‘Reckless’ farm loans by pvt banks: Govt to write to RBI

CHANDIGARH: The Punjab government is planning to take up with the Reserve Bank of India (RBI) the issue of “reckless” advancement of loans by private banks in rural Punjab, which proved to be beyond the pay-back capacity of farmers.

In the course of studying the debt pattern, government officials found that farmers were given loans in a very uneven pattern. Citing figures, a top official said a total of 5.71 lakh farmers who own up to 2.5 acres of agricultural land owe an aggrgate debt of ₹9,845 crore. Of these, only 35,000 farmers have a debt of ₹4,500 crore, which means each of them owes ₹13 lakh. There is a total debt of around ₹90,000 crore on about 10 lakh farmers in the state (up to march 31, 2016) and only 2 lakh of them (20%) owe around 75% of this debt amounting to around ₹63,000 crore, he said.

The uneven pattern of loan disbursement has become the cause of concern for the state top brass. “In no circumstances, a farmer with 2.5-acre land would pay back this loan, because his average annual income is about ₹1 lakh,” the official said. Officials feel that most of the unmanageable debt was given for non-agricultural purposes, largely to address social needs of the farming community.

“We are planning to write to the RBI urging it to look into the issue as to how heavy advances were made to poor farmers beyond their pay-back capacity?” a senior official of the Punjab government told HT.

When contacted, finance minister Manpreet Singh Badal said that in the course of studying farm debt pattern, he observed that the lending was unethical and not prudent. “There are banking norms which are to be followed before giving loan to any loanee, which I think were tweaked,” he said.

On April 15, the Punjab government set up an expert group to assess the quantum of agricultural debt on farmers in Punjab and suggest ways and means for its waiver. The government had announced that in two months, it would come up with “something concrete”. Sources revealed that the government wants to come out with some way forward on the issue before the assembly session, scheduled to be held in third or fourth week of June month.

The committee has met twice, but the course of action is yet to be drawn. Notably, state cooperative banks give crop loans to farmers, but their recovery rate is 90% to 95%, depending on the crop outcome.

› We plan to write to RBI, urging it to look into how heavy advances were made to poor farmers beyond their payback capacity? A SENIOR GOVT OFFICIAL