Allow farmers to bank on the system

The farmer was undergoing dialysis and was unable to repay his loans owing to the pandemic-induced losses. The manner in which the nationalised bank in question chose to freeze the farmer’s account without intimating him draws our attention to the glaring absence of a financial security net for farmers in India. Data from the National Crime Records Bureau (NCRB), recounts the number of farmers who committed suicide in 2019 - as many as 10,269. And most of them due to their inability to repay bank loans and the high degree of indebtedness. The scene is grim in Tamil Nadu too where 427 farmers and farm labourers died by suicide in 2019, an increase of 6% in deaths compared to the previous year. Representatives from the Tamil Nadu Vivasayigal Sangam, have zeroed in on the policies pursued by the Centre as being instrumental in compelling farmers to take such measures.

On the other hand are defaulters who have the ability to pay back loans but have wilfully chosen to ignore that aspect of the relationship with their lenders. The All India Bank Employees Association (AIBEA), had compiled a list of wilful defaulters last July. It names borrowers who had collectively failed to repay Rs 1.5 lakh crore in loan accounts, distributed among 2,426 accounts maintained by 17 public sector banks. And many of these aren’t your ordinary farmers or labourers. They are high net worth borrowers backed by cash-rich promoters, who can engage banks into year-long legal battles. One only has to look at the cases of individuals such as liquor baron Vijay Mallya, or diamantaire Nirav Modi or Mehul Choksi.

These developments call into question the very nature of lending institutions such as public sector banks and microfinance providers. One could argue that these institutions are accountable to the RBI, the investors, and stakeholders, which include other borrowers as well. This would make it difficult for them to extend leniency to one borrower, which could set off a chain reaction of thousands of more defaults. However, one only has to look at the selective amnesia or indifference employed by public sector banks that have allowed the quantum of wilful defaulters to surge in India. Last September, in a baffling turn of events, the RBI said it has no information on loans of the top 100 defaulters as well as wilful defaulters that banks had written off after the Apex Bank had pegged the total write off of the largest 50 wilful defaulters at Rs 68,600 cr. In fact, PSBs have shown a rising trend of bad loan write-offs for a while now. AIBEA says that bad loans worth Rs 5.48 lakh crore were written off by PSBs over the six years leading up to 2019.

The deep divide is further amplified when one realises that these preventable deaths were on account of relatively meagre borrowings, sometimes ranging in the thousands. So, how exactly can we remedy this situation? One solution could be to examine the coverage under the crop insurance scheme, which needs a much higher uptake among the farming community. Out of the 14.65 crore farmers (as per Agricultural Census 2015-16), just about 2.68 crore farmers (18.2 per cent) are covered under the PM Fasal Bima Yojana. Apart from this, there is also the need to widen the net when it comes to access to credit from financial institutions. Last year, the scandal involving the Tamil Nadu Pradhan Mantri Kisan Samman Nidhi farming subsidy saw over 80,000 beneficiaries when only 4% were genuinely eligible. Going ahead, a coordinated and sustained effort coupled with reformative intervention must be undertaken by both the Centre (with the new farm laws) and the State to help farmers genuinely benefit from these schemes