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C. Shivkumar

BANGALORE, Aug. 12

BANKS have begun lodging crop insurance claims with the General Insurance Corporation of India (GIC) on account of failure in the kharif crops.

These claims are from some of the public sector banks, which have covered farm loans with crop insurance. But sources said that crop insurance coverage encompassed barely 10 per cent of the farming community. For the kharif season, GIC sources said here that only about Rs 300 crore had been collected as premium from the farmers towards crop insurance.

But the cost of these premiums are partially subsidised by the Centre and State Governments. Crop insurance premiums are currently in the region of 1.75 per cent to as high as five per cent of the sum assured depending on the nature of the crops.

Besides only farmers who have availed themselves of credit from public sector banks, regional rural banks and cooperative banks are compulsorily covered under the crop insurance scheme.

Public sector banks have already made crop insurance one of the mandatory covenants for credit support to the farming community. Consequently, banking sources said, that some of the outstanding loans to the farmers affected by the drought would be set off against the outstanding claims.

This will accordingly alleviate the farmers who have taken crop insurance cover from any build up debt. But the sources said, "We would like to have claims filed before the last date."

The deadline for the submission of the claims is the end of this month. And some of the banks and State Governments are yet to lodge the claims. The sources said that in the past if farmers debts have accumulated, it was entirely the responsibility of the banks and the State Governments who have often breached the deadlines and leading to rejection of claims. As a result the debts could not be set off against the claims. This consequently led to an accumulation of debt.

This year, sources said, GIC was exerting pressure on both the banks and State Governments to prevent such a situation and insisting that the claims be filed before the deadline. This was to ensure that the debt burden of the agriculturists could be mitigated through setting of claims against outstanding debts.

Crop insurance has traditionally had high claims ratios from various part of the country. The claims ratios during normal periods are estimated to be in the region of about 12.5 times the premium recovered from subscribers. These claims in the past have been mostly from the southern, western and eastern regions of the country, which are most prone to natural calamities. This year, the claims ratios are expected to escalate in view of the drought situation, which has affected even part of the northern regions.

But the liabilities arising out of these claims are unlikely to impact GIC. This is because the entire claims payouts are equally shared between the Centre and State Government equally. GIC would also be expected to carry out the field investigations to verify the authenticity of the claims, the sources said.

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