Loan-waiver 08-09 hampered farm credit

For the first time in the last four years,the banks are likely to miss the target set for agriculture credit disbursal to the farmers.

For the first time in the last four years,the banks are likely to miss the target set for agriculture credit disbursal to the farmers. Against the budgetary target of Rs 2,80,000 crore for credit disbursal to the agriculture sector in fiscal 2008-09,the banks have lent Rs 2,65,000 crore Rs 15,000 crore less. The reason: governments loan-waiver programme of Rs 70,000 crore announced in FY2009.

According to the feedback from the implementation agencies,a number of farmers did not get loans from banks as they had unpaid dues on past loans. This is understandable indeed. The twist in the tale came when a number of farmers did not clear their debt hoping that the government would waive their debts at some later stage even though their accounts did not typically qualify for such a waiver under the debtwaiver scheme, a senior government official associated with the process told The Indian Express.

Last year,the banks had disbursed Rs 2,25,348 crore against the target of Rs 2,25,000 crore but this year the trend has reversed.

The scheme,announced last fiscal,was designed to cover direct agricultural loans extended to marginal and small farmers and other farmers by scheduled commercial banks,regional rural banks,cooperative credit institutions including urban cooperative banks and local area banks. The debt waiver and relief package were applicable to farmers with holdings up to two hectares.

As per the scheme,the waiver was to extend on loans due up to December 31,2007 and remaining unpaid until February 29,2008.

The total debt waiver for fiscal 2008-09 stood at Rs 65,300 crore,benefiting 3.6 crore farmers. Another Rs 15,000 crore was allocated to the scheme in the interim budget announced in February 2009. The amount will be disbursed to banks and financial institutions during the current financial year.

It is learnt that the finance ministry is considering the release of Rs 5,000 crore to lending institutions as part of the farm debt waiver plan in 2009-2010. This is being done to avoid escalation in interest payment.

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This would reduce the outstanding principal,which would be further reduced when the remaining Rs 10,000 crore slated for this fiscal is also released.