FM admits freeze on farm equipment loan unjustified

May 23rd, 2008 - 2:06 am ICT by admin  

A file-photo of P. Chidambaram

New Delhi, May 22 (IANS) Reiterating that farm loan waiver to the tune of Rs. 600 billion will be implemented by June 30 this year, Finance Minister P. Chidambaram Thursday admitted the State Bank of India’s (SBI) freeze on farm equipment loan was “unjustified.” “The circular (to freeze loans to farmers for buying tractors and other farm equipment) was not justified. It is a closed chapter now,” Chidamabaram told reporters in reply to a question after a briefing about the cabinet meeting.

Chidambaram, however, parried all questions on inflation and rise in crude oil price to $132 a barrel. Inflation for the week ended May 3 was recorded at 7.83 percent against 7.61 percent for a week before.

About Rs. 600 billion-loan waiver scheme to help out 4 million small and marginal farmers, Chidamabaram said that the details were being worked out and would be implemented by June 30, 2008.

Chidamabram said that the circular was “poorly worded” and “misunderstood”, adding that the banks must give and recover loans.

“Loans must be given and recovered,” he said.

Overseas Indian Affairs Vayalar Ravi Tuesday too had taken exception to the decision of state-owned SBI decision to freeze loans to farmers for buying equipment like tractors and other agricultural paraphernalia.

“It is unfair, and raises suspicion as the decision comes on the eve of assembly polls in Karnataka,” Ravi had told IANS, and had sought some control over public sector financial institutions taking any unilateral steps.

The SBI’s temporary freeze on the equipment loan to farmers was attributed to increasing defaults in paying back the loan amount by the farmers.

SBI is the largest player in the tractor and farm financing business. The bank’s total farm sector advances are close to Rs 430 billion, with non-performing loans estimated at 7 percent of this portfolio.

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