Friday, June 13, 2008

Agricultural debt waiver and debt relief scheme

by Jo Black

The Indian federal government gave its approval for the Guidelines for the implementation of the Farmers Debt Waiver and Debt Relief Scheme, 2008.

Briefing the media persons the Finance Minister P. Chidambaram said that the Scheme will 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 Scheme shall come into force with immediate effect.

‘Marginal Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land up to 1 hectare (2.5 acres).

‘Small Farmers’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 1 hectare and up to 2 hectares (5 acres).

‘Other Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 2 hectares (more than 5 acres).

The amount eligible for debt waiver or debt relief, as the case may be, shall comprise of:

(a) In the case of a short-term production loan, the amount of such loan (together with applicable interest):

(i) Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;

(ii) Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and

(iii) Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities, whether overdue or not.

In the case of an investment loan, the instalments of such loan that are over due (together with applicable interest on such instalments) if the loan was:

(i) Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;

(ii) Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and

(iii) Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities.

The following loans shall not be included in the eligible amount:

(i) Advances against pledge or hypothecation of agricultural produce other than standing crop; and

(ii) Agricultural finance to corporate, partnership firms, societies other than cooperative credit institutions and any similar institution.

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