The government has asked the Reserve Bank of India to issue instructions to commercial banks to reschedule their loans to people affected by the drought.
The General Insurance Corporation has also been asked to extend the last date for acceptance of insurance proposals by 15 days for farmers in drought-hit areas. Farmers, who have not taken any bank loans and have gone in for late sowing due to delayed rainfall, would also be able to get their crops insured in the extended period.
This was stated by agriculture minister Ajit Singh in the meeting of the state co-operative ministers convened here today to review the reforms in the co-operative sector.
Describing the drought situation in the country as widespread, Singh said adequate measures would be taken.
He said under the RBI guidelines, the commercial banks would convert or reschedule loans by converting the principal and interest on short-term loans due this year to term loans of three to five years. The banks will also defer recovery of the converted loans.
Besides, the instalment of principal and interest in respect of short-term loans due to be paid by the farmers would be rescheduled for three years. This term could be extended further.
He said the banks would provide fresh loans to farmers depending on the extend of the crop loss.
There would be no penal interest on individual agricultural loans of up to Rs 25,000 borrowed by the farmers, during the drought period. Banks will not compound interest on the converted or rescheduled dues.
The minister said that the National Bank of Agriculture and Rural Development (Nabard) had advised state co-operative banks and regional rural banks to provide relief measures in the drought-affected areas, including additional loans and enhanced loans to farmers to offset the loss of expenditure incurred by the farmers. They should also provide loans for purposes like purchase of fodder, deepening of wells and installation of tubewells and borewells.
