Govt may find farm loan waiver package stiffer

The farm loan waiver scheme may prove costlier to the government as the Regional Rural Banks (RRBs) - the banks that had granted loans to the farmers- are now seeking interest on their reimbursement against their loans due to long delayed from the government to compensate them on time.

The Finance Secretary (FS) Arun Ramanathan in this regard informed to media after concluding the meeting of Finance Minister with Chairpersons of RRBs to review the role of RRBs in the agricultural sectors and to ‘how to enhance their role in the interest of farmers?’

Informing to media Arun said that Finance Minister P Chidambaram was considering to pay interest on reimbursement of Rs. 72,000-crore loan written off by the public sector banks, as government could not grant the first installment of Rs. 9,000-crore to RRBs on time.

“The government is examining the possibility of interest payment and no decisions have yet been taken,” Ramanathan said.

The RRBs on the other hand have informed the government about liquidity crunch facing by the RRBs as these have not got any reimbursement against their disbursed loans and because of this, banks are not be able to distribute fresh loans to the farmers.

‘Banks are seeking the interest from March 01, 2008 and so for have not quoted the interest rate of their reimbursement,’ as per the FS, while government has not revealed the time barrier from that it is considering to pay interest so far.

According to sources, the reason of this delay is that Parliament session has not started so far and as per the officials, ‘due to late beginning of parliament session, it is not possible to pass the first tranche of reimbursement before the October end’.

The government would repay the reimbursement in several installments in which two third of the compensation is scheduled to pay within 14-months of the scheduled time while the remaining amount would be repaid in the few years by passing supplementary budget.

The Parliament has already voted around Rs.10,000-crore for reimbursing to banks’ while Rs.15,000-crore will be voted as a supplementary to this year’s (2008-09) budget. Another installment of Rs.15,000-crore will be paid from budget 2009-10 and rest of the money will be allocated from the corresponding years’ budget, as per sources.