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Fresh clarification on farm loan waiver, but deadline stays

Fresh clarification on farm loan waiver, but deadline stays
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First Published: Wed, Jun 25 2008. 01 15 AM IST

Updated: Wed, Jun 25 2008. 07 59 AM IST
New Delhi/Bharatpur: With less than a week to go for its 30 June deadline for implementing the farm loan waiver scheme, the government has extended the populist write-off to cover loans for poultry, dairy and horticulture.
By 30 June, all banks are expected to display a list of beneficiaries of the waiver and while most bankers say that they will meet this deadline, which the finance ministry believes is inviolable, doing so has just become more difficult. Bankers say these late changes will make it tough for them to identify beneficiaries and work out the loan amounts that will be written off. The changes and the need to meet the deadline could also increase the chances of mistakes, they point out.
The government has all along maintained as sacrosanct the 30 June deadline to roll out the scheme that will see Rs71,680 crore of farm loans being written off. However, it hasn’t helped that cause by issuing 34 clarifications last week (reported in 20 June edition of Mint).
According to one banker, the clarifications could lead to mistakes being introduced, given that banks are on a tight deadline (Photo by: AP)
Instructions to banks have been changed three times since May, according to officials working in separate banks in Robertsganj, a town in Uttar Pradesh.
“The government has inserted at least three changes in the past few months, creating problems for us to implement the order,” said one official, who did not wish to be identified. “When we were ready with our first list, we received a fresh order to rework it again.”
In the third week of last month, bankers were instructed that the cut-off date for the waiver would be December 2007. Within weeks, a fresh order arrived saying that the date had to be extended to February. When banks pointed out that this didn’t fit their system of quarterly reconciliations, a fresh order was issued asking them to bear the costs for all loans for the month of March.
A banker from a public sector bank said Tuesday’s clarification extended the benefits of the write-off to poultry, dairy and horticultural loans.
Consequently, it requires bankers to revisit calculations and delay announcing the list of beneficiaries.
“They (government) could have simplified the process, but everybody’s lobbying,” the banker said, referring to last- minute benefits handed out to poultry, dairy and horticultural farmers.
According to another banker in a public sector bank in Rajasthan, clarifications issued in the last few days may have increased the chances of a mistake being introduced in the final list of beneficiaries, given that bankers are on a tight deadline.
Commercial banks, regional rural banks and cooperative banks will, between them, publish a list of at least 40 million farmers who qualify for the debt relief programme according to the package promised by the government in this year’s budget. The write-off is expected to clean up the books of banks and provide a fillip to the agriculture sector, but its critics have also called it a populist ploy aimed at elections this year and next.
According to bankers in different parts of the country, the manner in which banks have been asked to implement the waiver package indicates limited understanding of the reality in rural branches.
An executive at a public sector bank’s branch in rural Madhya Pradesh said banks have had less than a month to identify beneficiaries. This has meant that branches have had to suspend regular work, leading to a backlog. This has affected the credit delivery system, the banker said, especially at a time when the new crop cycle has begun in most parts of the country and farmers are seeking fresh loans.
One of the clarifications issued last week asked bankers to check the records of self-help groups, or SHGs, to make sure agricultural loans issued to them for “on lending” or lending to the eventual beneficiaries were being used for the stated purpose.
The SHG clarification aims to make sure debt relief is extended to farmers who qualify for it according to the details of the scheme, but it shows little understanding of execution problems in rural areas, a banker had said last week.
sanjiv.s@livemint.com Maitreyee Handique contributed to this story.
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First Published: Wed, Jun 25 2008. 01 15 AM IST