No standoff over crop loan waiver

By M. R. Venkatesh

CHENNAI, JUNE 28. The major concession announced by the AIADMK Government to farmers vis-a-vis their crop loans seems to be a case of `one scheme with two names'.

Though the just-issued G.O. for implementing the scheme has raised some concerns, there is no stand-off between the Government and central banking authorities. On the contrary, Tamil Nadu's decision is in tune with the spirit of the on-going banking sector reforms.

What the farmers see as a ``waiver'' of interest and penal interest on their short-term crop loans due for repayment by June 30, 2000 (provided they pay up the principal), is from the authorities point of view a ``bonus or incentive scheme''.

The Government has estimated a total relief of about Rs. 310 crores, which is contingent on farmers paying up their dues. Following appeals, the Chief Minister, Ms. Jayalalithaa, has extended the date for repayment of the loans upto September 30, 2001.

The farmers could also now pay the overdues as on June 30, 2000, and whatever fell due after that date in three instalments, by July, August and September this year. The modifications have been incorporated in the GO.

Dispelling impressions that certain aspects in the GO needed clarification, sources pointed out that the scheme announced by Ms. Jayalalithaa was confined to the short-term loans farmers had taken from primary agriculture cooperative banks and district central cooperative banks.

But the demand from certain quarters that interest and penal interest be `waived' even on loans which fell overdue after June 30, 2000, was in effect asking for extending the concession to long-term agricultural loans also, the sources pointed out. This was not on the Government's agenda.

Pointing out that calling the scheme a `waiver' was technically incorrect, as the Government would fully provide for the interest and penal interest payable to the cooperative banks in the State budget, the sources said they would have some idea of the extent of allocation to be made in August, after farmers paid their first instalment in July.

Significantly, senior Government officials, after Ms. Jayalalithaa assumed office, met top officials of the National Bank for Agriculture and Rural Development at its Mumbai headquarters, before announcing this scheme.

During the meeting, the NABARD officials conveyed the general position that both the Reserve Bank and the NABARD did not favour ``loan waiver'', as it ``vitiated the recovery climate'' and ``put a premium on defaulters''.

The basic idea was that in such ``incentive schemes for farmers, the cooperative banks should not be involved'', as otherwise the health of the banks and their depositors' interests would be at stake, the sources explained.

In Tamil Nadu, the NABARD's refinance exposure for short-term crop loans in 2000-01 was to the tune of Rs. 321 crores and the central bank has not faced any `default' in repayment by the apex cooperative banks so far in any credit segment.

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