RBI instructs banks to restructure loans of farmers

The Reserve Bank of India (RBI) on Wednesday said it has instructed banks to restructure loans of farmers whose crops have been damaged by the recent unseasonal rains and hailstorms.

"We have given instruction to banks to restructure farm loans," RBI Governor Raghuram Rajan told reporters in the national capital.

Unseasonal rains and hailstorms in northern and central parts of the country in March have damaged rabi (winter-sown) crops in about 113 lakh hectares.

Earlier on Wednesday, Prime Minister Narendra Modi announced higher compensation for farmers whose crop have been damaged by unseasonal rains and also asked banks to ease criteria for them to avail government support.

Modi also asked insurance companies to be "proactive" in settling claims of farmers.

The Prime Minister said the criteria of 50 per cent crop damage for providing compensation to affected farmers had been reduced to 33 per cent, which would help more farmers to get compensation for their crop loss.

"Second important decision we have taken is to raise the parameters for helping him (farmers). The amount of compensation has been increased to 1.5 times. If earlier, he was getting Rs 100 as compensation, now he will get Rs 150, if it was Rs 1 lakh, he will get Rs 1.5 lakh... a 50 per cent increase," he added.

In its monetary policy on Tuesday, the RBI said that the adverse impact of unseasonal rains and hailstorms in March is still unfolding.

"Initial estimates indicate that as much as 17 per cent of the sown area under the rabi crop may have been affected though the precise extent of the damage remains to be determined," the central bank's policy document said.