The working group on risk management in
(viii). Credit & Insurance Linkage
Download 0.68 Mb. View original pdf
|
| 4.2.(viii). Credit & Insurance Linkage: NAIS has a credit link, and hence appropriate controls in credit disbursement would come in handy ineffective implementation of the scheme. For example, NAIS would require crop-wise, insurance unit-wise, season-wise and month-wise details of disbursement, as eligibility of claims would depend on these parameters. In other words, it would require that in the Kisan Credit Card (KCC), that the Maximum Borrowing Limit (MBL), should be fixed separately for crop production credit and for ancillary activities. Within crop production credit, the limits have to be fixed season wise and crop wise, on the basis of acreage proposed and scales of finance. Most importantly the KCC holder at the time of borrowing withdrawing money from his account, should furnish the season and crop wise breakup, to enable the bank to correctly reflect insurance coverage. NAIS even after modifications in future, would have to draw heavily from credit controls exercised by bankers. It has been suggested at many levels, that insurance coverage be de-linked from credit ‘disbursement’ not only to overcome operational difficulties, but also to minimize adverse selection. Any insurance link with actual disbursement, is only going to get more complex, as the banks are thinking of issuing ATM friendly credit cards, which could further reduce the ‘banker–farmer’ interaction. The suggestion, is that insurance coverage be provided on the basis of maximum borrowing limit, instead of loan amount actually availed, which would otherwise require tracking down each installment with respect to season, crop, etc. This would also help to advance the cutoff dates for loanee farmers, at par with non-loanee farmers, and minimize adverse selection. It also has other benefits, like accurately recording insured acreage crop-wise. While the issue needs to be debated with the Financial Institutions and NABARD, to find an appropriate mechanism, the Group felt, that MBL could be fixed as the sum insured and insurance effected at the beginning of the crop season. The farmer would bear the responsibility, to communicate by st July (Kharif) and 31st December (Rabi), if the crops for which the credit limits have been fixed, have not been sown. The insurance coverage provided based on MBL, would be treated as final, if no communication is received from the farmer by these dates. The Group suggests an insurance approach based on - (i) individual approach and (ii) weather insurance model. Download 0.68 Mb. Share with your friends:
|