Finance Minister P Chidambaram said that the Cabinet approved the guidelines for the Farmer Debt Waiver Scheme. The scheme is likely to cost Rs 71,680 crore (unaudited). He said that 3.69 crore small and medium farmers and 59.75 lakh other farmers will be benefited.

Chidambaram said that the scheme will be implemented by June 30 and that the banks and RRBs have 30 days to implement the scheme. He said there would be a full debt waiver for small and marginal farmers. He added that farmers with over two hectares of land would get OTS relief. The OTS relief would be 25% or Rs 20,000 whichever is higher for 237 districts, Chidambaram said. He also said that the short-term crop loan installments would be written off for small, marginal farmers.

Large farmers will also benefit from the government's farm loan waiver scheme. The programme, whose guidelines were approved by Cabinet, amounts to over Rs 71,600 crore i.e nearly 20% more than the original budget estimate of Rs 61,000 crore.

Under the modified scheme, all farmers in 237 identified districts will get debt relief of 25% of the outstanding amount, or Rs 20,000, whichever is higher. There will be complete loan waiver for small and marginal farmers, irrespective of the area they fall under.

The debt waiver and relief scheme will be implemented by the end of June, and all bank branches will be instructed to prepare and display a list of beneficiary farmers.

“The guidelines for the debt waiver and the debt relief scheme have been prepared and have been placed before the Cabinet and they have approved the guidelines,” said P Chidambaram, Finance Minister.

Initially, the Budget estimated the cost of the scheme would be Rs 60,000 crore to the central government and as it turns out the cost of the scheme is in the order of about Rs 71,680 crore, which is unaudited. After the audit there may be some reductions and the scheme will be implemented by June 30 2008.

The Reserve Bank has announced guidelines for the implementation of the farm loan waiver scheme. RBI is defining marginal farmers as those with less than 1 hectare of land. Farmers with between 1-2 hectares will fall under the small farmer category, and the remaining ones will be classified "other farmers".

In the case of a small or marginal farmer, the entire 'eligible amount' shall be waived. They will also be eligible for fresh agricultural loans, upon the waiver of the eligible amount.

For one-time settlements for "other farmers" who will pay installments, the last dates of payment will be September 30, 2008, March 31, 2009 and June 30, 2009.

Farmers who have availed investment credit loans not exceeding Rs 50,000, will fall under the "small farmer" category. If the loan amount exceeds Rs 50,000, the farmer will fall under the "other farmer" category, irrespective of the land holding. RBI has also asked banks to keep records of the loan amount that's waived for farmers according to norms that will be issued by NABARD.