The Punjab government’s farm loan waiver and deletion of kurki clause has resulted in a first ever fiscal crisis for the Punjab State Co-operative Agricultural Development Bank Limited (PSCADB) that provides long-term loans to farmers, with its recoveries plummeting to less than 20 per cent and the bank fearing defaulting on its Rabi installment to its financier.
The bank has sought a one-time bailout grant-in-aid of Rs 150 crore from the cash-strapped state government for paying the installment by July 31, failing which its credit flow from financier, National Bank For Agriculture & Rural Development (NABARD), could stop. Despite two reminders, first in April and second last week, the bank has not been assured of any help so far.
Sources said during a meeting with NABARD functionaries, Punjab’s Finance Department officials were told if the agri-bank defaulted, advances to Punjab would be stopped and state’s guarantee invoked, said sources in government.
Ever since the new government took over in March and reiterated its promise to waive farm loan, most of the farmers have defaulted on repaying their loans. The deletion of kurki clause has only worsened the matters for the bank, which has been able to collect only Rs 167 crore in recoveries while it requires Rs 250 crore to pay the installment, said sources in the government.
Given the bumper wheat crop and smooth procurement this Rabi season, the bank was expecting a recovery of Rs 450 crore between April and June.
Sources said the prevailing confusion over the loan waiver was also compounding the problem. Farmers were hoping every rupee of their loan will be waived while the government had announced waiver of only crop loan not more than Rs 2 lakh for every farmer. PSCADB does not advance crop loans. “It only lends money for long-term investments related to agriculture, but still the farmers have not paid up,” sources said.
A state official said the Punjab government stood as a guarantee to NABARD for financing the agri-bank.
“If we default in July, we will not get finance for the Kharif season. And if we default again in January, (as repayments are done twice a year, by July 31 and January 31), the NABARD could recall the entire amount of loan of Rs 3,500 crore. It is a serious situation. Also, the bank will not be able to lend money to farmers as there is a demand of Rs 1,593 crore for the current fiscal. The bank has never faced a crisis like this since its inception in 1958. The bank was set up to take farmers out of clutches of commission agents. But they surely will fall in their trap again,” the official said.
The Cooperative Department officials have sought a meeting with the Chief Minister to discuss the situation.