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Our Bureau

New Delhi , June 18

IN its first major pro-farm initiative, the United Progressive Alliance today announced a comprehensive debt-restructuring package for the country's agricultural community, involving a rescheduling of loans (as opposed to write-off) extended by commercial banks, regional rural banks (RRBs) and co-operatives.

All farmers who have suffered losses on account of successive droughts, floods or other calamities in districts declared as `calamity-affected' by the State Governments concerned will be given the facility of debt rescheduling.

The interest outstanding in the accounts of such borrowers will be clubbed with the principal amount due as on March 31, 2003, and the amount thus arrived at would be repayable over a five-year period at current interest rates, including an initial moratorium of two years.

Further, farmers who have defaulted and become ineligible for fresh credit in view of their earlier debts being categorised as `sub-standard' or `doubtful', will also be extended the benefit of debt rescheduling. This will make them eligible for fresh credit. Moreover, in the case of small and marginal farmers who have been declared as defaulters, the Reserve Bank of India and the National Bank for Agriculture and Rural Development (Nabard) will issue guidelines to `increase flexibility' for banks to offer them a one-time settlement. This again is aimed at reviving institutional credit flow to farmers in arrears.

Announcing the package here today, the Finance Minister, Mr P. Chidambaram, said that it was necessary considering that "our farmers are today in deep distress and we have to help them out." According to him, there was no populism involved in the exercise since the loans are being merely rescheduled and not waived. Neither are banks been asked to slash lending rates to the farm sector. Mr Chidambaram also dismissed suggestions that the package would result in a surge in non-performing assets (NPAs) of banks, by pointing out that "NPAs in agriculture are no more than that in the private corporate sector" and "what is being done is well within the limits of prudence".

Mr Chidambaram said that the Nabard chairman and the chairman of the Indian Bank Association would hold a meeting with the CEOs of commercial banks on June 22 to discuss ways and means to implement the package. There will be a similar meeting for State co-operative banks and RRBs on June 23 and June 24. "We want the package to be implemented soon since the sowing season is round the corner," he said.

Mr Chidambaram said that the total flow of institutional credit to agriculture is sought to being enhanced from Rs 80,000 crore during 2003-04 to about Rs 1,05,000 crore this fiscal. This would include Rs 57,000 crore from commercial banks, Rs 39,000 crore from co-operatives and Rs 8,500 crore from RRBs. Commercial banks will be asked to bring to their fold at least 100 new farmers at each rural and semi-urban branches during the current year. "Our goal is to enlarge the universe of new farmers borrowing from banks by about 50 lakh," he said.

Currently, scheduled commercial banks have 33,039 branches in rural and semi-urban areas, of which RRBs account for 14,051. Also, each rural and semi-urban branch of commercial banks will be made to take up at least two to three new investment projects in the areas of plantation and horticulture, fisheries, organic farming, agro-processing, livestock, micro-irrigation, sprinkler irrigation, watershed management, village ponds development and other agricultural activities.

Mr Chidambaram denied that the above measures implied a return to the earlier directed lending policy of the Government. "This is not directed lending. We feel that banks should view agriculture as a sector where there are commercial opportunities for banks to lend and earn reasonable profits. The present package will help in unclogging the channels for lending to the farm sector," he stated.

More Stories on : Financial Policy | Farm credit | Agricultural Policy

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