Despite loan waiver, why Maharashtra farmers stare at moneylenders again

The Rs 15,687.76-crore decline in fresh institutional crop loan disbursements is more than the Rs 13,782 crore of outstanding farmers’ bank debt waived until now under the Devendra Fadnavis government’s scheme.

Written by Parthasarathi Biswas | Pune | Updated: March 14, 2018 11:34 am
Maharashtra farmers protest crop loan waiver disbursement Banks, as on March 6, had been “permitted” to grant Rs 23,102.1 crore worth waiver against 46.34 lakh farm loan accounts under the Chhatrapati Shivaji Maharaj Shetkari Sanman Yojana. (Express Photo)

On March 9, presenting Maharashtra’s budget for 2018-19, state Finance Minister Sudhir Mungantiwar declared that bank loans totalling Rs 13,782 crore owed by 35.68 lakh farmers have so far been waived under the government’s debt writeoff scheme. Also, banks, as on March 6, had been “permitted” to grant Rs 23,102.1 crore worth waiver against 46.34 lakh farm loan accounts under the Chhatrapati Shivaji Maharaj Shetkari Sanman Yojana, a scheme announced after the unrest among farmers in June 2017.

What the minister’s statement did not mention was the credit crisis brewing in Maharashtra. The crisis has to do with a virtual collapse of institutional credit in the form of crop loans, even while a farm debt waiver scheme is being implemented. The end-result could be farmers being pushed further, this time into the insidious snare of private moneylenders.

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The accompanying table shows that total crop loan disbursements in Maharashtra from banks during the current fiscal (from April 2017 to February 2018), at Rs 23,228.06 crore, has been Rs 15,687.76 crore or 40.3 per cent below the amount for the corresponding period of 2016-17.

Maharashtra farmers protest crop loan waiver disbursement

Scheduled commercial banks (which include regional rural banks) as well as district central cooperative banks have reported lower disbursement of crop loans during April-February 2017-18 over April-February 2016-17.

Incidentally, the Rs 15,687.76-crore decline in fresh institutional crop loan disbursements is more than the Rs 13,782 crore of outstanding farmers’ bank debt waived until now under the Devendra Fadnavis government’s scheme.

Read | Loan waiver no solution, make farming viable: M S Swaminathan

Simply put, the waiver — the total cost was pegged at Rs 34,022 crore, but might go up with the decision Monday, after the farmers’ rally in Mumbai, to extend the scheme to tribal cultivators with outstanding loans taken before 2009 — has led to a situation where banks are reluctant to extend further credit.

After covering 180-kilometres — 35 km every day for six days — nearly 40,000 farmers carrying red flags converged in Mumbai around 5 am on Monday to press for their demands. Express photo by Deepak Joshi

This has been admitted as much by the State Level Bankers’ Committee (SLBC), a forum of institutional lenders and top state government officials that meets regularly to take stock of credit flows to priority sectors. At its last meeting on February 22, the collapse of institutional lending to the farm sector came up for discussion. “Reasons for low credit offtake this year can be attributed to the announcement/implementation of farm loan waiver scheme by Government of Maharashtra,” read the minutes of the meeting accessed by The Indian Express.

Express Explained | New edge to agrarian distress: Why demands are more than loan waiver

The ultimate victim of this could, however, be the farmer. With access to institutional credit significantly curtailed, farmers would obviously have had to approach private moneylenders to finance seasonal agricultural operations. That would, of course, entail borrowing at far higher rates — at least 36 per cent per annum, as against 7 per cent on Kisan Credit Card crop loans after interest subvention — pushing them further into debt.

The Maharashtra government’s own Economic Survey estimated a 28.7 per cent jump in loans given out by registered private lenders — from Rs 1,254.97 crore in 2015-16 to Rs 1,614.76 crore in 2016-17. This figure would only have gone up further during the current fiscal, while also not including lending by those not registered with the state government. Maharashtra had, as on March 2017, 12,214 active licensed moneylenders.

According to Ramesh Thorat, chairman of Pune District Central Cooperative Bank, uncertainly over loan waiver had led to a spurt in non-performing assets this year, as many farmers defaulted in the expectation of benefiting from the scheme. But in the process, they became ineligible for new crop loans.

Thorat’s own bank reported new lending of only Rs 1,394.04 crore during the current fiscal until February 28, compared to Rs 1,678.61 during the same period of 2016-17.

“Things may have been different had the state government managed to finish at least the identification of loan waiver beneficiaries by, say, August, when kharif season plantings were still on,” Thorat pointed out.

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  1. T
    T K Ramkumar
    Mar 15, 2018 at 12:30 pm
    It is obvious loan waivers are political gimmicks and a drain on public ex chequer.An handy tool for disgruntled political parties for showcasing one upmanship.
    1. Laurent Bern
      Mar 14, 2018 at 12:26 pm
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      1. V Janardan Rao
        Mar 14, 2018 at 12:08 pm
        Tragedy is that the powers that be, the Ministers, high officials of the Banks do not realise the pain and compulsions of the poor kisans.Would a kisan go for a loan from a private money lender ( THERE ARE MORE THAN 12, 000 REGISTERED MONEY LENDERS IN M'RASTRA, AS PER THIS NEWS STORY ! ONE CAN IMAGINE THE NUMBER OF UNREGISTERED MONEY LENDERS. ), paying exhorbitant rate of interest, if he could avail the facility from a Bank ? The failure of the govt. and the Banks is eviden in the number of private money lenders and their flourishing business ! What a shame !This, when Nirav Modis and Choksis can avail thousands of crores in the name of "loans " from these very Banks ! And deliberately avoiding to pay ! The Banks indulge in such practices simply because they are sanguine that they are practising the undeclared policies and outlook of the Government. Would they ( the Banks ) act in this way if they were not sure that the government is behind them ?
        1. R
          Rakesh Kumar Sinha
          Mar 14, 2018 at 11:36 am
          Reasons, take loan from sarkari banks as it will be waived. Take loan from money lenders. Use it for personnel gains. Cry ser again. Take a bigger loan from psu banks. Let jholawalas raise the plight in media. Loan is again waived. This cycle goes on and on.
          1. balaji baliarsingh
            Mar 14, 2018 at 8:50 am
            All the political parties playing dirty politics. No leader with proper vision is found in any party at the moment in india. This is the biggest challenge country is facing now.We had tested congress so many years, we had tested Communist also for so many year . There was a last hope in BJP. Now it also proved worthless. So now at this moment no body is good enough who can bring drastic change in the country towards development. All the leaders n parties as well are narrow minded politician only dying for short term gain only closing their eye for the future danger. God will save the country. Sincere love towards God can save us only. But it is very difficult to find the sincere lover of God. Love to Gods means loving all the souls , controlling the greedy, Understand the uncertainty of life, be satisfied with things life has given u. But it is not possible in present age. Unfortunately the qualities identified as demonic is in full demand in the present age. Such is the fate.
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