RBI hurdle may deprive 25 Lakhs drought-hit farmers of bank credit
Jun 29, 2016, 03.45 AM IST
Nagpur: As many as 25 lakh among the state's farmers, whom the state government had planned to bring under bank credit despite their earlier defaults, may not get the benefit thanks to RBI saying no to restructuring their loans. This year it was planned to ensure that at least 80% of farmers' population pegged at 1.37 crore should be granted crop loans through. Banks only offer fresh loans if the previous dues are cleared. It was seen that there were massive defaults in the period ranging from 2012 to 2014 which disqualified over 25 lakh farmers from getting bank loans. Typically such farmers then turn to private moneylenders for credit requirement.
Now RBI has turned down the state's proposal to revamp the loans to make them eligible for new ones. The state government had mooted a proposal to restructure the unpaid crop loans for years 2012-13 and 2013-14. Under the plan, the tenure of one year crop loan was to be extended to five with the state ready to pay half of the interest due. If approved, the restructuring could have led to regularization of accounts making the farmers eligible for a fresh loan. However, RBI did not approve this scheme for the years 2012 to 2014, said a source in state bureaucracy.
Restructuring is standard measure taken to ease the farmers' debt burden when a drought is declared by a state government. However, this is available only for the year when a drought is declared. For example, 2015-16 is declared drought year, there are standing instructions to restructure the loans and farmers can get fresh loans for the next year.
The relaxation for 2012 to 2014 was sought on the grounds that even as there was no drought officially, farmers had a tough time. There were patches in Vidarbha and Marathwada where the crop had failed leading to loan defaults.
When the RBI got the proposal, it said a permission cannot be given for old loans in the normal course and the matter needed to be examined. TOI had reported on June 13 that the state was awaiting a final reply from the RBI. TOI had sent an email to the RBI seeking its stance but it went unanswered. Now a state government source said there were clear indications that the permission would not be granted.
Farmers need loans each year to meet operational expenses for the season. As a large number of farmers do not have enough capital to start sowing operations, there is a huge dependency on loans in state like Maharashtra. With an aim to cover maximum number of farmers, the state government had set a target of covering at least 80% of peasants' population.
"RBI's stance will remove at least 25 lakh farmers out of the list as they are not eligible for getting bank loans. I have already written to the chief minister Devendra Fadnavis that they cannot be left like that and the union finance minister should be approached for a bailout package," said Kishor Tiwari, chairman of Vasantrao Naik Shetkari Swavalamban Mission, a state government agency. The government's announcement to cover 80% of the farmers had kindled hopes of many in Vidarbha and Marathwada, he said.
State wants to reset 2012-14 farm loans, RBI rule book says no
Jun 13, 2016, 03.03 AM IST
Nagpur: The state government announced in April that it would restructure farm loans for 2012-13 and 2013-14, but it has been waiting for Reserve Bank of India (RBI) nod since then. The apex bank has said revamping of four-year-old loans is not allowed according to current rules, and the matter will have to be looked into. The state government, however, wants to finish maximum disbursal's by June-end, for which it is hoping the RBI gives its approval at the earliest.
The state wants to revamp the loans so that more farmers are eligible to get fresh credit, and it can meet the target of bringing 80% of agriculturists under the bank loan net. Senior bureaucrats of secretary and chief secretary level have taken up the matter with RBI. There is a difference between revamp and loan waiver, as in the former loans are restructured while in the latter the government pays off the banks.
Reconstruction of loans is done in times of natural calamities like drought. Under this, the tenure of short-term crop loans is extended from one to five years. There are standing orders to revamp loans for the immediate preceding year in which a drought is declared. So, if the state government declares drought in 2015, the farmer will not only get a loan in 2016 for the current year but tenure of previous year's loans will be extended. The loans of 2015 have already been covered under the restructuring plan.
However, the state also wants older loans to be reset. It says there were crop failures in some patches. Recession in the cotton rates had also hit farmers' repayment facility. The state is insisting that these were not wilful defaults by farmers and their case needs to be considered. However, RBI says that the rule book does not allow it.
The RBI has not turned down the proposal immediately, but it had asked the state to come up with data like the number of loans and their type. The data has been provided, but the RBI has not reverted after that, say state government sources.
This is the first time in the recent past that the state has announced a revamp of older loans. Sources say RBI is worried that since these accounts are already non-performing assets (NPAs), it may be difficult for farmers to repay the old revamped loans as well as the fresh ones they get for the current year. The state, on the other hand, is ready to pay half of the interest for the 2012 to 2014 loans too, which were given when the Congress-NCP government was in power.
Kishore Tiwari, chief of Vasantrao Naik Shetkari Swavalamban Mission (VNSSM), said the move will cover some 28 lakh farmers having loans worth Rs36,000 crore. The RBI should take a sympathetic approach towards farmers, especially when the state government is ready to foot the interest on these loans, he said. Tiwari also asked the RBI to give its approval before June 31, otherwise farmers may resort to private moneylenders. "After the different loan waivers, this is the year when the highest defaults were seen," he said.
The announcement was made on April 28 and the RBI came up with the query on May 9. A meeting was held a fortnight later between senior bureaucrats and RBI management, and the decision is awaited, said Tiwari.
IN A NUTSHELL
Normally, in case of drought, loans of immediate preceding year are revamped
State wants to reset loans of 2012-14 also
RBI says case does not fit rule book, but still being considered
State argues these are not wilful defaults as crop failures hampered repayment
RBI has not taken a decision yet.