RBI clears settlement scheme

Heavily indebted small farmers can heave a sigh of relief now. The Reserve Bank of India (RBI) has instructed all scheduled commercial banks...

Heavily indebted small farmers can heave a sigh of relief now.

The Reserve Bank of India (RBI) has instructed all scheduled commercial banks to formulate guidelines for one-time settlement scheme for small and marginal farmers, reschedule payment of accrued outstanding for five years with a moratorium of two years, not to classify such outstandings as non-performing assets for next two years and make such farmers eligible for fresh loans.

RBI has directed banks to club accrued interest on crop loans and agriculture term loans with the principal outstanding of farmers hit by successive natural

calamities in the past five years.

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The banks have been asked to extend repayment of such amount accrued up to March 31, 2004 over a period of five years at current interest rates with an initial moratorium of two years. The cental bank has instructed all scheduled commercial banks to implement measures to improve the flow of credit to agriculture, in accordance with the announcements made by Finance Minister P Chidambaram.

According to the standard guidelines for providing relief to farmers affected by natural calamities, the RBI has asked banks to provide relief through conversion or rescheduling of loans in cases of crop failures.

Banks have also been asked to restructure debts incurred by farmers who have suffered production and income losses on account of successive natural calamities such as flood, drought in the past five years. As per the guidelines, banks would have to club the interest outstanding accrued in the accounts of crop loans and agriculture loans with the principal outstanding as on March 31, 2004.