Bankers are now anxiously awaiting finer details on the Rs 60,000-crore debt waiver package for farmers announcement by finance minister P Chidambaram in Budget 2008-09 on Friday. Chidambaram has set a deadline of June 30, 2008 for the implementation of the plan.
The banking industry, which hailed the proposal on Friday, largely after the finance minister assured complete reimbursement of the waived-off amount, however, are still in the dark about whether the finance ministry would also account for provisions made for bad loans.
They also expressed concern over the fact that the government would repay the loan-waiver amount over three years even though banks are required to complete the process before June 30 this year. ?There seems to be a disconnect here,? said a senior banker on the condition of anonymity.
Though all farm loans are not yet classified as non-performing assets, smaller loans have indeed been a concern as they have been provided for, said a south-based senior banker. An official of Punjab National Bank said the bank had Rs 1,200 crore of such sticky farm loans, of which provisions had been made in a few cases.
Of the Rs 60,000-crore debt waiver, scheduled commercial banks account for only Rs 12,000 crore, while cooperative banks and regional rural banks share the remaining Rs 37,000 crore and Rs 11,000 crore, respectively.
?The FM has said liquidity would be maintained at the existing level. I can?t think of another way than the RBI lowering of CRR (cash reserve ratio) to induce liquidity on or before June 30,? said another government banker in Mumbai.
There would be complete relief for marginal farmers holding up to 2 hectares of farmland. As for other farmers, Chidambaram announced a one-time settlement with a rebate of 25% against payment of 75% of loans. The finance ministry would make the funds available to the banks as and when they collected those debts, so that liquidity did not suffer, sources said.
