Maharashtra readies game plan for farm loan waiver

Mumbai city news: The state will train officials from its cooperation department and district on the required procedures to stop misappropriation of funds

After announcing a loan waiver of Rs34,022 crore on Saturday, the state government has started the process to issue directives to banks before they open accounts for farmers.

A government resolution (GR) formally announcing which farmers are eligible for a loan will be issued at the earliest.

The Centre had announced another loan waiver in 2008, which was fraught with irregularities. This time, the state will train officials from the banks and its cooperation department on the procedures to stop misappropriation of funds. And to avoid confusion among farmers, a government resolution (GR) formally announcing which of them are eligible for a loan will be issued at the earliest.

The government also plans to issue advertisements explaining the eligibility criterion and appealing to farmers to pay off the remaining loans over and above their eligibility for the waiver. The actual release of the loans, however, may be delayed owing to pending formalities with Reserve Bank of India (RBI) and NABARD.

“We are framing operational guidelines for the stakeholders, including officials, banks and farmers, so that there is no delay in the disbursement of new loans and writing off the old ones. The guidelines will take at least three weeks to be finalised,” said an officer from the cooperation department. The officer said they are developing software that will be linked with income tax data and VAT payers to establish eligibility, thereby avoiding granting a waiver to the wrong farmers.

The state government will also have to make budgetary allocation for the amount that needs to be paid to the banks to buy they non-performing assets (NPA) as a result of unpaid loan. Such allocation will be possible only through a provision in the supplementary budget during the monsoon session, which begins July 24. Since the government is planning to stagger the repayment of famers’ loan to the banks over the next four years, it is likely to make a budgetary provision of Rs8,000 crore.

However, questions are being raised if the banks will concede to shifting liability of the outstanding loans to the government from the farmers’ accounts.

Vishwas Utagi, banking expert and member of the farmers steering committee, doubts if the banks will be able to disburse the loan amounts immediately. “Without going to the state legislature, the government will not be in a position to release money to the banks. The monsoon session of the legislature is a month away. I doubt if the RBI, which regulates nationalised and commercial banks and NABARD, which controls the district cooperative banks will issue any notification based on the Maharashtra government’s intent to stand guarantee and shift these loans on its account. Considering that the loans given to the government bear ‘high-risk weightage’, I doubt if banks will easily reschedule the existing loan accounts. Without explicit sanction from the RBI or NABARD and central government, there is no sanctity to the government announcement.”

Government officials, however, said it would be an opportunity for the banks to get their bad debts worth Rs18,000 crore paid off from the government in the next two months. “It is true the banks have been demanding the government first own up the NPA, but we are talking to the authorities and a restructuring formula will soon be worked out. It may take some time and as we may extend the old loan payment deadline, which is June 30,” another official from the cooperation department said.