Implementation of the Agricultural Debt Waiver and Debt Relief Scheme, 2008

  The Union Cabinet today gave its approval for the Guidelines for the implementation of the Farmers Debt Waiver and Debt Relief Scheme, 2008.  Briefing the media persons the Finance Minister Shri P. Chidambaram said that the Scheme will cover direct agricultural loans extended to ‘marginal and small farmers’ and ‘other farmers’ by Scheduled Commercial Banks, Regional Rural Banks, Cooperative Credit Institutions (including Urban Cooperative Banks) and Local Area Banks.  The Scheme shall come into force with immediate effect. 

‘Marginal Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land up to 1 hectare (2.5 acres).  ‘Small Farmers’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 1 hectare and up to 2 hectares (5 acres).  ‘Other Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 2 hectares (more than 5 acres).

The amount eligible for debt waiver or debt relief, as the case may be, shall comprise of:

(a)     In the case of a short-term production loan, the amount of such loan (together with applicable interest):

(i)                   Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;

(ii)                 Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and

(iii)                Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities, whether overdue or not.

In the case of an investment loan, the instalments of such loan that are over due (together with applicable interest on such instalments) if the loan was:

(i)                   Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;

(ii)                 Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or not; and

(iii)                Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities.

The following loans shall not be included in the eligible amount:

(i)                   Advances against pledge or hypothecation of agricultural produce other than standing crop; and

(ii)                 Agricultural finance to corporate, partnership firms, societies other than cooperative credit institutions and any similar institution.

Nothing contained in this Scheme shall apply to any loan disbursed by a lending institution prior to March 31, 1997.

In the case of a small or marginal farmer, the entire ‘eligible amount’ shall be waived.  In the case of ‘other farmers’, there will be a one time settlement (OTS) Scheme under which the farmer will be given a rebate of 25% of the ‘eligible amount’ subject to the condition that the farmer pays the balance of 75 % of the ‘eligible amount’.

The lending institutions shall not charge any interest on the ‘eligible amount’ for any period after February 29, 2008.  However, in the case of an ‘other farmer’ who defaults in paying his shares of the eligible amount on or before June 30, 2009 and becomes ineligible for OTS relief, the bank may charge interest for the period after June 30, 2009.

The provisional figures so reported by RBI/NABARD show that about 3,69,00,000 small/marginal farmer accounts and about 59,75,000 ‘other farmer’ accounts with an overdue amount of about Rs.60,416 crore and about Rs.31,839 crore respectively are covered under the Scheme.  The cash outgo from Central Government towards reimbursement of the amount of waiver/relief to the lending institutions has been estimated by RBI and NABARD at around Rs.60,416 crore for small and marginal farmers and about Rs.7,960 crore for ‘other farmers’.

The salient features of the Scheme are:

(i)                   All direct agricultural loans (crop loans, investment credit for direct agricultural activities and investment credit for allied activities) disbursed to farmers between March 31, 1997 and March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008 are covered under the Scheme.

(ii)                 Farmers cultivating agricultural land up to 1 hectare are classified as ‘marginal farmers’ and cultivating agricultural land between 1 to 2 hectares are classified as ‘small farmers’. This classification will apply in the case of crop loans and investment credit for direct agricultural activities. However, in the case of investment credit for allied activities, the land holding is not germane and, hence, those farmers whose principal loan amount is Rs.50,000 or less will be classified as ‘small and marginal farmers.’

Farmers cultivating agricultural land in excess of 2 hectares are classified as ‘other farmers’.  This classification will apply in the case of crop loans and investment credit for direct agricultural activities. In the case of investment credit for allied activities, farmers whose principal loan amount is more than Rs.50,000 will be classified as ‘other farmers’.

(iii)                Full debt waiver of the eligible amount will be given to small & marginal farmers. This will benefit around 3,69,00,000 small & marginal farmer accounts.

(iv)                OTS rebate of 25% will be extended to ‘other farmers’ against payment of balance 75% in not more than three instalments by June 30, 2009. This will benefit around 59,75,000 farmer accounts.

(v)                  In respect of 237 districts falling under DPAP or DDP or PM’s Special Relief Package, OTS relief will be 25% of the overdue amount or Rs.20,000 whichever is higher. This will enable graded relief to ‘other farmers’ as shown below:

Amount Overdue (Rs.)	Relief (Rs.)	Relief as % of overdue
Up to   20,000	Up to 20,000	100.00
30,000	20,000	66.66
40,000	20,000	50.00
60,000	20,000	33.00
70,000	20,000	28.60
80,000	20,000	25.00
1,00,000	25,000	25.00

  The estimate of the additional cost of the more liberal package to ‘other farmers’ in the 237 districts will be of the order of Rs.3,304 crore.

(vi)                Groups of farmers, borrowing as a group such as SHG or JLG, are covered under the Scheme, provided banks maintain disaggregated data of the loan extended to each farmer belonging to that group.

(vii)               Direct agricultural loans disbursed under Kisan Credit Card (KCC) would be eligible for debt waiver/debt relief.

(viii)             The Scheme provides debt waiver/debt relief to farmers whose loans were rescheduled and restructured by the banks up to March 31, 2007 as per applicable RBI guidelines or through the special packages announced by the Central Government in 2004 and 2006.

(ix)               Farmers will not be required to make any application for debt waiver/debt relief. Relief would be based on the total landholding of the farmer as per records maintained by the lending institution at the time of sanction. The lending institutions shall display on the Notice Boards of each branch the list of farmers eligible for debt waiver and the list of farmers eligible for debt relief and specifically mention the amount of debt waiver or debt relief proposed to be granted in each case.

(x)                 Immediately after the debt waiver/debt relief is finalised, all ‘small and marginal farmers’ and such ‘other farmers’ of DPAP, DDP and PM’s Special Relief Package Districts whose total loans have been waived will be eligible for fresh short-term production loan as well as investment credit.

(xi)               The ‘other farmers’ will be required to pay one-third of their share before they become eligible for fresh short-term production loan. They will be eligible for investment credit only after they pay their full share is not more than three instalments on or before June 30, 2009.

(xii)              The Scheme does not cover instalments of investment credit which fall overdue after December 31, 2007. Lending institutions may recover such instalments along with the applicable interest in the normal course. However, they may, in appropriate cases, reschedule these instalments in accordance with the normal policy of the lending institution concerned.

BSC/SS/DN-125/08

(Release ID :39107)

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