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Farm debt relief evokes lukewarm response

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Banks seek permission to pitch in with part of first instalment needed to qualify for rebate.

Farmers busy in fields planting paddy sapling
Farmers busy in fields planting paddy sapling

K Ram Kumar
Priya Nair

Mumbai, Dec. 27 Banks such as Union Bank of India and IDBI Bank have been taken by surprise at the ‘not so good’ response of large farmers to the one-time settlement scheme under the Government’s Agriculture Debt Waiver and Debt Relief Scheme, 2008.

Nearly 40 per cent of these banks’ eligible farmer-borrowers, who own over 5 acres of agricultural land, are believed to have not coughed up even the first instalment towards one time settlement in order to avail themselves of the 25 per cent rebate on their loan overdues.

Under the Debt relief scheme-2008, the government gives 25 per cent rebate on the overdue loan amount if farmers bring in the balance 75 per cent for one-time settlement.

Union Bank of India has moved the Finance Ministry to the effect that it is willing to make good a portion of the 75 per cent overdue loan amount so that the farmers become eligible to get a rebate on the balance 25 per cent from the Government.

Extended deadline

The Union Bank’s move to seek North Block’s permission comes as nearly 40 per cent of the bank’s farmer-customers who were eligible for debt relief had not come forward with the first instalment by the October 31 deadline.

“In fact, the first deadline to avail of debt relief, which was September 30, was extended by a month. September and October typically being busy season, farmers possibly deployed their surplus towards investment in farm activity instead of paying the first instalment towards one time settlement of their dues.

Another reason could be that farmers have shifted to other places,” said Mr K Laxman Rao, General Manager, Union Bank of India.

Hence, the bank has sought the finance ministry’s permission to pitch in, in deserving cases, with a portion of the farmers’ 75 per cent overdue loan amount in order to provide succour.

In the case of Union Bank, the total amount of debt waiver and debt relief is Rs 979 crore. The total amount is divided between debt waiver and debt relief in the ratio 3:1. The bank has already received reimbursement of Rs 300 crore from the Government on account of waiver.

A top official of IDBI, another bank which is facing similar problem, said that roughly 30-40 per cent of the eligible farmers from the ‘other’ category had not turned up to collect eligibility certificates, despite the fact that they would not be eligible for fresh loans unless they paid the first instalment.

The total amount of debt waiver and debt relief given by all banks in the country collectively is Rs 66,569 crore. Out of Rs 25,000 crore to be reimbursed to lending institutions in 2008-2009 as the first instalment, so far the Government has released Rs 15,000 crore.

More waivers?

In some parts of the country such as Gujarat, most of the farmers have paid the first instalments under the relief scheme. But in certain parts of the country, Uttar Pradesh, for instance, there seemed to be some unwillingness on part of farmers to pay the first instalment, said the general manager in charge of priority lending with a leading public sector bank.

“It seems that the UP government may also come out with a similar waiver scheme. So, perhaps the farmers are waiting for that,” said a senior official with a leading public sector bank.

Under the debt-relief scheme, in the case of marginal farmers (farmers – as owner or tenant or share cropper - cultivating agricultural land up to 2.5 acres) and small farmers (farmers – as owner or tenant or share cropper - cultivating agricultural land up to 5 acres), the entire ‘eligible’ amount has been waived. In the case of ‘other farmers’ (farmers – as owner or tenant or share cropper - cultivating agricultural land more than 5 acres), a one time settlement has been offered, whereby they have been given a rebate of 25 per cent of the ‘eligible’ amount subject to the condition that the balance 75 per cent is paid.

Related Stories:
‘Farmers did not fully understand scope of loan waiver scheme’
Debt waiver guidelines restrictive, says agri-rural bank federation
Ensure loan waiver for all eligible farmers, banks told

(This article was published in the Business Line print edition dated December 28, 2008)
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