RBI to reschedule farm loans soon: AP finance minister

Farmers will be denied fresh credit if their existing loans remain categorised as the overdues

The Andhra Pradesh government has said it was expecting an official communication from the Reserve Bank of India (RBI) in a day or two on its request for rescheduling the short-term agriculture loans.

“The RBI has asked for some more information regarding the borrowers. We are expecting the banking regulator’s nod for the farm loan reschedulement very soon,”  finance minister Yanamala Ramakrishnudu told Business Standard on Tuesday.

Chief minister N Chandrababu Naidu today reportedly spoke with RBI Governor Raghuram Rajan before closeting with his ministerial colleagues, including Ramakrishnudu and agriculture minister P Pulla Rao, to discuss the final points.

If the government’s prediction proves right, the timing of permission for recast would still be relevant to the farmers besides being a big relief to the ruling party, which sees this as an immediate substitute for loan waiver.

Both AP and Telangana began receiving rains only in the last couple of days, almost one month after the monsoon entered the region. This, in turn, delayed agriculture operations and also demand for fresh farm credit.

“Though kharif operations usually start in June, the demand for credit picks up in July but it will peak in the month of August. Almost half of kharif loans are taken in August,” said a banker.

Farmers will be denied fresh credit if their existing loans remain categorised as overdues and this would also put pressure on the government as it would not be able to save them from that situation.

“Loan reschedulement will serve the very purpose of debt waiver that we had promised to our farmers. All that we wanted was to remove the debt burden off the farmers’ shoulders. That is being achieved now,” Ramakrishnudu said.

On how they would repay the rescheduled loans, he said they would come out with a plan based on the RBI decision.

According to one optimistic scenario, the size of loan installment comes down if the RBI allows a seven-year repayment period in addition to a one-year moratorium on repayment as requested by the AP government. In such a case, the amount of money required to be allocated each year for the debt waiver would be within the manageable levels.

However, some officials engaged in the loan waiver exercise are not willing to share this optimism. “Even if the government sticks to a waiver of Rs 1.5 lakh loan per family, it will require Rs 35,000 crore, which would be sufficient to build a new capital city. And the budget hardly supports that kind of a spending on a single programme,” a senior government official said on condition of anonymity.

The government had still not indicated to the expert committee as to how much money it was willing to spend on this programme, he said.

According to reports, the two governments are also considering options like raising money through sale of government-owned lands. AP is also considering sale of red sanders seized from smugglers as one of the ways to raise resources. An official, however, said red sanders would fetch no more than Rs 200-300 crore as the Centre had given permission to sell 4,000 tonne at a time.