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Karnataka government plans bill to free farmers of all debts

In an attempt to help small farmers break free from the vicious cycle of debt, the Karnataka cabinet has decided to pass an ordinance that will nullify all loans availed from the informal sector, incl

Published: 25th August 2018 03:09 AM  |   Last Updated: 25th August 2018 03:20 AM   |  A+A-

By Express News Service

BENGALURU: In an attempt to help small farmers break free from the vicious cycle of debt, the Karnataka cabinet has decided to pass an ordinance that will nullify all loans availed from the informal sector, including private money-lenders. However, the relief will be applicable only to small farmers and farm labourers.

The cabinet on Friday cleared the ‘Karnataka Debt Relief Bill 2018’, which aims to give a one-time relief to landless farm labourers and small farmers. All loans obtained by small farmers and farm labourers from private money- lenders, with no maximum cap, will be written off if the ordinance is cleared by the President. With the assembly not in session, the cabinet has decided to take the ordinance route. The decision comes on the day the cabinet also cleared the path to repay Rs 30,163 crore, including full interest, to nationalised banks as part of its mega farm loan waiver.

Ordinance will not cover non-banking financial companies

The bill will not apply to Non-Banking Financial Companies coming under RBI, but will apply to all other private monetary institutions, registered or unregistered, that come under the state government’s ambit. The bill proposes to make farmers with up to two hectares of land and farm labourers with an annual income not exceeding Rs 1.25 lakh ‘debt-free’ without repayment of loans borrowed from informal sector, including pawnbrokers and private money lenders. Any belongings pledged as a guarantee should also have to be returned.The ordinance will render all agreements and documentation made between private lenders and borrowers null and void, essentially relieving the borrower of all repayment. A similar Act was promulgated by Karnataka in 1976 and 1980. On similar lines, the state government has decided not to reimburse lenders but protect loanees from recovery.

What is exempted?
Arrears on revenue tax
Arrears on taxes due to any central or state government boards
Arrears on labour charges and salaries
Arrears to central or state agencies and cooperatives
Loans from govt cos
Life Insurance
Institutions registered under Karnataka Cooperative Societies Act
Loans taken on instalments

How it will work
The ordinance compels money lenders to give details of loans. Those who force recovery are liable to be jailed for up to one year with a fine of Rs 1.25 lakh.

Who is covered
  Farmers with up to 2 hectares of dry land
 Farmers with up to 1.5-acre rain-fed agricultural land
  Farmers who own up to half an acre irrigated land
  Small farmer or agricultural labourer whose annual income doesn’t exceed Rs 1.25 lakh



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