The banks in Punjab have decided to adopt a block in each district following the slow progress of the ‘Debt Swap Scheme'.

This step has been taken to free the farmers from the clutches of money lenders who harass them by charging preposterous rates for loans.

Punjab National Bank, the leading bank in the state has recently come up with some amendments in the Debt Swap Scheme. According to this, if a borrower requests for loan then at the discretion of the branch manger entire loan of Rs 50,000 may be disbursed to the credit of borrower's saving or Kissan Credit Card and the receipt for payment from the moneylender may not be required.

The scheme has come up as a beneficial aid to both the borrowers as well as the banks. Other than helping banks meet their priority sector lending norms, the scheme is beneficial as it involves minimal risk.

"The risk of lending is much less in case of debt swap as the loan is given to farmers who already have security deposits with the bank in most cases. Standalone debt swap is relatively rare," said an executive of Uco Bank.

Banks have turned to extending this scheme mostly to existing borrowers. The interest rates in this case are PLR based. So interest rates charged are low.

In contrast, the money lenders used to charge exorbitant rates. Moreover, most of these money lenders are not registered as per state provisions. They would thus lend privately and also without any documentary proof of the process.

"We conducted a survey and found that in certain cases moneylenders charge as high as 96 per cent annually. Giving bank loans to such borrowers is a win-win situation for both... We will take the scheme forward in the coming days," said George Joseph, CMD, Syndicate Bank.

To overcome this problem, PNB has decided to allow financing under the scheme on the basis of affidavit of the farmer.

The total disbursement target for the year 2009-10 as set by SLBC (state level bankers committee) data and compiled by Punjab National Bank is Rs 27,122.54 crore. Further, the target for the debt swap (on the basis of 3 per cent of agriculture) is 813.68 crore.

So far none of the private sector and cooperative banks in Punjab have provided assistance to farmers under the Debt Swap Scheme.

The only banks to have come up with assistance under this scheme are regional rural banks and public sector banks.