SOME public sector banks are offering as much as 25% rebate to improve recovery on their farm loans, providing substantial relief to farmers who have already had same amount waived off as part of the debt relief scheme.
The offer follows a nod from the RBI to the banks to give discount as per their own internal assessment to settle the loans because not many farmers were settling their dues despite two extensions.
“This is the last chance for farmers, since there’ll be no further extension to the scheme and we expect a healthy recovery,” said chairman and managing director of Bank of Baroda MD Mallya.
The bank is offering a 25% rebate to the large farmers, over and above the 25% offered by the government to the large farmers under the one-time settlement scheme or OTS, which was part of the debt waiver plan.
This is over and above the 25% rebate offered by the government to large farmer under the one time settlement scheme (OTS). The total mount under the OTS scheme for large farmers is estimated at Rs 10,000 crore. It was open till June 2009, but has been extended periodically. Farmers have till June end to avail of the scheme.
A bank offering 25% rebate will be able to recover only 75% of the loan, 50% from the farmer and 25% from the government. Bank of Baroda has already made a provisioning of Rs 212 crore last year towards loans given under the debt relief scheme.
Almost all leading public sector banks are offering schemes to these farmers so as to help them repay their loans. PNB is giving an additional relief of 15%. “Giving such discounts is a logical move as recovery through other means is a long drawn process,” says RIS Sidhu, chief GM, PNB.
SBI is giving a discount of Rs 50,000 for farmers who are unable to repay their loans. “There is a considerable section of farmers who are really unable to pay and such support will help them to partly pay their dues,” said a senior SBI official who do not wish to be named.
The RBI had earlier allowed the banks to treat accounts under the waiver scheme as standard provided adequate provision is made by the banks for the loss in present value terms.
The generous offer will not impact the revenue of banks as most of them have already made provisions for these farm loans classifying them as NPAs or bad assets.
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