Cash compensation for banks waiving farm loans | business | Hindustan Times
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Cash compensation for banks waiving farm loans

business Updated: Mar 15, 2008 03:19 IST
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The government will give cash in compensation to banks writing off loans under the Rs 60,000-crore debt relief package for farmers, but the payment will be staggered over four financial years, Finance Minister P Chidambaram said on Friday.

The loan waiver, the biggest takeaway from Budget 2008-09, raised many eyebrows, especially on questions relating to funding of the plan, but the finance minister insisted he would divulge the details only when Parliament discussed the issue.

Starting July, Chidambaram told Lok Sabha, the lenders will be given Rs 25,000 crore in next 12 months. The rest will be paid in following years — Rs 15,000 crore in 2009-10, Rs 12,000 crore in 2010-11 and Rs 8,000 crore in 2011-12.

He said the government would raise the money by tapping the buoyancy in tax revenue, proceeds from royalties, dividends and other non-tax earnings including a possible offloading of shares of state-owned companies in the stock market.

He said the government and the RBI are exploring ways wherein banks could step in to help farmers pay off loans from local money lenders – a practice that, critics say, has not been addressed in the budget proposal.