Punjab National Bank had urged the RBI to consider the demand for raising the ceiling of Rs 50,000 under Debt Swap Scheme to Rs 100,000 to free state farmers from the clutches of money lenders.
Even as bankers in Punjab seek raising of the ceiling of the Debt Swap Scheme to Rs 100,000 to help debt- ridden farmers, Reserve Bank of India (RBI) on Wednesday said the matter should be taken up with Indian Banks’ Association (IBA).
“We have no issue... the matter (raising ceiling under Debt Swap) should be taken up with IBA,” RBI Regional Director Jasbir Singh today said during the State Level Bankers’ Committee of Punjab.
Punjab National Bank, which is the convener of SLBC in Punjab, last month had urged RBI to consider the demand for raising the ceiling of Rs 50,000 under Debt Swap Scheme to Rs 100,000, with the intention to free state farmers from the clutches of money lenders.
Bankers had pointed out that the low ceiling of Rs 50,000 was one of the reasons behind the failure of Debt Swap Scheme in the state.
“In many cases, farmers have taken loans in excess of Rs 50,000 from money lenders, which deprive them of availing the debt swap scheme,” bankers said.
Punjab Government had raised this matter with the Finance Minister Pranab Mukherjee during the meeting with Chief Ministers of northern states and CEO’s of public sector banks in the month of July this year.
The Debt Swap Scheme has a mandate to swap farmers’ debt taken from moneylenders with fresh credit in order to bring them out of their clutches.
According to bankers, moneylenders charge farmers very high rates of interest, which could be in the range of 20 to 30 per cent per annum.
The failure of debt swap scheme in Punjab could be gauged from the fact that against Rs 273.92 crore of debt, just Rs 22.90 crore of debt had been swapped in the state till June 2010. The Finance Ministry had asked banks that at least 3 per cent of total farm credit should be given as loan under debt swap scheme.
Money lending is a flourishing business in Punjab as farmers prefer taking loan from informal sources than banks because of ease in getting money.
“Farmers can get loan at any time from money lenders because they are easily accessible. Moreover, farmer can use the money anywhere as moneylender will not question him about purpose of raising loan,” a bank official said.
Slow progress in debt swap scheme is another reason for the reluctance shown by farmers in revealing their financial liabilities with money lenders, bankers said.