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.
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.
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.
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.
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.
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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.