New Delhi, June 18
The government today announced a slew of measures for the agriculture sector, including a one-time settlement for defaulting farmers who could not repay bank loans.

The package of measures announced by Finance Minister P. Chidambaram involves a multi-pronged strategy for enhancing the flow of low-cost institutional credit to farmers.

The government has targeted to raise the level of institutional credit to farmers by 30 per cent in the current fiscal year (2004-05) to Rs 1,04,500 crore and has proposed to bring in 50 lakh additional farmers under the institutional borrowing system.

The debt-restructuring package has taken particular cognisance of farmers who are in distress and have, therefore, not been able to repay bank debt.

The distressed farmers have been offered a debt-settlement package. This will be done by clubbing the outstanding interest payable by them with the principal amount, as on March 2004. This will be repayable over a period of five years at the current interest rate and will carry an initial moratorium of two years.

The Finance Minister, however, said this did not tantamount to waiver of loans and was, therefore, not violative of prudential norms as stipulated by the Reserve Bank of India (RBI). "This is the first step towards redeeming our promise in the common minimum programme to double the flow of agriculture credit in three years," Mr Chidambaram said.

He said Nabard had prepared by the plan in association with the Indian Banks' Association (IBA).

The total farm credit by banks, which is targeted to reach Rs 1,04,500 crore in 2004-05, would come mainly from commercial banks, he added.

The commercial banks were projected to lend Rs 57,000 crore of the total institutional farm credit.

Cooperatives would lend Rs 39,000 crore, while the remaining Rs 8,500 crore would come from the regional rural banks (RRBs).

"The government believes that agriculture is a profitable area for banks", he said. There could be further slashing of interest rate on farm loans, he indicated. "Interest rates on farm loans have already been shed. Banks have voluntarily brought it down to 8.5 per cent. But if the banks can reduce it further, they are free to do so", he said.

He said a meeting of Nabard and IBA officials would be held on June 22 in Mumbai.