Until debt do us part: cotton farmer and the moneylender

Hardly a surprise since the cooperative societies, the institutional system of credit, have gone bankrupt, leaving the field wide open for these moneylenders.

“Even people in the financial sector point out that the private moneylender has his own place and justification,” says Sharad Joshi, founder of the Shetakari Sangathana, which has been leading an agitation for reforms in the agriculture sector. “They should be better regulated in order to improve resources available for agriculture and to augment investment in the farm sector.’’

Instead, there is the Bombay Money Lenders Act, 1947. Not only has it not been revised, it’s not even enforced.

Consider these:

• Under this law, moneylenders need to register themselves. In Amravati, home to 15 lakh farmers, only 235 moneylenders—less than a third—have registered.

• As suicides climbed, in one month, 47 of them were booked, 25 went underground and within days, orders were toned down. The government now wants an inquiry before authorities register a case. No arrests have been made since.

• The law does not allow them to keep land as guarantee, a condition violated with impunity.

• Moneylenders need to inform the government their “loan target” for the year. There is no monitoring.

• There is an interest rate cap, not revised since 1947: 18% when borrowers mortgage something like jewellery, 21% without mortgage. There are moneylenders who charge as high as 100% interest.

“We have no clear guidelines to implement the act and no power to take any punitive action if we find something wrong,’’ admitted B D Zhalke, District Deputy Registrar Cooperative Societies, the man whose job is to monitor moneylenders. “Recommendations have been sent to amend it, give it more teeth but nothing has been done,” said Zhalke.

The reason these loan sharks scent blood is because cooperatives have been crumbling. “When we announced in all Gram Sabhas that no farmer should pay back the sahukars, there was a backlash…the farmers were angry at us and said who will give them money for crops, funerals and weddings,’’ said Harshal Kamble, Collector, Yavatmal, a district that has seen the maximum suicides in Vidarbha.

On paper, the cooperative system is a decentralised system of credit. A farmer is member of a society at the village level called the Principal Agriculture Credit Society. It lends to the farmer and is fed by the district cooperative bank. Above this, is the federal structure — state, Nabard and RBI.

While RBI lends at the rate of 2%, by the time it comes down to the farmer today, it is 13%. In Amravati, all 668 societies have been declared bankrupt as 50% of their members have been unable to repay their loan. Now the bank lends directly to the farmers.

Each time a loan is disbursed, 3% goes towards building shares of the society. Farmers are now asking, where is this money? “If the bank belongs to the farmers, why is it not coming to its aid in times of crisis? While the bank is rich, the farmers are poor,’’ said Jagdish Bonde, district president of Shetkari Sangathana.

This is what the balance sheets read like: Yavatmal, the district with maximum suicides, has money that has share capital of Rs 32 crore in Madhyavartiya District Cooperative bank. This money is lying unused. ‘‘If this is released to the farmer, it will help him in repaying his loan,’’ said Bonde.

Last year, crores were allegedly diverted by Madhyavartiya’s top office-bearers. While their personal assets have grown, thanks to the 3% collected, farmers are finding it increasingly difficult to access credit.

Office-bearers, in turn, blame the sorry state of agriculture. “Cooperatives failed because agriculture has never been good in this area unlike in Western Maharashtra. If they could repay their loans in time, cooperatives would not be in this situation,’’ said Vasant Ghuikhedkar, vice president of the Madhyavartiya bank.

(Tomorrow: Cotton’s there but where are the mills and the markets?)