AGRICULTURAL DEBT WAIVER AND DEBT RELIEF SCHEME, 2008

1.1. The Finance Minister, in his Budget Speech for 2008-2009, announced a Debt Waiver and Debt Relief Scheme for farmers. Subsequently in the budget for 2010-11, in view of the recent drought in some States and the severe floods in some other parts of the country,  it was proposes to extend by six months the period for repayment of the loan amount by farmers from December 31, 2009 to June 30, 2010.

2.1 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 (hereinafter referred to compendiously as “lending institutions”) as indicated in the Guidelines.

2.2 The Scheme shall come into force with immediate effect.

3.1. ‘Direct Agricultural Loans’ means Short Term Production Loans and Investment Loans provided directly to farmers for agricultural purposes. This would also include such loans provided directly to groups of individual farmers (for example Self Help Groups and Joint Liability Groups), provided banks maintain disaggregated data of the loan extended to each farmer belonging to that group.

3.2. ‘Short Term Production Loan’ means a loan given in connection with the raising of crops which is to be repaid within 18 months. It will include working capital loan, not exceeding Rs. 1 lakh, for traditional and non-traditional plantations and horticulture.

3.3. ‘Investment Loan’ means

(a) investment credit for direct agricultural activities extended for meeting outlays relating to the replacement and maintenance of wasting assets and for capital investment designed to increase the output from the land, e.g. deepening of wells, sinking of new wells, installation of pump sets, purchase of tractor / pair of bullocks, land development and term loan for traditional and non-traditional plantations and horticulture; and

(b) investment credit for allied activities extended for acquiring assets in respect of activities allied to agriculture e.g. dairy, poultry farming, goatery, sheep rearing, piggery, fisheries, bee-keeping, green houses and biogas.

3.4. ‘Cooperative Credit Institution’ means a cooperative society that i) provides short-term crop loans to farmers and is eligible for interest subvention from the Central Government; or ii) carries on banking activities regulated or supervised by RBI or NABARD; or iii) is part of the Short-Term Cooperative Credit Structure or Long-Term Cooperative Credit Structure in a State or Union Territory.

3.5. ‘Marginal Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land up to 1 hectare (2.5 acres).

3.6. ‘Small Farmer’ 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).

3.7. ‘Other Farmer’ means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 2 hectares (more than 5 acres).

4.1 The amount eligible for debt waiver or debt relief, as the case may be (hereinafter referred to as the ‘eligible amount’), 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.

(b) in the case of an investment loan, the installments of such loan that are over due (together with applicable interest on such installments) 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; and

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

Explanation:In the case of an investment loan disbursed up to March 31, 2007 and classified as non-performing asset or suit filed account, only the installments that were overdue as on December 31, 2007 shall be the eligible amount.

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

(a) advances against pledge or hypothecation of agricultural produce other than standing crop; and

(b) agricultural finance to corporates, partnership firms, societies other than cooperative credit institutions (referred to in para 3.4), and any similar institution.

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

5.1. In the case of a small or marginal farmer, the entire ‘eligible amount’ shall be waived.

6.1. 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 per cent of the ‘eligible amount’ subject to the condition that the farmer pays the balance of 75 per cent of the ‘eligible amount’;

Provided that in the case of revenue districts listed in Annex-I, ‘other farmers’ will be given OTS rebate of 25 per cent of the ‘eligible amount’ or Rs.20,000, whichever is higher, subject to the condition that the farmer pays the balance of the ‘eligible amount’.

7.1. Every branch of a scheduled commercial bank, regional rural bank, cooperative credit institution, urban cooperative bank and local area bank covered under this Scheme shall prepare two lists, one consisting of ‘small and marginal farmers’ who are eligible for debt waiver and the second consisting of ‘other farmers’ who are eligible for debt relief under this Scheme. The lists shall include particulars of the landholding, the eligible amount and the amount of debt waiver or debt relief proposed to be granted in each case. The lists shall be displayed on the notice board of the branch of the bank/society on or before June 30, 2008.

7.2. A farmer classified as ‘small farmer’ or ‘marginal farmer’ will be eligible for fresh agricultural loans upon the eligible amount being waived.

7.3. A farmer classified as ‘other farmer’ eligible for OTS relief shall give an undertaking agreeing to pay his share (that is eligible amount minus the amount of OTS relief) in not more than three instalments and the first two instalments shall be for an amount not less than one-third of his share. The last dates of payment in the case of three instalments will be September 30, 2008; March 31, 2009 and June 30, 2009.

7.4. The undertaking shall be in such form as may be prescribed by RBI/NABARD.

7.5. The amount of OTS relief (i.e. the Central Government’s share) will be credited to the account of the ‘other farmer’ upon the farmer paying his share in full.

7.6. In the case of a short-term production loan, the ‘other farmer’ will be eligible for fresh short-term production loan upon paying one-third of his share.

7.7. In the case of an investment loan (for direct agricultural activities or allied activities), the ‘other farmer’ will be eligible for fresh investment loan upon paying his share in full.

7.8. Reserve Bank of India shall be the nodal agency for the implementation of the Scheme in respect of scheduled commercial banks, urban cooperative banks and local area banks. NABARD shall be the nodal agency in respect of regional rural banks and cooperative credit institutions.

8.1. 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 share 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.
8.2. Installments of investment credit which fall overdue after 31.12.2007 shall be recovered by the lending institutions along with the applicable interest. Lending institutions may, however, in appropriate cases, reschedule these instalments in accordance with the normal policy of the lending institution concerned.
8.3. Notwithstanding anything contained in this Scheme, the amount of interest that a lending institution may claim as reimbursement from the Central Government under this Scheme shall not, in any case, exceed the principal amount of the loan.
8.4. Ministry of Finance will issue supplemental instructions to the lending institutions in respect of all incidental and ancillary matters including instructions on interest and other charges that shall not be claimed by the lending institutions from the farmer or the Central Government.

9.1. In the case of small and marginal farmers, upon waiver of the eligible amount, the lending institution shall issue a certificate to the effect that the loan has been waived and specifically mention the eligible amount that has been waived.

9.2. In the case of ‘other farmers’, upon granting OTS relief, the lending institution shall issue a certificate to the effect that the loan account has been settled to the satisfaction of the lending institution and specifically mention the eligible amount, the amount paid by the farmer as his share and the amount of OTS relief.

9.3. The certificate shall be in such form as may be prescribed by RBI/NABARD and upon issuing the certificate the lending institution shall take an acknowledgement from the farmer.