One-time loan settlement will ease farmer woes
On the basis of an interim report submitted by a working group constituted by the RBI under the chairmanship of SS Joshi, the central bank has proposed the OTS scheme.
By TNN |
MUMBAI: This may well be the balm that Vidarbha’s distressed farmers have been desperately hoping for. RBI on Tuesday sought to address the long-pending issue of a one-time settlement (OTS) of agri-debts. On the basis of an interim report submitted by a working group constituted by the RBI under the chairmanship of SS Joshi, the central bank has proposed the OTS scheme.
The proposal could not have come at a more appropriate time from Maharashtra’s point of view, as hundreds of debt-ridden farmers have committed suicide in the state owing to their inability to repay bank loans.
The RBI has proposed that “banks, with approval of their boards, may formulate a transparent policy for providing OTS facility to farmers whose accounts have been rescheduled/restructured due to natural calamities as well as also those who have defaulted on account of circumstances beyond their control”.
The working group had a mandate to suggest measures for assisting beleaguered farmers, including provision of financial counseling services and introduction of a specific credit guarantee scheme, under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. The group submitted its interim report in October only.
For farmers, this could mean respite from the debt burden since the RBI’s policy promises to settle their prolonged debt by adjusting the principal portion, while Prime Minister Manmohan Singh’s special package, announced this July, has waived interest on outstanding loans up to July 1, ’06.
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The state, in particular Vidarbha, has seen over 1,000 farmers taking the extreme step of ending their lives due to a piling debt burden. This will enable the co-operative banks to offer OTS to farmers by waiving, restructuring or settling their dues, a state co-operative ministry official explained. The regulator has also sought to address another contentious issue of money-lending which is one of the root causes of farmer suicides. The RBI has proposed to co-opt money-lenders as special invitees from the state governments on a technical group constituted by the regulator under SC Gupta to review the efficacy of existing legislative framework governing money-lending in different states.
This would lead to a wider representation, the regulator has said. “We welcome the RBI’s initiative. There has been a long-pending demand to offer OTS to Vidarbha’s farmers. Let’s now hope that this will halt suicides,” Maharashtra chief minister Vilasrao Deshmukh said.
Particularly, for Mr Deshmukh — who completes two years of his chief ministership — the RBI decision comes as a major reprieve since his government has been facing severe flak for its failure to stop suicides. In the recent past, the cash-strapped Maharashtra government and a number of NGOs have pointed out that the OTS could be the only way to liberate farmers from the vicious debt burden.
The Sharad Joshi-led Shetkari Sanghatana and state BJP president Nitin Gadkari were at the forefront demanding OTS for Vidarbha farmers. Mr Gadkari, who himself comes from the Vidarbha region, has even sought an appointment with the President of India on the suicide issue. “In many cases, the amounts repaid by farmers are much more than the principal amount. But they are caught in a debt trap. We have OTS for the industry, why not then for farmers?” Mr Gadkari has asked the Centre.
Many critics had pointed out a futility of Rs 3,750-crore package announced by the Prime Minister since it was silent on the OTS. The package included a Rs 712-crore interest waiver and Rs 1,300-crore for loan restructuring. The balance amount of the package was for long-term measures such as irrigation and allied farming.
However, a major portion of the amount has been used to clean up the lending banks’ books rather than help farmers. “Now, the RBI policy removes this lacuna,” a co-operative ministry official said.
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