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In a late but swift move, the Telangana government has decided to release Rs 4,250 crore to banks with immediate effect after striking a deal with the bankers, who agreed to renew all the loans eligible under the crop loan waiver scheme.
The amount represents 25 per cent of the total Rs 17,000 crore loan liability the government would pay to the banks on behalf of the borrowers in similar installments during the course of the next four years.
The move also comes in handy for banks as they would be able to keep Rs 17,000 crore in loan outstanding away from becoming non performing asset (NPA) and book interest on the same in the second quarter ending September 30.
To achieve the desired outcome, the bankers will have to complete the process of renewing the loan accounts of about 3.6 million borrowers in the next eight days, at least 200-300 loan accounts a day by each branch, the government officials said. The amount being released towards the loan waiver is equal to a month's total revenue (including the central devolution) that comes to the state exchequer.
"This shows our commitment to the people of Telangana towards fulfiling the electoral promises how difficult they may be," finance minister Etela Rajender said on Monday.
Announcing the decision, agriculture minister P Srinivas Reddy said the banks had also agreed to enhance the scale of finance for these loan accounts as they grant fresh loans to farmers. "We have taken this swift decision as the farmers will not be eligible for fresh kharif loans after September. They would also lose the facility of crop insurance if their loans are not renewed before September 30," Reddy said.
This "simple looking loan waiver formula" was termed as a deal entered between the government and the bankers.
"The Reserve Bank of India (RBI) had stated it had no issues if the government directly pays the money to the banks under the loan waiver scheme. That is what we are doing now and the RBI has no role in this," V Nagi Reddy, state principal finance secretary told Business Standard.
The list of eligible borrowers was prepared by the banks in an elaborate exercise in accordance with a set of transparent guidelines issued by the finance department for identifying the former. Chief minister K Chandrasekhar Rao had promised to waive crop loans up to a limit of Rs 1 lakh per family in the Assembly elections.
"In normal times, the banks mostly used to roll-over the farm loans (ever greening) after collecting the interest part from the borrowers every year. Now, they get more than that. They have not only got fresh liquidity in their hands but also enjoy the guarantee that the government is giving for the repayment of the entire loan liability that qualifies under the loan waiver scheme," said an official of the state agriculture department.
