The Maharashtra government’s much-publicized loan restructuring plan for farmers in the state, which it claimed would be a big step in enabling drought-stricken farmers to access credit for this year’s kharif season, turned out to be a wet joke. .
In March, several ministers were quoted in the media as saying that due to drought in several areas of Maharashtra, farmers who took crop loans from 2013-14 and were unable to repay them could restructure their loans. This would allow these farmers to obtain new loans for the next planting season, which started in June. Media reports from April and May also He suggested the government was restructuring three-year loans.
However, the government resolution of April 26 mentioned that loans would only be granted for one year’s crops, 2015-’16. eligible for restructuring.
the tarnished stain
There are thousands of farmers in Maharashtra who have defaulted on loans since 2013 thanks to consecutive years of drought. So this season, in places like Marathwada, farmers don’t have the money to plant new crops. With several indebted farmers selling cattle, gold and jewelry to get by during recent years of drought, new loans are often the only way farmers can plant new crops. It doesn’t help that planting costs have increased due to inflation.
Apparao Chinchole from Khudawadi village of Osmanabad district had taken a cultivation loan of Rs 2 lakh from the State Bank of India for the 2013 kharif season.
Chinchole paid the interest on that loan that year and rolled over the loan account in 2014-’15, as is common practice in these places.
Farmers do this on occasions when they cannot pay the principal amount. This allows them to keep the account running to prevent them from showing up as delinquent. A checking account makes farmers eligible for a fresh crop loan; defaulters do not obtain new loans.
However, in 2015-16, Chinchole was unable to pay even the interest, and was marked as delinquent.
“The moment we go to the bank, the officials interrupt us, telling us that we are delinquent and that they will not give us any loans,” said Chinchole.
Some bank branches have even issued written statements expressing their inability to provide crop loans.
Low demand for restructuring
According to data available at the divisional commissioner’s office in Aurangabad, although 7.8 lakh farmers are eligible for loan restructuring, very few applications have come in and only 1.40 lakh have been processed in eight districts. In fact, the restructuring is completed only in 18% of cases.
An official from the Central Cooperative Bank of the Latur District said that only 11 farmers in the entire district have applied to restructure their loans.
Farmers are reluctant to restructure their loans because of the crippling interest they then have to pay.
In Maharashtra, farmers do not have to pay interest on crop loans up to Rs 1 lakh. Therefore, most farmers benefit from these interest-free loans, which are usually for one year.
“Restructuring is a loss-making exercise for the farmer,” said Annasaheb Patil in the Wadwal village of Latur.
This is because loan restructuring means converting the principal of a zero-interest crop loan into the principal of a five-year, high-interest loan. This places a heavy burden on farmers, who would prefer to do without it.
“I had taken a loan in 2013 for sugar cane,” Chinchole said. “So the credit available for harvesting was around Rs 32,000 per 1 hectare. [2.5 acres]. Today, even if I take a loan for my entire seven-acre soybean plot, I will not get more than Rs 20,000-25,000. In addition, the restructuring will mean that I will have to pay higher interest rates for the next four years.”
VB Chandak, director (administration and accounts) of the Central District Cooperative Bank in Osmanabad, showed a rare empathy among bank officials and bureaucrats regarding the plight of drought-affected farmers.
“The person who could not pay 0%-2% interest [on the original loan] you just won’t be able to afford the 6%-7% interest [on the restructured loan]Chandak said.
His awareness of the stress that the four-year long drought has placed on the average farmer can perhaps be attributed to the fact that he is from a farming family and works on the family farm himself on weekends.
Banks are tough
Strangely, eligible farmers who are willing to restructure their loans also have a hard time getting new ones. These farmers accuse the banks of delaying the restructuring process.
“They say I can’t get a loan unless my previous loan is restructured,” Prasad Gogave told this correspondent at a tea stall in Naldurga village in Osmanabad district. “I submitted my restructuring request a month and a half ago. But every time I go to the bank, they tell me that the process is not complete yet. And they keep denying me a new loan.”
As further proof that the government of Devendra Fadnavis is not really serious about helping farmers, in May the state government issued a government resolution that extended the deadline within which banks had to complete the restructuring process of loans. As of April 30, the deadline was moved to July 31.
The planting window for the Kharif season in Maharashtra lasts until mid-July, at the latest the third week of July, which is upon us.
Thus, this government order effectively gave banks an additional reason to continue denying loans to farmers, possibly until the need for credit ended, which coincides with the end of the planting season.
Loan denials are pushing farmers into the arms of private moneylenders, microfinance institutions and non-bank financial institutions that operate without regulation.
By the way, dozens of such institutions offering easy loans have opened shops at the district headquarters in Marathwada in the last two or three years. Some have even reached the taluka level.
When last heard of, everyone was getting great interest on easy credit: land, vehicles, houses, tractors, anything mortgaged.
The author is a senior correspondent for the statesman and a doctoral fellow at the Center for Studies in Social Sciences, Calcutta.