Govt asks banks to launch debt swaps for farmers
Before the country goes into the next Lok Sabha elections, the UPA government has launched yet another pro-farmer programme.
KOLKATA: Before the country goes into the next Lok Sabha elections, the UPA government has launched yet another pro-farmer programme. The finance ministry has directed banks to offer a debt-swap facility to farmers who are outside the banking ambit, but indebted to unorganised money lenders. The ministry has urged banks to earmark a slice of their fresh agricultural lending for the debt-swap scheme.
According to finance ministry officials, a minimum of 3% of banks agricultural loan target of Rs 2.80 lakh crore in 2008-09 should be used for this programme. The ministry has spelt this out at a recent meeting with the country���s top bankers. This would enable farmers to liquidate their debt to money lenders and then get included in the mainstream banking space.
The move is also slated to help the government counter the criticism that the Rs 60,000-crore loan waiver scheme proposed in the latest budget would merely benefit poor farmers who���ve taken loans from institutional sources.
Banks have been told to offer soft loans to farmers with no access to bank loans so that they can repay their high-cost debt to money lenders.
According to banking sources, banks will offer loans at interest rates ranging from 9% to 10%, while money lenders used to charge exorbitantly at around 36%. Following the ministry diktat, banks like Allahabad Bank and UCO Bank have launched specific products. Allahabad Bank plans to market the scheme in nine drought-prone districts in Uttar Pradesh and Madhya Pradesh.
Allahabad Bank chairman and managing director AC Mahajan said that 3-5% of the bank���s fresh agricultural lending may be used for the debt-swap scheme. UCO Bank, on the other hand, plans to allocate 3% of agri-credit to this end. A couple of banks in the South have been offering debt swaps to farmers in Andhra Pradesh for the past 3-4 months.
The government now wants all public sector banks to launch this scheme, chairman of a public sector bank who attended the meeting with ministry officials said. The finance ministry has told banks to prepare an action plan for the debt-swap programme. Nevertheless, bankers said that ministry officials kept mum on the issue of an original loan waiver scheme. So far, there has been no clear-cut message from ministry officials on loan waiver, a top banker in the South told ET on conditions of anonymity.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
