Govt extends agri debt relief scheme

The government has extended the debt relief scheme for farmers with land holdings in excess of 5 acres by six months till December. It has also given banks the discretion to make payments out of provisions set aside for such loans in case the farmer is unable to repay three-fourth of the loan amount as stipulated by the scheme, according to a Reserve Bank of India circular on Monday. The remaining 25% of the loan will continue to be provided by government under the compromise package to banks. According to MV Nair, chairman, Indian Banks’ Association, and chairman, Union Bank of India, the move will enable banks to speedily settle farm loans and reduce non-performing assets from bank balance sheets. The one-time settlement scheme was part of the FY09 budget announcement, which recommended a complete waiver of agri loans taken by small and marginal farmers, with land holdings of up to 5 acres and 2.5 acres, respectively, and partial relief to ‘other’ farmers. The debt waiver and relief scheme was eligible on short-term and long-term agri loans disbursed up to March 31, 2007, and overdue as on December 31, 2007, and which remained unpaid till February 29, 2008. Banks will also not charge any interest on the eligible amount (75%) from February 29, 2008, to June 30, 2009, (the earlier date of settlement). However, banks can charge a normal rate of interest on the 75% from July 01, 2009, up to the revised date of settlement on the unpaid amount. The loans eligible for debt waiver and relief were short-term crop loans (from six to eighteen months) and for term loans (investment credit) for longer duration.