Gujarat High Court recently reprimanded the State Bank of India for not issuing a fee-free certificate to a farmer due to outstanding fees of only, believe it or not, 37 paise (not Rs.) on their accounts!
This should be read in conjunction with the statistics that the same bank wrote off loans worth Rs. 34,402 crores (one crore = 10 million) in fiscal year 2020-21.
The difference in the two situations was that most of these loans had been taken by very wealthy and influential individuals or companies.
However, a recent study by this bank of small loans taken by borrowers of modest means (mostly street vendors) revealed that most of these were reimbursed as per regulations and the track record of prompt recovery was quite good. This happened in the context of a PM Swanidhi government program despite the many difficulties faced by these borrowers in exceptionally difficult times.
There was a scare in the villages of Punjab recently when arrest warrants were issued against the names of nearly 2,000 farmers who had defaulted on their loans taken from the Punjab State Cooperative Agricultural Development Bank.
As the farmers’ movement in this state is very strong, there was a huge protest against this and the newly elected government had to withdraw the arrest warrants, however this episode turned out to be a cruel reminder that the arrest of a farmer for default, a relatively small loan is still a possibility even in a state where farmers’ unions are supposed to be the strongest in the country.
In fact, concerns about their mounting debts, themselves caused by a number of adverse factors, have been a very important reason for farmers’ suicides. In Punjab recently, many farmers have experienced a large reduction in wheat yield due to adverse weather conditions and issuing arrest warrants for non-payment of small loans at this time was a particularly insensitive decision, also considering that a new government has just being elected promises justice for farmers. Around 15 farmer suicides have already been reported in Punjab since the formation of the new AAP government here.
In fact, while reporting from the Bundelkhand, this writer realized, based on conversations with several farming households, that non-payment of loans was the main concern of these farmers, ultimately leading them in some cases to suicide. Banks, including rural banks, in some cases employed strong muscular men as loan recovery agents who used very foul language. Self-respecting farmers feared these meetings and some of them chose to end their lives. However, the fact remains that their economic problems and non-payment of loans were caused in most cases by highly erratic and adverse weather conditions in times of climate change over which they had no control.
In addition, the loans were often part of a more expensive agricultural technology that was promoted strongly by a nexus of civil servants-banks-companies. As a result of these strong promotional tactics, small farmers who did not really need tractors were induced to make this unfeasible and certainly avoidable purchase.
I also noticed that some politically well-connected and influential villagers had emerged as middlemen who arranged easy loans for the villagers, but only after taking a hefty commission for themselves. They passed on a portion of this to bank officials.
Another undesirable trend was that when the farmers were to receive or give some amount under various government schemes, this would be adjusted in their loan accounts by the banks without even informing them.
Due to all these factors, the concern about the indebtedness of farmers in most of the country has been increasing. However, banks have been far less forgiving of them and other small borrowers compared to the wealthy and influential borrowers. In recent years, small entrepreneurs have suffered greatly due to various adverse policies including demonetization, GST and longer-than-necessary lockdowns and thus their ability to repay loans has been negatively affected, but overall they have not received a sympathetic hearing from the banks.
On the other hand, banks have been accumulating bad debt or non-performing assets related to wealthy and influential borrowers, some of whom have gotten into the habit of living a life of luxury based on smart management of borrowed money.
Since the Modi regime took over in 2014-15, bank loans worth more than Rs. 10 lakh crore (10 lakh = million) have been cancelled. Only during the fiscal year 2020-21 around Rs. 2 lakh crore was cancelled. These installments are mainly related to wealthy and influential borrowers. During the last 5 years the punishment has accounted for more than double the recoveries. Almost 75% of such cancellations correspond to public sector banks.
What’s more, in many cases, banks have refused to reveal the names and details of those people and companies whose huge loans have been written off.
Clearly, these distortions in the banking system urgently need to be corrected.
Bharat Dogra is Honorary Coordinator of the Campaign to Save the Earth Now. Recent books by him include Man Over Machine (Gandhian Ideas for Our Times) and India’s Quest for Sustainable Farming and Healthy Food.