RRBs to get farm debt waiver funds from govt by mid-2010

After having seen the impact of the Rs 60,000-crore farm debt waiver in the general elections, the government has planned to further spur the supply of money in rural areas by reimbursing the loan relief amount on a priority basis to regional rural banks (RRBs) and co-operative banks.

To ensure that these banks have adequate funds to lend to farmers, the finance ministry plans to reimburse them the entire amount by 2010 — exactly one year before commercial banks.

“Our priority is to first reimburse the RRBs and co-operative banks under the agriculture debt waiver and debt relief scheme announced in the Budget last year for 360,000 small and marginal farmers of the country. They have already received over 70 per cent of the total waived-off amount,” an official in the finance ministry, who did not want to be identified, told Business Standard. The government is planning to reimburse the entire amount to RRBs and co-operative banks by mid-2010. In 2008-09, it had released Rs 25,000 crore, of which Rs 17,500 crore was for RRBs and co-operative banks. The rest went to scheduled commercial banks. In the current financial year, out of the Rs 15,000 crore released, Rs 10,500 crore was for these banks and only Rs 4,500 went to scheduled commercial banks. The official said RRBs and co-operative banks were a priority because they are not as flush with funds as the commercial banks. The government will release Rs 12,000 crore in 2010-11 in the third installment under the scheme, of which about Rs 10,000 crore will go to RRBs and co-operative banks. The last and final installment of Rs 8,314 crore will be used to reimburse commercial banks. The government is also giving an interest of Rs 3,872 crore on the balance installments of the reimbursable claims of lending institutions.

The government has also recapitalised these banks so that farmers who have benefited from the scheme do not face any problems while approaching banks for fresh loans. The debt waiver scheme covered all agricultural loans disbursed by banks from April 1997 to March 2007, which became overdue in December 2007 and remained unpaid until February 2008.

For marginal farmers who own up to 1 hectare as well as for small farmers (1-2 hectare), there was a complete waiver of all such dues while, for other farmers, there was a one-time settlement scheme.