Govt to work with RBI, banks
The government on Thursday said it will implement the Rs 60,000 crore farm-loan relief scheme in a way that the banking system is not constrained and assured banks that they would be adequately compensated. “The scheme would be implemented in a manner that the banking system is strengthened rather than weakened", Finance Minister P Chidambaram told reporters after the post-budget meeting with the Reserve Bank of India (RBI) Board here.
“I explained the debt waiver and debt-relief scheme to the board members and since it was a closed-door meeting I took them through the contours of the package,” he said.
Chidambaram, in his Budget for 2008-09, had said the government had decided to waive Rs 50,000 crore institutional loans borrowed by small and marginal farmers and offered a one-time-settlement scheme for other farmers involving Rs 10,000 crore.
The government has kept June as the deadline for implementing the plan, but has not explained how the funds would be managed to fulfil the promise. “The RBI has assured us that they will support and help the government in implementing the debt waiver plan in a manner that the banking system will be strengthened,” he said.
“He explained the rationale of the agricultural loan waiver scheme, which was essential for the welfare of small and marginal farmers. He said banks would be appropriately compensated. He emphasised that it was important to accelerate the extension of credit to farmers,” a RBI statement said.
RBI governor Y V Reddy said the Reserve Bank would work closely with the government and the banks to ensure that the loan waiver scheme was implemented within the announced time frame, so as to serve the interest of the farmers and improve credit flow while serving the interest of the banking system.