Loan waiver has bailout package for debt-ridden rural banks

According to the bailout package, the government has plans to take over troubled loans, which means, public money would be used to tackle the NPA mess

Written by Sandeep Ashar | Mumbai | Updated: June 29, 2017 3:10 am

The Maharashtra government’s Rs 34,022 crore farm loan waiver also has a bailout component for debt-burdened rural credit institutions. The proposal is to infuse taxpayers’ money to take over the loans that have turned bad over the years and are accumulating as non-performing assets (NPAs).

While the Chief Minister’s loan waiver is for crop loans and medium-term loans availed by farmers between April 1, 2012 and June 30, 2016, senior government sources said that such loans that had turned bad prior to the 2012 date and have since been restructured have been included as well.

According to the bailout package, the government has plans to take over these troubled loans, which means public money would be used to tackle the NPA mess.

The rural banks, especially state-run banks and banking cooperatives, are sitting on a huge pile of stressed assets in the form of bad or restructured agriculture loans, confirmed sources. A senior government source said that the burden could be to the tune of Rs 4,000 crore, and added that the burden was much more in the case of corporate loans.

While deliberations over the bailout have been held with bankers, the Devendra Fadnavis government has approached the Reserve Bank of India for permission to take over the bad loans.

“The banking sector regulator’s prior permission will be required for taking over the bad loans,” an official said.

Even as the government resolution regarding the loan waiver was declared on Wednesday, senior officials said that the implementation would take some more time.

“Our immediate priority is to restore the line of credit for needy farmers in time for the kharif sowing season,” said an official.

The bankers have conveyed that this would involve the government taking over the outstanding loan accounts of all eligible farmers within the Rs 1.5 lakh maximum waiver cap.

“Advanced talks are ongoing with bankers to enable this. Simultaneously, the government and the banks have initiatedthe process of identification of eligible farmers and the outstanding loan amount due in each case.

Several discrepancies, including bogus claimants, had come to light when the last farm loan was implemented in the state in 2009, which had also become a political embarrassment for the then Congress, Nationalist Congress Party government.

In a bid to avoid a repeat, the BJP government has decided to seed beneficiary farmers’ Aadhaar details with his outstanding loan account/s. “The banks have informed that such data was already seeded in 75 per cent cases.

A uniform digital interface would be evolved at the government level for sharing of this information. We are hoping that this would help curb instances of multiple or bogus claimants,” a senior official said.

Mandatory performance and social audit is another step being planned by the government to avoid such leakages. But government sources admitted that it is still grappling with issues related to the implementation of the loan waiver.

It is yet to decide the approach it would take in cases where a single beneficiary has defaulted on loans in multiple banks.

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