The High Court of Gujarat recently reprimanded the State Bank of India for not issuing a dues exemption certificate to a farmer due to pending dues of just believe it or not 37 paise (not Rs.) in his accounts!
This should be read with the statistics that the same bank has canceled loans amounting to Rs. 34,402 crore (one crore = 10 million) in the financial year 2020-21.
The difference between the two situations was that most of these loans had been taken out by very wealthy and influential people or companies.
However, a recent study by this bank on small loans taken out by borrowers of modest means (mostly peddlers) revealed that most of them had been reimbursed according to standards and the track record of prompt recovery was quite good. This happened under a government program PM Swanidhi despite the many difficulties faced by these borrowers in exceptionally difficult times.
Recently, there was an alert in the villages of Punjab when arrest warrants were issued against the names of nearly 2,000 farmers who had failed to repay their loans taken out with the Cooperative Agricultural Development Bank of Punjab. State of Punjab.
As the farmers’ movement in this state is very strong, there was a great outcry against this and so the arrest warrants had to be withdrawn by the newly elected government, nevertheless this episode proved to be a cruel reminder that arresting a farmer for defaulting on a relatively small loan remains a possibility even in a state where farmers’ unions are said to be the strongest in the country.
In fact, worries about their growing debts, in turn caused by a number of unfavorable factors, have been a very important reason for farmer suicides. Recently in Punjab, many farmers experienced a sharp reduction in wheat yield due to unfavorable weather conditions and issuing arrest warrants for non-payment of small loans at this time was a particularly insensitive decision, given also that a new government has just been elected that promises justice for farmers. Already around 15 farmer suicides have been reported in Punjab since the formation of the new AAP government here.
In fact, during a report by Bundelkhand, this author realized, based on conversations with several farming households, that non-payment of loans was the main concern of these farmers, which ultimately in some cases leads to suicides. Banks, including rural banks, in some cases employed strongmen as loan collectors who used very foul language. Self-respecting farmers dreaded these meetings and some of them chose to end their lives. Yet the fact remains that their economic problems and non-payment of loans are in most cases due to very erratic and adverse weather conditions in times of climate change over which they have no control.
In addition, the loans were often part of a more expensive agricultural technology that was promoted strongly by a network of civil servants, banks and companies. Because of these heavy-handed promotion tactics, small farmers who didn’t really need tractors were tricked into making this unsustainable and certainly avoidable purchase.
I also noticed that some influential and politically well-connected villagers had become middlemen who arranged easy loans for villagers, but only after taking a hefty commission for themselves. They forwarded part of it to bank officials.
Yet another undesirable trend was that when farmers were to receive or give a certain amount under various government programs, this amount would be adjusted in their loan accounts by the banks without even notifying them.
As a result of all these factors, farmers’ debt worries in most parts of the country have increased. However, banks have been much less lenient towards them and other small borrowers compared to wealthy and influential borrowers. In recent years, small entrepreneurs have suffered greatly due to several unfavorable policies including demonetization, GST and longer than necessary lockdowns and as a result their ability to repay loans has been affected, but they have not generally not been well received by the banks.
On the other hand, banks have accumulated bad debts or non-performing assets linked to influential and wealthy borrowers, some of whom have become accustomed to living a life of luxury based on clever management of borrowed money.
Since the Modi regime took power in 2014-2015, bank loans worth more than Rs. 10 lakh crore have been written off (10 lakh = million). In the financial year 2020-21 alone, around Rs. 2 lakh crore was written off. These contributions mainly concern wealthy and influential borrowers. Over the past 5 years, amortizations have more than doubled recoveries. Nearly 75% of these abandonments relate to public sector banks.
Additionally, in many cases, banks have often refused to release the names and contact details of people and companies whose huge loans have been forgiven.
It is clear that these distortions in the banking system need to be corrected urgently.
Bharat Dogra is the honorary organizer of the Campaign to Save Earth Now. His recent books include Man Over Machine (Gandhian Ideas for Our Times) and India’s Quest for Sustainable Farming and Healthy Food.