The central bank has, in a recent circular, asked banks to grant fresh loans and charge an interest of 4 per cent to all eligible farmers. Further, the standing guidelines for extension of relief to the farmers affected by natural calamities have been modified to enable the banks to convert/ reschedule existing loans for a period ranging from three years to nine years, grant fresh loans, grant consumption loans, not to compound interest due on the existing loans and not to charge penal interest.

Union finance minister Yashwant Sinha had, in his budget speech for 1998-99,stated that while there was need for improvement in the repayment culture of the farmers, they should not be forced to go to jail or commit suicide for defaulting on the loan repayments.

Pursuant to the announcement, banks have been asked to consider providing appropriate relief to chronic defaulting farmers. The measure, besides giving relief to the borrowing farmers, would also help banks reduce their level of non-performing assets (NPAs), RBI sources said.

Besides this, the central bank has also asked banks to modify procedures pertaining to agricultural advances on the basis of the recommendations made by the RV Gupte Committee. This would make simple the process of application agreements, rationalise internal returns of banks, help delegate more powers to branch managers, introduce composite cash credit limit for agricultural farmers, introduce new loan products with a savings component, allow cash disbursement of loans, dispense with the no-objection certificate and allow banks to decide on mattersrelating to margin/security requirements for agricultural loans above Rs 10,000.

The implementation of the Gupte Committee recommendations is expected to facilitate easy access to bank credit for farmers and augment the quantum of credit available, the RBI added.

Banks have also been asked to introduce a cash-credit facility for their agricultural lending in a bid to make available timely and adequate credit to the farmers to help them sustain their production levels.

RBI recapitalises 90 RRBs

The Reserve Bank has so far recapitalised 90 loss-making rural regional banks to the tune of Rs 200 crore. The central bank has undertaken the recapitalisation exercise with a view to facilitate the flow of credit to the agriculture sector on the back of budgetary support from the government and infusion of capital by sponsor banks and state governments in equal proportion.

The process of recapitalisation, which was initiated in 1994-95, has been been carried forward to 1997-98 and 1998-99. A budgetaryallocation of Rs 200 crore and Rs 265 crore has been provided during 1997-98 and 1998-99, respectively.