Even as the Reserve Bank of India's (RBI) final instructions on the Rs 60,000

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crore farm debt waiver and one-time settlement scheme are awaited, a preliminary estimate by State Bank of India (SBI), the country's largest bank, indicates that Rs 7,000 crore outstandings of its agriculture loans could get adjusted by the scheme announced in the Union Budget 2008-09. “Agriculture non-performing assets (NPAs) which currently stand at 5% could almost be wiped off if the bank's claims under the debt waiver scheme are met by the government,” said KJ Taori, general manager, Agri Business Unit, SBI. “Although It must be remembered that not all of the Rs 7,000 crore outstandings can be classified as NPAs according to RBI guidelines, which define an agriculture NPA as a default over two crop seasons.”

The scheme envisages a complete waiver of loans overdue as of December 31, 2007 and outstanding till February 29, 2008 for small and marginal farmers with land holdings up to 2 hectare and subvention or rebate to the extent of 25% of the loan amount for farmers with land holdings over 2 hectare under OTS.

Besides waiving off the loans of cash-strapped farmers, finance minister P Chidambaram said in his budget speech that farmers covered under debt waiver and OTS would be eligible for fresh bank credit. The campaign, Mr Taori said, would enable SBI to target its “ambitious” crop loan financing scheme not just at those farmers covered by the debt waiver and OTS but also to farmers not covered by the scheme, thereby freeing them from the money lenders' clutches. Under the crop loan finance scheme, the loan per acre of crop cultivation has been liberalised and made more need-based. Mr Taori, the helmsman of the scheme, said: “If you want to free the farmer from the money lender and get him to be a part of the organised credit structure you have to adequately meet his credit needs. We do not follow the crop loan scale fixed by district technical committees but have our own way of realistically assessing investment requirements of farmers for crop cultivation.” To date, SBI's total agricultural advances, comprising direct and indirect loans to farmers, are around Rs 55,000 crore, making it the leader among all public sector banks with a market share of 20%. Among all scheduled commercial banks also, SBI's market share is the highest at over 16%. Interestingly, Mr Taori holds the opinion that Indian agriculture will largely remain immune from the contagion of a global slowdown as high global prices of farm commodities could enable the government to procure adequate buffer stock by raising minimum support prices to some extent and doling out bonuses.

In wheat, he said, assuming the per unit cost of import works out to around $40 per quintal, that would translate to Rs 1,600 per quintal, way above the government's minimum support price of Rs 1,000. Currently, buffer stocks of rice and wheat stand at 27.5 million tonne (mt). The government proposes to procure an additional 11-12 mt of wheat for PDS in the current marketing season that commenced on April 1, of which it proposes to release 1 mt each month.

“To keep prices under check, the government may release more grain under PDS as buffer stock position is comfortable. Farmers could be incentivised to sell wheat to the government if MSP is raised a bit, enabling achievement of procurement targets and price control,” he said.