RBI/
2008-09/140
RPCD.PLFS. BC. No. 22 /05.04.02/ 2008-09
August 26, 2008
The Chairman /Managing Director/
Chief Executive Officer
Scheduled Commercial Banks (including RRBs)
Dear
Sir,
Simplification of lending procedures for crop loans
Please
refer to paragraphs 138 and 139 of the Annual
Policy Statement for the year 2008-09 (copy enclosed).
2.In
the Mid-term
Review of the Annual Policy 2007-08, it was proposed to constitute an Internal
Working Group to examine the recommendations of the Radhakrishna Expert Group
on Agricultural Indebtedness that are relevant to the banking system in general
and the Reserve Bank, in particular.
3. The Expert Group
recommended that banks should be directed to simplify procedures and help in
providing small and marginal farmers with timely access to credit.
4.
It may be mentioned in this connection that the Reserve Bank has already taken
certain steps to simplify the procedures for the farmers in the light of the recommendations
of the Working Group (Chairman: Shri C.P.Swarnkar), constituted by the Reserve
Bank for simplification of the procedures and processes for obtaining agricultural
loans, especially by small and marginal farmers:
(i)
banks have been advised to dispense with the requirement of 'no dues' certificate
for small loans up to Rs.50,000 to small and marginal farmers, share-croppers
and the like and, instead, obtain self-declaration from the borrower; and
(ii)
in order to overcome the problem faced by the banks in lending to landless laborers,
share-croppers and oral lessees due to the absence of documents verifying their
identity and status, banks have been advised to accept certificates provided
by local administration/panchayati raj institutions regarding the cultivation
of crops in case of loans to landless labourers, share-croppers and oral lessees.
5.
The Internal Working Group has recommended that landless labourers, share croppers,
tenant farmers and oral lessees, may be alternatively allowed to submit
an affidavit explaining their identity and status for loans up to a certain amount
(say, Rs. 50,000/-). However, banks may go through their procedures of appraisal
and usual pre-sanction checks before extending finance. The step would help in
further simplifying the procedures for the disadvantaged section of the farmers.
6.
It is therefore proposed that where there are difficulties in getting certification
as indicated at 4 (ii) above banks may accept an affidavit submitted by landless
labourers, share croppers and oral lessees giving occupational status
(i.e., details of land tilled/crops grown) for loans up to Rs.50, 000/-. Banks
could also encourage the Joint Liability Group (JLG)/SHG mode of lending for such
persons. However, banks may go through their procedures of identification as
per KYC norms; appraisal and usual pre-sanction checks before extending finance.
7. Action taken in this regard may be advised to our Regional
Office under whose jurisdiction the head office of the bank functions.
Yours
faithfully,
(B.P.Vijayendra)
Chief General Manager
ANNEX
Paragraphs
138 and 139 of the Annual Policy Statement for the year 2008-09:
(d)
Simplification of Lending Procedures for Crop Loans
138.
The Working Group (Chairman: Shri C.P.Swarnkar) appointed by the Reserve Bank
and the Committee on Agricultural Indebtedness (Chairman: Dr.R.Radhakrishna) appointed
by the Government of India made several recommendations to address credit constraints
faced by farmers, including the issue of availability of cash throughout the year
for agricultural operations. The report of the Internal Working Group (Chairman:
Shri V.S.Das), set up by the Reserve Bank to examine the recommendations of the
Radhakrishna Committee, has been placed on the Reserve Bank's website for wider
consultation.
139. While action on the
recommendation of the Radhakrishna Committee will be finalised based on comments/responses
received, it is proposed:
- to introduce a simplified
procedure for crop loans to landless labourers, share croppers, tenant farmers
and oral lessees whereby banks can accept an affidavit giving details of land
tilled/crops grown by such persons for loans up to Rs.50,000 without any need
for independent certification. Banks could also encourage the Joint Liability
Group (JLG)/SHG mode of lending for such persons.