure rose to 58% for farmers with ownership holdings of land between 1-2 hectares.[2][2][2][2]More recently, the 2017 NABARD All India Rural Financial Inclusion Survey reported that 40% of loans continue to be taken from. Respondents cited ease of availability, no stringent timelines for repayment, no documentation formalities required, lower or no interest expected, and faith in families and friends as reasons why they preferred to take loans from non-institutional sources.[3][3][3][3]Secondly, the criteria used to limit the beneficiaries of 2008 waiver did not adequately consider the socioeconomic reality of farmers. Under the 2008 waiver, 100% of the overdues owed to small and marginal farmers in “ownership” of “up to 2 hectares of land”, and 25% of the overdues of larger farmers were waived.[4][4][4][4]Banks generally require land title as a guarantee, which meant that sharecroppers, tenant farmers and labourers who did not own land were excluded. On a related note, critics have pointed out that the land ownership requirement means that landlords are more well positioned to benefit from a loan waiver than the sharecroppers who actually cultivate the land.[5][5][5][5] Sharecropping agreements involve the landlord permitting the sharecropper to farm on a parcel of land in exchange for a portion of the crop.[6][6][6][6]Consequently, sharecroppers often have to borrow money from moneylenders to invest in their crop so that they give their dues to the landlord. However, as they do not own the land, they fall outside the purview of loan waivers. To tackle this issue, the Indian government responded by rolling out another scheme, “Bhoomi Heen Kisan” in 2014 to provide Rs. 8 lakh crores credit support ( basically, more loans!) to 5 lakh joint farming groups.[7][7][7][7]Agricultural land in rural India is often jointly held[8][8][8][8]by family members and more likely to exceed 2 hectares. Similarly, some farmers may have larger holdings, not because they are richer but because their land is less productive. For example, an opinion piece published in The Hindu[9][9][9][9] shed light on how in Vidharba, the average landholding size is 3.03 hectares, and up to 50 per cent of Vidharba’s farmers were above the two-hectare criterion for the 100% waiver. This was not because they were big landlords but because their land was less productive. By contrast, the farmers of Western Maharashtra with smaller, well-irrigated and more productive holdings who were better off in most regards, were more likely to meet the two-hectare criterion and therefore stood to gain more from the waiver.If that weren’t bad enough, it is not inconceivable that corrupt bank officials will ensure that only a fraction of the allocated money reaches the already limited pool of loan waiver beneficiaries. In a survey on the IRDP loan program implemented in 1980, 67% of the beneficiary respondents reported that they had paid a bribe for the loan to be sanctioned.[10][10][10][10]Thirdly, loan waivers encourage a bad credit culture that hurts both banks and farmers. Honest farmers are penalized for repaying their loans on time when defaulters get their loans waived. Some of them who realize this may decide to go rogue and willingly default so that they can avail themselves of the waiver and save money. This “borrower moral hazard” was documented in working paper by the World Bank on the 2008 waiver, which noted that borrowers in high-bailout districts started defaulting in large numbers after all the non-performing loans in these districts had been written off.[11][11][11][11] Not long ago, announcements of farm loan waivers in 2017 by some states led HDFC Bank’s NPA ratio to rise to 1.24% for the June quarter from 1.05% in the previous quarter. More than half of the increase in bad loans was from its agriculture portfolio.[12][12][12][12]Finally, loan waivers worsen the fiscal positions of the state and leave less money for investments in infrastructure like roads, electricity and irrigation systems which could help farmers more in the long-run. According to a recent article published in December 2018 by the Hindustan Times, the newly formed Congress governments in Madhya Pradesh, Rajasthan and Chhattisgarh may not have adequate fiscal space or funds left to implement other poll promises in the current financial year after announcing farm loan waivers.[13][13][13][13] Pressure to provide loan waivers is mounting in other states as well – In Odisha, Chief Minister Naveen Patnaik criticized the opposition political parties who demanded a waiver, saying that it would make the State Government bankrupt.[14][14][14][14]To conclude, the farm loan waiver looks like a negative-sum game for everyone involved and does little to meaningfully improve the lives of farmers – why should anyone (except the leaders scoring brownie points during the elections) be happy about it?Footnotes[1] The economic effects of India’s farm loan bailout: business as usual?[1] The economic effects of India’s farm loan bailout: business as usual?[1] The economic effects of India’s farm loan bailout: business as usual?[1] The economic effects of India’s farm loan bailout: business as usual?[2] India’s Agricultural Debt Waiver Scheme, 2008[2] India’s Agricultural Debt Waiver Scheme, 2008[2] India’s Agricultural Debt Waiver Scheme, 2008[2] India’s Agricultural Debt Waiver Scheme, 2008[3] https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf [3] https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf [3] https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf [3] https://www.nabard.org/auth/writereaddata/tender/1608180417NABARD-Repo-16_Web_P.pdf [4] Page on thehindubusinessline.com[4] Page on thehindubusinessline.com[4] Page on thehindubusinessline.com[4] Page on thehindubusinessline.com[5] https://economictimes.indiatimes.com/blogs/cursor/farmers-need-remunerative-prices-not-debt-waiver-to-end-rural-distress/ [5] https://economictimes.indiatimes.com/blogs/cursor/farmers-need-remunerative-prices-not-debt-waiver-to-end-rural-distress/ [5] https://economictimes.indiatimes.com/blogs/cursor/farmers-need-remunerative-prices-not-debt-waiver-to-end-rural-distress/ [5] https://economictimes.indiatimes.com/blogs/cursor/farmers-need-remunerative-prices-not-debt-waiver-to-end-rural-distress/ [6] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.378.8225&rep=rep1&type=pdf [6] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.378.8225&rep=rep1&type=pdf [6] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.378.8225&rep=rep1&type=pdf [6] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.378.8225&rep=rep1&type=pdf [7] Finance to 5 Lakh Joint Farming Groups of “Bhoomi Heen Kisan” through Nabard in the Current Financial Year[7] Finance to 5 Lakh Joint Farming Groups of “Bhoomi Heen Kisan” through Nabard in the Current Financial Year[7] Finance to 5 Lakh Joint Farming Groups of “Bhoomi Heen Kisan” through Nabard in the Current Financial Year[7] Finance to 5 Lakh Joint Farming Groups of “Bhoomi Heen Kisan” through Nabard in the Current Financial Year[8] https://www.indiaagronet.com/indiaagronet/agri_economics/CONTENTS/Land%20Tenure.htm [8] https://www.indiaagronet.com/indiaagronet/agri_economics/CONTENTS/Land%20Tenure.htm [8] https://www.indiaagronet.com/indiaagronet/agri_economics/CONTENTS/Land%20Tenure.htm [8] https://www.indiaagronet.com/indiaagronet/agri_economics/CONTENTS/Land%20Tenure.htm [9] https://www.thehindu.com/todays-paper/tp-opinion/Oh-What-a-lovely-waiver/article15181680.ece [9] https://www.thehindu.com/todays-paper/tp-opinion/Oh-What-a-lovely-waiver/article15181680.ece [9] https://www.thehindu.com/todays-paper/tp-opinion/Oh-What-a-lovely-waiver/article15181680.ece [9] https://www.thehindu.com/todays-paper/tp-opinion/Oh-What-a-lovely-waiver/article15181680.ece [10] http://shodhganga.inflibnet.ac.in/bitstream/10603/187194/14/14_chapter%208.pdf [10] http://shodhganga.inflibnet.ac.in/bitstream/10603/187194/14/14_chapter%208.pdf [10] http://shodhganga.inflibnet.ac.in/bitstream/10603/187194/14/14_chapter%208.pdf [10] http://shodhganga.inflibnet.ac.in/bitstream/10603/187194/14/14_chapter%208.pdf [11] The economic effects of India’s farm loan bailout: business as usual?[11] The economic effects of India’s farm loan bailout: business as usual?[11] The economic effects of India’s farm loan bailout: business as usual?[11] The economic effects of India’s farm loan bailout: business as usual?[12] https://www.livemint.com/Money/8oTRtiFqkk1pMdHhnZ6wNI/HDFC-Banks-impeccable-asset-quality-gets-a-farm-loan-waiver.html [12] https://www.livemint.com/Money/8oTRtiFqkk1pMdHhnZ6wNI/HDFC-Banks-impeccable-asset-quality-gets-a-farm-loan-waiver.html [12] https://www.livemint.com/Money/8oTRtiFqkk1pMdHhnZ6wNI/HDFC-Banks-impeccable-asset-quality-gets-a-farm-loan-waiver.html [12] https://www.livemint.com/Money/8oTRtiFqkk1pMdHhnZ6wNI/HDFC-Banks-impeccable-asset-quality-gets-a-farm-loan-waiver.html [13] https://www.hindustantimes.com/india-news/after-waivers-fund-crunch-for-3-states/story-GdRlDNbVxo6aAVLPkFMHzO.html [13] https://www.hindustantimes.com/india-news/after-waivers-fund-crunch-for-3-states/story-GdRlDNbVxo6aAVLPkFMHzO.html [13] https://www.hindustantimes.com/india-news/after-waivers-fund-crunch-for-3-states/story-GdRlDNbVxo6aAVLPkFMHzO.html [13] https://www.hindustantimes.com/india-news/after-waivers-fund-crunch-for-3-states/story-GdRlDNbVxo6aAVLPkFMHzO.html [14] http://www.newindianexpress.com/states/odisha/2018/dec/22/loan-waiver-will-make-state-bankrupt-cm-1915059.html [14] http://www.newindianexpress.com/states/odisha/2018/dec/22/loan-waiver-will-make-state-bankrupt-cm-1915059.html [14] http://www.newindianexpress.com/states/odisha/2018/dec/22/loan-waiver-will-make-state-bankrupt-cm-1915059.html [14] http://www.newindianexpress.com/states/odisha/2018/dec/22/loan-waiver-will-make-state-bankrupt-cm-1915059.html

Oh don’t do it. You will be required to purchase additional insurance. It will be considered an attractive nuisance if other kids use it and get hurt. If someone gets hurt you will be sued. Count on it.I get you want to be a good landlord, but this is not something that is a good idea.If you really want to do it, you will need to contact your insurance company about coverage. And you will also want to hire a lawyer to write a waiver for the child’s family. This waiver will not help with other families. And it won’t prevent someone from filing a lawsuit. Even the original child’s family.The road to hell, and court, is paved with good intentions my friend.

I am going to answer this differently. Don’t be your own problem . . . I have seen landlords waiver the deposit for fear of not filling the vacancy. Or split the deposit up over several months to move a tenant in.For those of us that know, this is a problem set-up to happen later.One of the basic tests for a tenant to pass is paying his first and last month rent, plus a full deposit. If you have these financial requirements in the beginning and the tenant can not afford it, then there is a good chance he/she can not afford the lease.Another sign of trouble will be a tenant that pays the above, but soon after asks for the last month rent, or security deposit to be credited to current rent.