Farm credit push lined up

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The government is planning an array of measures, including the rollover of Rs 5,000 crore worth of bad and doubtful loans to farmers, to push up banks' lending to the agricultural sector by 30 per cent in the current fiscal.

According to senior government officials, a proposal to extend fresh loans to farmers who had defaulted in the past is also being considered by the finance ministry.

"While there is a corporate debt restructuring mechanism for companies that have defaulted, farmers have little choice. The rollover will make the defaulters eligible for fresh loans," an official said.

Chairmen of state-owned banks said according to plans being drawn up by the finance ministry, the banks would also be asked to extend loans to tenant farmers and those who do not possess titles to agricultural tracts to wean them away from money lenders who charge exorbitant interest rates, often in excess of 35 per cent a year.

Bankers said farmers who had defaulted on loans accounted for a mere 8-10 per cent of the NPAs of banks amounting to nearly Rs 60,000 crore.

On May 14, food credit was estimated at Rs 42,232 crore, 13 per cent lower than the corresponding period last year.

The United Progressive Alliance had, in its common minimum programme, promised that the government will take steps to ensure that dues to all farmers, including sugarcane farmers, will be cleared at the earliest.

Finance ministry officials said that the proposal had not been finalised so far, but the government was keen on announcing measures to increase the flow of credit to the rural sector, particularly the farming community. An announcement of a scheme to step up agricultural credit is expected in the forthcoming Union Budget.

Officials said while one option was to ask the panchayats or local authorities to certify that the farmer concerned was in possession of the land for which a loan was being sought, the other option was for banks to simply extend credit without a collateral.

"The credit policy has also said that loans up to Rs 50,000 do not require a collateral. In the case of farmers, the demand for capital is much less and if there are problems with recovery we will work out a scheme for that," an official said.

Bankers said that they can also issue kisan credit cards to farmers and incentivise them by offering higher credit if the outstanding amount was settled.

"This way, we can get the farmer back into the credit system and increase assistance to them besides reducing e some of our NPAs," a banker said.