Credit crunch may hold up debt waiver
The UPA government’s much-hyped farm debt waiver seems to be too little, too late for farmers in the state.
By ET Bureau |
MUMBAI: The UPA government���s much-hyped farm debt waiver seems to be too little, too late for farmers in the state. The new kharif season has set in but a large number of farmers are likely be deprived of fresh credit, thanks to the ���credit crunch��� dogging banks.
Commercial banks, and in particular co-operative banks which cater to about 80% of the farm credit sector, have conveyed their inability to extend fresh credit for the kharif season citing liquidity crunch, state government sources and Nabard officials told ET. Banks have cited inadequate liquidity due to two reasons, sources said.
First, only about 10% of the total agriculture credit(Rs 16,000 crore) extended in 2007-08 has been recovered by co-operative banks. The nationalised banks, which have a marginal presence in the agricultural credit sector, have reported slightly better recovery between 10% and 30%, sources said. The second reason why banks are facing liquidity crunch is because the 50% reimbursement from the Centre would come in only by September-end.
���RBI expects Nabard and banks to complete audit of all accounts and final settlement of all issues in another couple of months. It���s a very cumbersome process and by the time it gets over the Kharif season would be gone,��� said an official. Banks have expressed their willingness to lend to farmers before this process is completed, sources said. ���Banks are ready to lend but they don���t have the liquidity. Nabard has agreed to request the Centre to extend advance liquidity,��� said a Nabard official.
The state government has estimated that farmers in the state would require about Rs 9,500 crore of agriculture credit in the 2008-09 Kharif and Rabi seasons. But representatives of co-operative and nationalised banks informed Nabard, which is implementing the farm debt waiver package as per RBI guidelines, at a meeting on Friday here that they did not have enough liquidity to release fresh credit.
The state government, which clearly sees a crisis unfolding in regions like Vidarbha and Marathwada over farmers being denied fresh credit, has pointed out to Nabard that a close scrutiny of the waiver package has revealed a drop in the earlier projection about the number of beneficiaries.
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���The drop in the number of eligible farmers is more in Vidarbha and Marathwada. This means that the very purpose of the debt-waiver to bring maximum farmers in the formal credit coverage is getting defeated,��� a government spokesperson said. On the state government���s suggestion, Nabard has agreed to request the government of India to release advance liquidity to the banks. The banks would later on adjust this amount against the reimbursement of dues on account of debt-waiver to be paid by the government, sources said. The Centre has said that 50% of the debt waiver burden and one time settlement (OTS) scheme would be reimbursed to banks by the end-September this year.
CM Vilasrao Deshmukh, who chaired the meeting, asked Nabard to ensure maximum number of farmers benefited from the waiver and OTS. ���Banks have told Nabard that the process to update accounts held by farmers is almost complete and lists of farmers with updated accounts will be displayed on June 30. On the same day, farmers will be issued no dues certificates or updated account statements in case of OTS beneficiaries,��� said an official who attended the meeting.
The official, however, added that the real problem would crop up when a large number of farmers would be denied fresh credit even after being declared eligible for credit.
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���The most positive impact of debt waiver will not be seen in how much outstanding farm loan gets waived off or rescheduled. It has to be evaluated in the number of farmers getting eligible for fresh credit. But that depends on liquidity available with the banks and therein lies the problem,��� pointed out the official.Download
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