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Farm debt waiver: PSBs want interest

NEW DELHI: Public sector banks (PSBs) participating in the Rs. 70,000-crore farm debt waiver programme have asked for payment of interest on the written-off loans owing to the delay in reimbursements by the Government.

With the Government not in a position to reimburse an amount of about Rs. 25,000 crore before the end of October this year, the PSBs also complained of an ongoing liquidity crunch on account of the delay and expressed their inability to provide fresh credit to the farmers.

At a press conference here on Finance Minister P. Chidambaram’s meeting with chiefs of regional rural banks (RRBs), Financial Sector Secretary Arun Ramanathan said: “Banks have suggested that they be compensated on payment of farm debt waiver.”

The RRBs, catering to the credit needs of the rural sector, are sponsored by the major state-owned banks even as the Centre and various state governments hold a substantial stake in them. The regional banks are expected to receive about Rs. 9,000 crore from the Government as reimbursement for writing off the farm loans.

At their meeting with the Finance Minister, the bank chiefs expressed concern that while all farm loans as on March 31, 2008, had been written off, they were yet to receive funds from the Government by way of reimbursement. In the event, they sought compensation from the Government through payment of interest on the loans waived off, mainly because the banks were bound to pay interest to their own lender for the period of delay.

Responding to the bankers’ demand, Mr. Chidambaram explained that the hitch in reimbursement of the loans written off was the delay in Parliament session, owing to which the relevant supplementary demand for grants could not be passed. Since the Parliament session stood deferred to October 17, the Government would not be in a position to release the necessary funds till the end of October. However, he assured the bank chiefs that the Reserve Bank of India (RBI) and NABARD had been asked to look into the matter to ensure the availability of funds for advancing loans to farmers.

On the performance of RRBs, Mr. Ramanathan noted that the current profit after tax of all these rural banks had gone up to Rs. 1,102 crore in 2007-08 from Rs. 787 crore in the previous year while the net non-performing assets came down to 2.96 per cent from 3.46 per cent during the period. “Of [the] 90 RRBs as on March 31, 2008, only nine are incurring current losses,” he said.

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