Since the government has not as yet released the subsidy for waiver of agricultural loans and one-time settlement of loans, banks are facing pressure on their net interest margins and a liquidity crunch.

The ambitious Agricultural Debt Waiver and Debt Relief Scheme, 2008 was announced in the Union Budget for 2008-09 as a step to relieve the farmers from indebtedness. Aiming to benefit about 40 million farmers, the scheme is estimated to cost the exchequer more than Rs 71,680 cr (as per the unaudited estimates) as against the original estimate of Rs 60,000 cr.

As per the scheme, direct agricultural loans extended to `marginal and small farmers' and `other farmers' by Scheduled Commercial Banks, Regional Rural Banks, Cooperative Credit Institutions (including Urban Cooperative Banks) and Local Area Banks would be waived off.

All direct agricultural loans (crop loans, investment credit for direct agricultural activities and investment credit for allied activities) disbursed to farmers between March 31, 1997 and March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008 would qualify for the Debt Waiver and Debt Relief Scheme. Ü All direct agricultural loans (crop loans, investment credit for direct agricultural activities and investment credit for allied activities) disbursed to farmers between March 31, 1997 and March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008 would qualify for the Debt Waiver and Debt Relief Scheme.

Analyst Magazine, Agricultural Debt Waiver, Debt Relief Scheme, Agricultural loans, Agricultural activities, Regional Rural Banks, Private Sector Banks, Statutory Liquidity Ratio status, SLR, One Time Settlement, OTS, Non-Performing Assets, NPA, Net Present Value, NPV.