The Hindu Business Line : Bengal co-op bank seeks clarifications on farm loan waiver scheme

The ambiguities in the Agricultural Loan Waiver and Debt Relief Scheme have left co-operative banks in a quandary so much that the Chairman of West Bengal State Cooperative Bank (WBSCB) has sought immediate intervention of both the RBI Governor and the Nabard Chairman.

In communications to the RBI Governor and the Nabard Chairman, the Chairman of WBSCB, Mr Samir Ghosh, has stressed on the need for relaxation of NPA (non-performing assets) and CRAR (capital-to-risk weighted assets ratio) norms, and has appealed for special dispensation for those borrowers who took loans by March 31, 2007, but repaid their loans before the cut-off date.The waiver scheme, it is pointed out, will apply to loans taken on or before March 31, 2007 and that have fallen overdue as on December 31, 2007, remaining unpaid till February 29, 2008.

But what happens to the loans taken on and after April 1, 2007, and have fallen overdue on March 31, 2008? Mr Ghosh asks.

Loan treatment

These loans, according to him, should be treated as performing assets.

Otherwise, making any provisioning for these loans will be reflected in the profit and loss accounts of the three-tier structure of short-term cooperative credit institutions.

Precisely for the same reason, the provisions of CRAR should not be strictly enforced in respect of these institutions.

Mr Ghosh apprehends that an estimated 11.6 lakh borrowers, now defaulters as per the waiver scheme but soon to be rendered debt-free, will approach the cooperative credit institutions for new loans from July. “We just do not have funds to meet their credit demands,” he says and appeals to Nabard for granting funds at zero interest rate to meet the probable surge in demand for credit.

The WBSCB Chairman feels that some mechanism should be evolved to reward those small and marginal farmers who took loans on or before March 31, 2007 but repaid their loans within the due date. “We’ve urged Nabard to grant to these borrowers an amount which will be equivalent to loan amount repaid by them within the stipulated period,” Mr Ghosh adds.

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