FM asks banks to restructure agriculture loans

FM asks banks to restructure agriculture loans

Finance Minister P Chidambaram on Saturday asked public sector banks to reschedule agricultural loans and convert them into long term credit in order to help farmers tide over huge crop losses incurred due to deficient monsoon and drought.

At a meeting with public sector bank heads, his coming back as the finance minister early this month, Chidamabaram also asked them to keep EMIs low to stimulate purchases, disburse education loans for eligible students, double the number of ATMs and enable them to receive cash as well.

Allaying banks’ apprehension that lending more credit to agriculture may increase their bad loans, the finance minister said that bad loans or non-performing assets of the banks were not alarming at the moment. He was sure that as the economy picked up, bad loans would come down. “All bank chairmen have told me that they are fully geared to meet the requirement of farmers in the drought-affected areas. Short-term loans are being rescheduled as medium-term loans, new loans will be given for replanting for an alternative crop,” Chidambaram said.

Some of the financial sector lenders, including Indian Bank, have already started  rescheduling and restructuring their farm sector loans. Such loans are not being treated as NPAs and their repayment is now being shifted to the next crop cycle.

Besides, NABARD is also taking steps to prepare a rescheduling programme on crop loan. The farmers of drought-hit areas in parts of Karnataka, Maharashtra, Rajasthan, Gujarat and Haryana are expected to benefit from the loan re-scheduling.

NABARD is also considering the provision of a medium-term loan for fodder purchase in drought-hit parts of the country. The government’s efforts to increase credit disbursal to the farm sector is expected to top Rs 6 lakh crore this year against the target of Rs 5.75 lakh crore.

To give farmers more financial freedom and easily avail credit, the finance minister announced conversion of over 11 crore kisan credit cards into debit-cum-ATM cards.

Nearly 10 crore farmers hold kisan credit cards in the country at present. The card, which has been instrumental in faster delivery of credit to farmers will now be made more friendly and farmers would be albe to use it at various points-of-sale. Asking bankers to ensure that the number of ATMs double from 63,000, Chidamabaram said the challenge ahead was to ensure that the Rs 11 lakh crore, that people kept in cash, comes into the system.

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