Report of the Expert Group on Agricultural Indebtedness

<strong>Expert</strong> <strong>Group</strong> on Agricultural Indebtednessdistress. It also recommends continuation <strong>of</strong> ‘Non-Credit Component’ <strong>of</strong> <strong>the</strong> package for twomore years (paras 4.36-4.38).Rescheduling <strong>of</strong> Loans <strong>of</strong> Farmers Affected by Natural Calamities12. The central and state governments have programmes <strong>of</strong> rescheduling loans to farmersaffected by natural calamities like floods and cyclones with a view to reviving <strong>the</strong> livelihood base<strong>of</strong> <strong>the</strong> affected families. The <strong>Expert</strong> <strong>Group</strong> recommends thata. <strong>the</strong> loans <strong>of</strong> all <strong>the</strong> affected families should be rescheduled,b. <strong>the</strong> families whose loans are rescheduled should be eligible for fresh loans, andc. <strong>the</strong> interest liability <strong>of</strong> <strong>the</strong> borrowers for <strong>the</strong> extended period <strong>of</strong> up to two years (bothfor short and long term loans) should be waived and <strong>the</strong> financial burden equallyshared between <strong>the</strong> central and state governments (para 4.12).Credit for Rainfed Areas13. Rainfed areas in many parts <strong>of</strong> India are prone to frequent crop failures and need specialtreatment. The <strong>Expert</strong> <strong>Group</strong> recommends that in <strong>the</strong> event <strong>of</strong> crop failure for one year, <strong>the</strong>loans should be rescheduled and fresh loans be made available. Should <strong>the</strong> crop fail for <strong>the</strong>second consecutive year, as per <strong>the</strong> assessment <strong>of</strong> revenue authorities, in addition torescheduling <strong>of</strong> <strong>the</strong> crop loan, interest for <strong>the</strong> extended one year period should be waived and<strong>the</strong> financial burden equally shared between <strong>the</strong> central and state governments (para 4.12).Cyclical Credit14. The existing system <strong>of</strong> crop loan tends to constrict credit flow in rainfed areas when rainsfail. The <strong>Expert</strong> <strong>Group</strong> recommends that such liquidity constraints should be mitigated throughcyclical credit by a system <strong>of</strong> treating crop loan as a wea<strong>the</strong>r cycle long intervention ra<strong>the</strong>r thanas an annual feature. It could be initiated on a pilot basis in a few rainfed districts (para 2.53).Formalisation <strong>of</strong> Informal Credit15. The <strong>Expert</strong> <strong>Group</strong> underlines <strong>the</strong> need for mitigating <strong>the</strong> burden <strong>of</strong> farmers’ indebtedness tomoneylenders. It recommends a one-time measure <strong>of</strong> providing long-term loans by banks t<strong>of</strong>armers to enable <strong>the</strong>m to repay <strong>the</strong>ir debts to <strong>the</strong> moneylenders. Fur<strong>the</strong>r, it recommends thatPanchayat Raj Institutions (PRIs), civil society organisations like farmers’ collectives and Non-Governmental Organisations (NGOs) should be involved in arriving at negotiated settlements with<strong>the</strong> moneylenders. This would also help in achieving <strong>the</strong> objective <strong>of</strong> financial inclusion. Themodalities <strong>of</strong> <strong>the</strong> scheme may be worked out by <strong>the</strong> National Bank for Agriculture and RuralDevelopment (NABARD) for early implementation. The cost <strong>of</strong> making this scheme operational in<strong>the</strong> distressed districts should be met by creating a ‘Moneylenders Debt Redemption Fund’ with3