Noted economist and senior PDP leader, Dr Haseeb Drabu called on RBI Governor, Dr Raghuram Rajan on Monday evening to discuss various possibilities of providing debt relief to trade, business, agriculture and horticulture sectors in flood-hit Jammu and Kashmir.
Drabu presented a five-point debt relief package to the RBI Governor, which includes, classifying all commercial bank lending in J&K, especially involving traders and small businesses, as priority sector lending, placing debt waiver and write-offs that Banks offer to the flood victims to under CSR expenditure of corporates mandated under the Companies Act, instituting subsidized rate of interest on rehabilitation and reconstruction lending of all commercial banks, arranging one-time waiver on specified amount of KCC and ACC borrowings and converting non-tenured limits of artisanal and horticultural borrowers into KCC/ACC lending.
Drabu informed the RBI Governor that in addition to debt relief, in the post-flood J&K, availability of credit and the pricing of credit are of crucial importance. “One way to increase this, without impairing the health of the banks is to declare all lending in J&K for one year as priority sector lending. Not only does it resolve the credit availability issue as banks will bend backwards to lend, it also addresses the pricing of loans as the lending can be done at around 5 -6 per cent interest rate.
An innovate idea mooted in the note is that the financial debt relief in the form of waivers or write-offs that Banks and financial institutions offer to the flood victims should qualify under the CSR (Corporate Social Responsibility) expenditure of corporates mandated under the Companies Act.
It has been suggested that the Union Ministry of Finance be requested to subsidize rate of interest on all rehabilitation and reconstruction lending of commercial banks in Jammu and Kashmir.
Turning to rural indebtedness, Drabu requested the RBI Governor that a specific relief package must be given for the existing Kisan Credit Card (KCC) borrowings as of late majority of the farmers’ borrowing have been done under KCC. It was suggested that a one-time waiver of about Rs 1 lakh be given which would benefit almost 8 lakh farmer families. “This could be made a part of the Government of India rehabilitation package.” It was also suggested that the Ministry of Finance offer subsidized rate of interest on all “rehabilitation and reconstruction” lending in JK.
Drabu also suggested that the overdraft (OD) and Cash Credit (CC) limits of horticultural borrowers must be converted into KCC lending. A similar scheme must be implemented for the Artisan Credit Card (ACC) lending.
Drabu apprised the Governor that apart from major asset loss, large areas of fruit bearing orchards being washed away by floods, have resulted in sharp shoot-up of the costs of conducting horticulture business. “This alongwith sharp decline in the price realization due to flood impact on the quantity and quality of apples has resulted in a substantial income loss for the growers. Coming on the back of a four year drought like situation, there is complete financial distress and apple cultivation is becoming unviable. Earlier it was unprofitable now it is unviable. As such, effective debt relief and not just deferment and rescheduling is needed,” the note reads.
He urged the Governor to ensure that Banks strictly implement the guidelines for relief measures outlined in the RBI Master Circular. The financial assistance required by borrowers in the event of natural calamity must include uncollateralized fresh consumption loans, fresh loans for resumption of normal business and restructuring of the existing loans.
The Governor, according to Drabu, was receptive to the suggestions and assured that these would be examined and deliberated upon.