Madam FM! For farm loans, 3-installment moratorium is for 3 years, not 3 months  

The Central Government has announced a slew of schemes and packages to farmers in particular and agriculture in general. But the regulatory system like the Reserve Bank of India (RBI) and the banking sector are basically faulty as they are formed without proportional representation as per requirement of the basic principles of the Constitution and not knowing the reality in the agriculture sector.

Neither the RBI nor the director boards of the nationalized banks are being represented by farm experts and hence whatever is being offered by the government is not being easily available to the hard-hit farmers. The corona crisis has now created an atmosphere of introspection and doing right what has been side-tracked during the last many decades.

If the RBI is formulated by the specific Act which also should follow the constitutional provision which is mandatory to be represented by all sections which are being governed by it as a regulatory body. This is not done in the case of the RBI which is now controlling banks and financial institutions which are not duly represented on its board of directors. The denial of representation on the RBI to farmers, small scale industries, medium term industries, common consumers in urban areas is violation of the section 14 and 16 of the Constitution. This section provides principle of equity and equal opportunity to all irrespective caste or class in appointment of any
office under the state.

This basically means that any formation of any body by the State that is the government needs to be represented by all sections of society for which a particular body is constituted. This basic violation has created the lacuna leading to different set of norms for one section while another set for other sectors thereby violating principle of equality and equal opportunity. Both the ignorance and negative interpretation is reflected in the RBI’s circular providing relief to small and medium industries and farmers in the country.

In order to provide relief to consumers and borrowers who are suffering due to the current corona crisis, the RBI has issued a comprehensive circular. The circular asks each bank to follow the required procedure so that all flaws and  the
systemic prohibitive factors that may hinder their cash flow would be removed.

The normal hindrance in the present norms in banks is the condition of the NPA, (the non-performing assets) which means that any account of a borrower turns in to a black tag which blocks all transactions of that account so that while the borrower is not eligible to get any other benefit, and he or she is liable to face legal action for the
recovery. This NPA’s black tag is now removed by the RBI which says that installment period as per NPA is extended by moratorium of three months installments which means that the black tag is removed during this period.

In a specific query in FAQ, the RBI has clarified that moratorium of three months or three installments is applicable to all loans, including personal as also to agriculture term loans, crop loans and retail loans and the period of monthly installment payment is extended by three months or extension of three installments is considered for
repayment. As three months or 90 days is based on the calculation of three installments, the installments is the basic criteria for calculating the moratorium.

Agriculture is a special sector in the current crisis as farm production of food grains, vegetables, fruits, sugar, milk, etc., has continued to serve people in Maharashtra as also in other of India and hence should be and is specially considered in this context.
While all other productions have come to a standstill, farm production has continued to serve people in all areas in in the country. Both the finance minister and the RBI seem to have considered the farm sector’s service to provide essential farm products.

But banks in both the co-operative and nationalized sectors have not considered the basic criteria of moratorium of the three installments in agricultural crop and term loans. In the case of agriculture, installments are annual and hence three installments mean moratorium of three years. All crop and term loans are eligible to get this relief. Again all NPAs or defaults in the case of rural credit societies, which are seen in loan accounts  up to March 30 should be removed so that the beneficiary farmers would get all blocked loans due to the restrictive NPAs or loan defaults.

As crop and term loans are recorded by rural co-operative societies, record of all such loans in these societies should be considered eligible to get relief by removing the NPA or default tag and all pending benefits of cash flows which were blocked so far because of the said tag should be immediately released without any condition. Nationalized and other banks which have offered loans to agriculture sector or farmers are expected to follow the procedure without any delay.

For instance, farmers who should get payment of their cane bills or sanctioned crop loans are so far neglected by not crediting their amounts in their accounts by sugar mills and banks due to the NPA tag or loan defaults as recorded in rural credit societies and as the said tag is now removed all such amounts should be immediately credited with their all various due payments and such payments should not be credited to loan accounts. This should be done without any condition of formal application or any other expectation. All farmers who are esteemed consumers of banks should get urgent relief now offered by the Union government, finance minister and the RBI. The RBI circular should be viewed from positive approach and should be interpreted in such a way that farmers are duly benefited by the relief measures as the farm sector is now at the helm of the national scenario.

The RBI and the finance minister should have been clear in their announcements in regard to agricultural loans provided by co-operative, nationalized banks and rural co-operative credit societies in the country. This is not done because while the RBI is
not duly represented by farm experts knowing reality in this sector, the finance minister also has not been duly informed by the concerned bureaucrats who also may not be knowing the reality in the farm sector. That is why the Finance Minister Nirmala Sitharaman has erroneously said while announcing the farm sector package that the farm loans are extended by moratorium of 90 days thereby using the criteria of three months which criteria is applicable only for monthly wage earners and not farmers who are not getting monthly wages but yearly income after sale of their crops at the end of the season every year.

Both the finance minister and the RBI should now realize the lacuna in understanding and should correct the matters by asking all banks in the country to follow the three-installment moratorium criteria and three-year moratorium in farm loans. Elected representative namely MLAs and MPs who are legislators in states and the country and who are dependent on rural votes in their constituencies should take initiative and motivate the state and Union governments to set the matters clear and let the hard-hit farmers get the benefit of whatever is offered by the package in the corona crisis.

If elected representatives take up the matter with dynamism and without any restrictive approach of party discipline, the governments in states and the Centre have to consider the reformation of the RBI with representation to all due constituents which are being governed and the current disparity in both the formation of credit norms and actions for constitutional violations will be curbed forever.