Banks seek crop loss reports to reschedule farm loans in Odisha

As per RBI norms, in case of short-term loans, principal along with interest payable in the year of natural calamity will be converted into term loan

After chief minister Naveen Patnaik announced the rescheduling of loans in the wake of rising incidents of farmer suicides in the state, banks are awaiting the official crop damage assessment report to reschedule the advances.

"The loans can be rescheduled only after getting the final report of cross loss from the revenue and disaster management department. The preparation of final crop damage report is a cumbersome process as it involves assessment from the block level", said a senior bank official.

After getting the report, the Reserve Bank of India (RBI) or the state level bankers committee (SLBC) will convene a meeting with the controlling heads of the banks before taking a call on the rescheduling of loans, he added.

RBI, in March 2015, had revisited the guidelines for relief measures by banks in areas affected by natural calamities after taking into account the different practices followed by the state governments. As per the RBI norms, in case of short term credit (crop loans), the principal amount of the loan as well as the interest due for repayment in the year of occurrence of natural calamity will be converted into term loan. The repayment period of restructured loans may go upto 10 years and a moratorium of one year can be considered.

Similarly, in case of long term agriculture loans, the existing term loan installments will be rescheduled keeping in view the repaying capacity of the borrowers and the nature of natural calamity.

T K Panda, managing director, Odisha State Co-operative Bank said, norms of loan rescheduling are in place and the credit can be rescheduled after a final report is prepared after the crop cutting season.

"The state government is implementing a drought package of Rs 1000 crore. The state government has already taken the decision to re-schedule agriculture loans and strong action will also be taken against unscrupulous money lenders", Patnaik has said recently.

As per the latest report of SLBC, Rs 21,945.74 crore of agriculture credit is outstanding with the banks as on June 30, 2015. The commercial banks have extended Rs 11,851.13 crore farm loans while the exposure of regional rural banks and co-operative banks to the sector is Rs 3,279.89 crore and Rs 6,814.72 crore as on June end this year. Bank officials said recovery rate of loans hovers around a measly 50 per cent in the agriculture sector.

The recent spate of suicides of debt-ridden farmers over crop loss in the past couple of months has given enough fodder to the opposition and farmers' organizations to target the BJD government's handling of drought situation in the state.

Kharif crops have been severely impacted in large parts of Odisha due to inadequate rainfall in July and August, 2015 and about 5.32 lakh hectares of cropped area has suffered damage to the extent of 33 per cent or more.

Lashing out at the state government, K V Singhdeo, president of state BJP unit said, "The number of suicides of debt ridden farmers collected from different media reports has surged to around 50, but the number is much more than that." The farmers are looking for waiver of loans, not rescheduling of loans. In addition, the government has failed in its commitment made in the election manifesto of providing loans at the rate of one per cent to the farmers, he added.

Singhdeo also questioned the basis of demand of Rs 3,500 crore special package from the Centre to meet the calamity.