Agrarian Distress: State to bring in stringent norms for private moneylenders

The ministries of cooperation, finance and agriculture are working out guidelines to ensure that farmers forced to seek loans from licensed private moneylenders are not financially overburdened.

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Licensed moneylenders will be asked to bring down interest, and give farmers more time to repay loans.
Last week, Chief Minister Devendra Fadnavis spelled out a slew of reforms and interventions to reschedule loans availed by farmers from recognised district cooperatives, and national banks.

The most significant was bringing down interest from 12 per cent to 6 per cent, extending zero interest loans to farmers in the first year, and increasing repayment period from the existing three years, to five years.

A senior official in the ministry of agriculture and cooperation said, “It is our endeavour to bring similar reforms in the private moneylending business. The government cannot get rid of private moneylenders. The only way is to ask them to follow guidelines or face stringent punishment.”

“We have come across cases where farmers sought loans in desperation at 30 to 40 per cent interest,” he added. A source said licensed private moneylenders would be asked to keep interest rate between 9 and 12 per cent.
Sources revealed, “There is no account of how many farmers seek financial help from non-licensed private moneylenders. Their operations are discreet. We need to strengthen monitoring mechanism.”

“Exploitation of farmers by licensed operators, if reported, will lead to cancellation of license,” said an official.
In 2013, 347 licenses were cancelled and in 2014, 450 were cancelled.

Fadnavis said, “Sweeping reforms in loan rescheduling is to make farmers less dependent on private moneylenders. It is our relentless effort to strengthen financial institutions to ensure farmers can have easy access to loans.”

Conceding that banking norms make it mandatory for some discipline in loan repayment, he said, “The government would step in, to give farmers a breather in the first year to give zero interest loans. But we will simultaneously have to provide alternative financial support to farmers who have small land holdings and whose repayment capacity in times of crop losses is the worst.”