/ 2007-2008/ 330
The Chairman/Managing Director
Commercial Banks (including Local Area Banks)
Budget – 2008-09 – Agricultural Debt Waiver and Debt Relief Scheme, 2008
you are aware, the Hon’ble Finance Minister, in his Budget Speech (paragraph 73)
for 2008-09 has announced a debt waiver and debt relief Scheme for farmers, for
implementation by all scheduled commercial banks, besides RRBs and co-operative
2. The detailed Scheme notified by
the Government of India along with necessary explanations is enclosed. The scheduled
commercial banks (including Local Area Banks) may take necessary action towards
implementation of the Scheme at the earliest. The implementation of the Debt Waiver
and Debt Relief Scheme should be completed by June 30, 2008.
Further communication in respect of this Scheme would follow.
In case of RRBs and co-operatives, a separate circular is being issued by NABARD.
Chief General Manager – in –
DEBT WAIVER AND DEBT RELIEF SCHEME, 2008]
version of the Scheme
The Finance Minister, in his Budget Speech for 2008-2009, announced a Debt Waiver
and Debt Relief Scheme for farmers.
1.2. Guidelines for
implementation of the Scheme are given below.
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.
‘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.
‘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
3.3. ‘Investment Loan’ means
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
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.
‘Marginal Farmer’ means a farmer cultivating (as owner or tenant or share
cropper) agricultural land up to 1 hectare (2.5 acres).
‘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).
The classification of eligible farmers as per the above landholding criteria under
the Scheme would be based on the total extent of land owned by the farmer either
singly or as joint holder (in the case of an owner-farmer) or the total extent
of land cultivated by the farmer (as tenant or share cropper), at the time of
sanction of the loan, irrespective of any subsequent changes in ownership or possession.
2. In the case of borrowing by more than one farmer
by pooling their landholdings, the size of the largest landholding in the pool
shall be the basis for the purpose of classification of all farmers in that pool
as ‘marginal farmer’ or ‘small farmer’ or ‘other farmer’.
In the case of a farmer who has obtained investment credit for allied activities
where the principal loan amount does not exceed Rs.50,000, he would be classified
as ';small and marginal farmer'; and, where the principal amount exceeds
Rs.50,000, he would be classified as ‘other farmer’, irrespective in both cases
of the size of the land holding, if any.
4. Direct agricultural
loan taken under a Kisan Credit Card would also be covered under this Scheme subject
to these Guidelines.
5. A short-term production loan and
an investment loan taken by a farmer shall be counted as two distinct loans and
the Scheme will apply to the two loans separately. Likewise, in the case of a
farmer who has taken two investment loans for two separate purposes, the two loans
shall be counted as two distinct loans and the Scheme will apply to the two loans
4. Eligible amount
The amount eligible for debt waiver or debt relief, as the case may be (hereinafter
referred to as the ‘eligible amount’), shall comprise of:
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,
(ii) restructured and rescheduled by banks in 2004 and in 2006 through
the special packages announced by the Central Government, whether overdue or not;
(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
restructured and rescheduled in the normal course up to March 31, 2007 as per
applicable RBI guidelines on account of natural calamities.
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.
The following loans shall not be included in the eligible amount:
advances against pledge or hypothecation of agricultural produce other than standing
(b) agricultural finance to corporates, partnership firms, societies
other than cooperative credit institutions (referred to in para 3.4), and any
4.3 Nothing contained in this Scheme
shall apply to any loan disbursed by a lending institution prior to March 31,
5. Debt Waiver
In the case of a small or marginal farmer, the entire ‘eligible amount’ shall
6. Debt Relief
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
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.
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. Interest and other charges
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. Instalments 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.
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. Certificate of debt
waiver or debt relief
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.
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.
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.
10. Obligations of the lending institutions
Every lending institution shall be responsible for the correctness and integrity
of the lists of farmers eligible under this Scheme and the particulars of the
debt waiver or debt relief in respect of each farmer. Every document maintained,
every list prepared and every certificate issued by a lending institution for
the purposes of this Scheme shall bear the signature and designation of an authorised
officer of the lending institution.
10.2 Every lending institution
shall appoint one or more Grievance Redressal Officers for each State (having
regard to the number of branches in that State). The name and address of the Grievance
Redressal Officer concerned shall be displayed in each branch of the lending institution.
The Grievance Redressal Officer shall have the authority to receive representations
from aggrieved farmers and pass appropriate orders thereon. The order of the Grievance
Redressal Officer shall be final.
10.3 Any farmer who is
aggrieved on the ground that his name has not been included in either of the two
lists referred to in paragraph 7.1 or on the ground that his name has been included
in the wrong list or on the ground that the relief granted to him has been calculated
wrongly, may make a representation through the branch from which he received the
loan or directly to the Grievance Redressal Officer of the lending institution
concerned and every such representation shall be disposed of within 30 days of
books of account of every lending institution that has granted debt waiver or
debt relief under this Scheme (including the books of accounts maintained at the
branches) shall be subject to an audit in accordance with the procedure that may
be prescribed by RBI/NABARD. The audit may be conducted by concurrent auditors,
statutory auditors or special auditors as may be directed by RBI/NABARD. The Central
Government, if it is satisfied that it is necessary to do so, may direct a special
audit in the case of any lending institution or one or more branches of such lending
A copy of this Scheme in English and in the official language or languages of
the State/Union Territory shall be displayed in each branch of every lending institution
covered under this Scheme.
12.2. A copy of this Scheme
will be available on the websites of the Ministry of Finance, Department of Financial
Services; RBI; and NABARD.
13. Interpretation and power
to remove difficulties
13.1. If any doubt arises on
the interpretation of any paragraph of this Scheme or any instructions issued
thereunder, the Central Government shall resolve the doubt and the decision of
the Central Government shall be final.
13.2. If any difficulty
arises in giving effect to the provisions of the Scheme or any instructions issued
thereunder, the Central Government may by order do anything which appears to it
to be necessary or expedient for the purposes of removing the difficulty.
There shall be constituted a National
Level Monitoring Committee consisting of
Department of Financial Services, Ministry of Finance – Chairperson
Department of Agriculture and Cooperation, Ministry of Agriculture
Governor, Reserve Bank of India;
(iv) Chairman, NABARD;
(v) Chairman and
Managing Director of two public sector banks;
(vi) Chairman of two Regional
Rural Banks; and
(vii) Managing Director of two State Level Cooperative Banks
to monitor the implementation of the Scheme.
(viii) Annex 1 (to the Guidelines)
Revenue Districts covering DPAP, DDP areas and PM’s Special
Relief Package Districts