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Drought: Banks urged to reschedule agri loans

Faced with drought in many states, the Centre has asked Reserve Bank of India to direct banks to convert their short-term agriculture loans into long-term ones, to mitigate hardship to farmers in the affected regions.

"Farmers and agriculture labourers in more than half the states were affected badly by drought and banks should reschedule their loans to three-year tenure," Union Minister of State for Finance Anant Geete told reporters after inaugurating a branch of Bank of Rajasthan in Thane, Maharashtra on Friday.

Banks should not insist on recoveries from affected farmers and "if required, fresh credit should be extended to them for agricultural purpose," Geete said.

Asked about the impact of this step on the level of non-performing assets, the minister said NPAs would not grow much and it is important that farmers get timely assistance.

To a query on the impact of the securities ordinance, the minister said the re-promulgated ordinance has created a fear among industrialists who have been avoiding regular repayment of loans.

While recovering the dues, banks and financial institutions have to take care that their efforts do not create problems for economic activity, he added.

The NPAs of banks and financial institutions were pegged at Rs 1,00,000 crore (Rs 1,000 billion) and funds recovered from defaulters could be used for providing financial assistance to new industries and units, Geete said.

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