The members of the board of Reserve Bank of India (RBI) have drawn finance minister Nirmala Sitharaman’s attention to the inefficacy of the government’s PM-Kisan Scheme and the plight of housing finance companies (HFCs) during their interaction with her last week.
MUMBAI: The members of the board of Reserve Bank of India (RBI) have drawn finance minister Nirmala Sitharaman’s attention to the inefficacy of the government’s PM-Kisan Scheme and the plight of housing finance companies (HFCs) during their interaction with her last week. It was pointed out that the scheme, under which the government provides Rs. 6,000 a year to small and marginal farmers, is often failing to reach the actual tiller of the soil.
The government has so far spent about Rs. 55,000 crore out of a budget of Rs. 75,000 crore , covering around 9 crore farmers as against a target of 14.5 crore under the programme christened Pradhan Mantra Kisan Samman Siddi.
“The definition of farmers, identifying them, and the refusal of some states to provide data are some of the challenges. Also, funds are distributed to ‘farmers’ whose names figure in the land holding records. More than these persons, farmers who till the land deserve the money,” said a person familiar with the issue.
The amount of Rs. 6,000 is distributed in three equal instalments to smaller farmers holding up to 2 hectares. “The data base from the agri census and the socio-economic census do not always match. Some states which had initiated similar programme are unwilling to alter their data base,” said a senior economist. “Orissa has managed to reach the agri workers and poorer farmers by opening the scheme to all,” he said.
At the board meeting, chaired by RBI governor Shaktikanta Das, another RBI central board director touched upon the woes of HFCs whose inability to raise funds for commercial real estate ventures have left a trail of unfinished projects.
Even though HFCs are now at par with finance companies (NBFCs), banks are sanctioning fund as long as HFCs use the money to give retail loans. “There is no wholesale or general purpose funding.
Banks are laying down the end-use. Surveillance level is high, there is concurrent audit by lenders. Money is no longer fungible,” said an industry official. While SBI under the government’s direction has set up a Rs. 25,000 crore fund to lend to distressed developers, it is inadequate to address the crisis the sector is grappling with. The industry believes a separate stress asset fund should be created to fund stalled realty ventures.
“The SBI fund could follow a last in-first out model, where the developer would service the new lenders before paying the existing lenders which in many cases would be HFCs or NBFCs. Thus, HFCs may have to categorise the loan as NPA,” said a senior HFC official.
An RBI spokesperson declined to comment on the issues raised by some of the central board members. One of the directors also said that in promoting ‘ease of doing business’ the government should consider pruning paper work and multiple clearances for new entrepreneurs.
FM was accompanied by Anurag Singh Thakur, minister of state for finance, Tuhin Kanta Pandey, secretary (investment and public asset management), TV Somanathan, secretary (expenditure) and Krishnamurthy Subramanian, chief economic advisor.
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