RBI asks banks go ahead with relief measures

MUMBAI: Debt ridden farmers in six districts of Vidarbha have been granted relief on loan repayments by Reserve Bank of India on Monday. The central bank has asked banks to waive interest and reschedule repayments of outstanding loans as on July 1 and also advance an additional Rs 1,275 crore to the region.

The move comes after failed cotton crops triggered a spate of suicides by indebted farmers drawing the centre’s attention to the region. This culminated in a visit by the Prime Minister this month.

In a communication to all banks operating in the region, it said that the debt relief measures were announced by the Prime Minister in respect of agriculture credit. The Package is applicable to the districts of Amravati, Wardha, Yavatmal, Akola, Washim and Buldhana.

In terms of the package the entire interest on overdue loans as on July 1 ‘06 will be waived and all farmers will have no past interest burden as on that date. Not only will it reduce their interest burden, it will also make them immediately eligible for fresh loans.

The old loans which have not been repaid will be rescheduled over a period of 3-5 years with a one-year moratorium. The Prime Minister has asked banks to lend an additional Rs 1,275 crore in these six districts. Banks will not lose money as the burden of waiver of overdue interest will be shared equally by the state and central governments. The total amount of credit of Rs 1,275 crore envisaged to be released by the banks will be allocated by Bank of Maharashtra (as SLBC Convenor ) among the banks functioning in the districts.

Announcing the package on July 1, Prime Minister Manmohan Singh had said that the government would also set up an expert group in the next few days to look into the problem of rural indebtedness. The group is expected to submit its report within three months, he said, adding that based on the recommendations, the government will take effective measures to deal with problems of farming community.