Banks propose setting up INR 70,000 crore fund for farmers

Agriculture: Public sector banks who have significant exposure to the agriculture sector, have asked the government to set up a credit guarantee fund that will cover defaults by farmers. This, they said, will make lending to the farm sector less risky for banks.

The banks have proposed that the government provide an initial corpus of INR 70,000 crore over three years for the fund. The idea for the fund draws from the Credit Guarantee Fund Trust for Micro and Small Enterprises, which compensates lenders for losses they might incur when lending to small enterprises. This fund covers up to 85 percent of the outstanding amount in the event of a default.

The farm sector accounts for a significant proportion of bad loans for many banks. According to Reserve Bank of India’s (RBI) Trends and Progress Report, the total gross non performing assets (NPA) in the agriculture sector stood at INR 1.26 lakh crore at the end of March 2020, which is 15 percent of the total NPA.

The hope is that with the setting up of the fund, banks will be encouraged to lend to the sector. According to NABARD, in 2019-20, credit to the agriculture sector reached INR 13.68 lakh crore, 8.8 percent more than the previous year. Banks are also hoping that the credit guarantee fund will obviate the need for farm loan waivers by states.  

Read this article on how we can safeguard farmers through the projected decline in supply, demand, and value in the agriculture sector.

Fundraising & Communications: The Ministry of Home Affairs (MHA) has issued a circular extending the validity of FCRA registration certificates to September 30th, 2021. This applies to all FCRA licences that have expired or will expire between September 29th, 2020 and May 31st, 2021. The decision to extend the deadline has been driven by the exigencies arising from the COVID-19 situation.

FCRA refers to the Foreign Contribution (Regulation) Act 2010, which permits charitable organisations based in India to raise funds from foreign sources.

The order also clarified that nonprofits that have already opened an account and have the requisite permission to receive foreign aid, can henceforth receive it only in these newly-opened accounts.

The FCRA law was amended in September 2020 to include a clause that mandated that all nonprofits receiving foreign aid must necessarily open an account in State Bank of India’s New Delhi Main Branch. The government had initially set the deadline for this account opening as March 31st, 2021; it later extended it to June 30th, 2021 after several nonprofits argued in court that there had been delays because necessary approvals from MHA had not been received.

Several organisations have not been able to receive foreign funds during the crisis caused by the second wave, and this has impacted their COVID-19 relief efforts. Relaxing the foreign funding rules could significantly help organisations ramp up their operations to help individuals, supply critical healthcare equipment, and respond to communities in rural areas.

Read this article to know how amending the FCRA can have unforeseen implications.

Philanthropy & CSR: The Ministry of Corporate Affairs (MCA) has issued a circular that allows corporate spending on health infrastructure for COVID-19 care to qualify as corporate social responsibility (CSR) expenditure.

This includes setting up medical oxygen generation and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders, and other medical equipment to counter COVID-19.  

The announcement comes at a time when all efforts are being directed towards expediting efforts to support the country’s healthcare infrastructure.

According to the circular, companies can now undertake projects and activities in collaboration with other companies using CSR funds. Additionally, they can contribute to specified research and development projects, as well as publicly funded universities and certain organisations that conduct research in science, technology, engineering, and medicine.

The government had earlier clarified that setting up makeshift hospitals and temporary COVID-19 care facilities would also be considered a CSR activity. Rajesh Verma, the Corporate Affairs Secretary, has requested businesses to consider converting vacant office buildings into COVID-19 facilities to cater to the rapidly increasing caseload.

Read this article to understand why media attention on COVID-19 deaths due to lack of oxygen in big cities has skewed donor priorities.