The Hindu has an article where it raises pertinent questions on the Farm loans waiver.

Cooperative bank officials here said that unless the Government comes out with concrete guidelines, it would be difficult to implement the loan waiver scheme.
..

For example in Dharmapuri district the bank had issued loans on ghost coverages. The local officials did not make crop verification nor cross verification of land holdings at the time of issue of loans. Loans had been issued for crops like banana and turmeric inlands where it was not possible to raise such crops in these area. Cases had been registered against farmers concerned for misleading the bank and disciplinary proceedings had been initiated against officials for issuing loans without making proper enquiry.

..

The officials said while the loan of farmers who could not repay due to successive droughts in the State could be written off, the scheme should not be extended to those who had "cheated the banks" by making bogus claims or taken loans through fictitious names.
..
Similarly the officials also wanted to know how the government was going to compensate honest borrowers who had been prompt in repaying the loan. They said the honest borrowers should be rewarded for repaying the loan in time. If the Government decided to reimburse the amount, then it had to allot Rs. 500 crore more under the scheme.

Meanwhile, the repayment of loans by farmers had come to a standstill affecting the financial position of the many PACBs in the State. Seventy per cent of the advances made by these banks were from their own funds. If the government did not reimburse the loan amount to the PACBs at the earliest, many banks had no other alternative but to suspend their operations. With the kuruvai season beginning from the second week of June, farmers, especially small and marginal farmers required bank loans for their farm operations. At least for advancing loans to farmers, the government should compensate the PACBs at the earliest, the officials added.

Interesting points.

I think people who've been honest enough to repay their loans promptly should get an incentive, rather than get nothing. May be they should be allowed easier approvals the next time they get a loan.

About whether those who got the loans by fraudulent means should be compensated, the issue is more tricky. For people who are convicted as frauds, the government shouldn't give back anything. But, for people against whom there are active cases going on, if the government holds back the loan amount, it will amount to assuming guilt without proving.

That said, if people actually got loans by cheating, shouldn't there be a disciplinary action against the officer who approved the loan without doing his due diligence first?