WEEKS before sowing starts across the state for the 2019-20 Kharif season, while the state government is concerned about poor credit uptake in the crop loan sector, farmers and farmer leaders are complaining that access to fresh credit remains poor. The slowing down of crop loans was also discussed at Friday’s stock-taking meeting of officials from across the state ahead of the sowing season, chaired by Chief Minister Devendra Fadnavis.
“It is a misconception that there is a dip in demand for agricultural loans,” said Dr Ajit Navle of the All India Kisan Sabha. “Very large number of farmers are desperately in need of credit right now, for purchase of farm inputs including seeds and fertiliser, and they are unable to access fresh institutional credit either because they’ve become defaulters in the hope of the government relaxing the various conditions imposed on its loan waiver, or have restructured their loans and banks are unwilling to allow them fresh loans.” Navle said the numbers of farmers who will return to private moneylenders or others offering usurious rates of interest will rise this year.
For the year 2019-20, the State-level Bankers’ Committee (SLBC) has set an annual credit plan for agriculture of Rs 87,322 crore, little lower than the previous year’s target. Over the last two years, only 50 to 60 per cent of the crop loan targets have been met. Several officials interpret this as a dip in demand for fresh credit.
Professor R Ramakumar of the Tata Institute of Social Sciences says a declining growth of agricultural credit is an all-India trend for the last three or four years, and is not restricted to Maharashtra alone. While it’s not easy to assess if this is a supply or demand question, Ramakumar says banks have historically slowed down offering of fresh credit to farmers after a loan waiver, a trend witnessed after previous loan waivers. The Maharashtra government announced a Rs 24000 crore farm loan waiver in June 2017, and has so far waived off loans to the tune of Rs 16,000 crore.
“On the demand side, are farmers demanding less credit due to distress? This can be seen two ways. On one hand, farmers may be cutting down on costs because of the agrarian distress, perhaps not undertaking a lot of operations and not spending as much as they did previously. On the other hand, the reverse is also possible, farmers may want to intensify operations to make up for previous losses and may want more credit. It is difficult to say which is true,” he says.
But owing to the widespread financial distress over the past two-three years, farmers and especially those with Kisan Credit Cards would likely be seeking loans beyond the Rs 2 lakh-Rs 3 lakh segment for consumption, or for non-agricultural purposes – although these would also be counted as agricultural loans in banks’ books. “Some of that borrowing would have happened,” says Ramakumar. “And if it has happened, then credit uptake should have risen. But it has not, and so by method of elimination the conclusion appears to be that maybe fresh farm loan applications are not being granted loans.”
Incidentally, in April, Bank of Maharashtra, the lead banker for the SLBC, issued a circular instructing branches in six districts of Maharashtra, all drought-hit districts, not to issue fresh crop loans at the branch level. Titled ‘Analysis of Agriculture Portfolio: Special Emphasis on NPAs under Agriculture’, the April 18 circular called the condition of the bank’s farm loans “pathetic”, with gross NPAs as a percentage of total agriculture sector advances standing at 18.36 per cent at the end of 2018-19. This percentage has been growing — it was 11.3 per cent on March 31, 2017, and 15.38 per cent on March 31, 2018.
Fresh slippages for Bank of Maharashtra stood at Rs 1,300 crore in 2018-19, up from Rs 865 crore in 2016-17 and Rs 977 crore in 2017-2018. The circular basically told branches in zones where NPAs are over 15 per cent not to sanction new loans or enhanced credit proposals at the branch level. Instead, genuine cases of existing borrowers with a “good track record” and new clients should be tapped and recommended to the higher authority for sanctions based on merit. Other banks including district central cooperative banks have similarly witnessed rising NPAs in the agriculture sector.
“The growing NPAs could mean that farmers are awaiting fresh loan waivers,” said one district collector from Vidarbha. Ahead of elections to the state Legislative Assembly in October this year, Chief Minister Devendra Fadnavis has already indicated that an extension of the 2017-18 loan waiver may be inevitable.
Ramakumar says data shows that while some farmers may be able to repay, they deliberately do not do so in anticipation of a loan waiver, the large majority comprises farmers genuinely affected by distress and unable to repay their loans.
According to CPI leader and farm activist Rajan Kshirsagar in Parbhani, in large parts of Marathwada, farmers who have applied for loans have been refused. “Some have been unable to get their loans restructured. Fresh applications, even from the large numbers who still don’t have access to institutional finance, are not being entertained. And then there are those whose loan waiver process is not completed for technical reasons and so are still ineligible for fresh loans,” Kshirsagar says.
In addition, those with an outstanding older loan from perhaps two seasons ago, or from a non-drought year, have been rendered defaulters and are now unable to get renewed credit. “It is going to be a very stressful situation as the monsoon approaches and the time for sowing nears,” he adds.