India’s ambitious loan waiver scheme for small farmers has been extended by nearly 20%, to more than Rs 71,000 crore from the Rs 60,000 crore announced in the budget

Over 40 million indebted Indian farmers have begun to get some financial relief as the massive loan waiver scheme for small and marginal farmers officially came into effect on June 30.

The scheme has now been enlarged with the government announcing that it would waive farm loans to the extent of Rs 71,680 crore, nearly 20% more than the Rs 60,000 crore declared in the nation’s budget in February.

Instead of the earlier estimate of 30 million small farmers, the waiver will now extend to nearly 30.7 million. Also, the number of farmers who will have to reschedule most of their loans is now estimated at 6 million, down from an earlier estimate of 10 million. “The government is taking over the debt of our farmers and reimbursing the banks,” Finance Minister P Chidambaram said after a Cabinet meeting cleared the package on June 30.

The government has also identified 237 low-productivity districts where farmers will be eligible for a minimum loan relief of Rs 20,000 even if their landholdings are above two hectares.

All government banks will display lists of farmers who will have their loans written off. There is a one-month period during which farmers can appeal for their names to be included in the lists. They do not have to submit any documents and will receive a certificate from the bank with details of the loan waiver.

Under the scheme, small and marginal farmers with landholdings of less than two hectares can have their entire outstanding loans, till March 2007, waived. Farmers with holdings of over two hectares will be eligible for a one-time settlement rebate of 25% of their outstanding loans, subject to the condition that the remaining 75% will be paid in three instalments by June 30, 2009. No interest will be charged on the outstanding amount.

Chidambaram said all direct agricultural loans, including crop loans and investment credit for agriculture and allied activities made between March 1997 and March 2007 (which remain unpaid by February 2008) will be covered.

An estimated 55% of the package has been disbursed to borrowers from cooperative institutions; 35% to borrowers from commercial banks; and 10% to borrowers from regional rural banks (RRBs).

“Such a scheme is unprecedented in India,” said O P Bhatt, chairman and managing director of the country’s largest bank, State Bank of India (SBI). SBI has written off loans worth Rs 6,000 crore to 1.9 million small and marginal farmers while another 600,000 farmers have been granted relief worth Rs 1,500 crore.

Although the final figures are yet to come in, bankers believe that around Rs 46,000 crore in relief will be routed through cooperative banks and RRBs. “These farmers will be entitled to fresh loans, which they can seek simultaneously,” said Alok Misra, chairman and managing director of Oriental Bank of Commerce that has extended the benefit to 1.21 lakh farmers involving loans worth Rs 496.37 crore.

Source: The Hindu, July 1, 2008
              www.livemint.com, July 1, 2008