A bank account as a safety net
The PM Jan Dhan Yojana, if utilised properly, could lessen farmers’ suicides and distress
For a country that is set to be ranked among the world’s top five economies over the next decade, India cannot afford to be counted as a home for impoverished farmers who are ending their lives because they do not have the money to return loans as small as `10,000. According to the National Crime Records Bureau (NCRB) data, 5,650 farmers committed suicide in India last year. Bankruptcy and indebtedness are believed to be the major cause of nearly a quarter, or 22.8%, of these deaths. The numbers are chilling if read with the government’s data on rural credit. Indicators from an NSSO (National Sample Survey Organisation) report released in December last year show that nearly 52% of farm households in India are indebted.
The results of the Situation Assessment Survey of Agricultural Households in India are based on a countrywide survey of nearly 35,000 households by the NSSO (70th round), for which data were collected for the agricultural year July 2012 to June 2013, and are useful pointers to link farms with institutional financing. Nearly four out of 10 farmers’ loans come from informal sources. Moneylenders, who charge interest rates of more than 5% a month or more than 60% a year, are the source of loans for 26% of these peasants. Microfinance institutions in India, which extend largely small-size loans to the rural poor predominantly, are been mired in controversy in the wake of reports about suicides that were linked to allegedly coercive methods by some of these institutions. This has given rise to the view that microfinance was not the miracle it was assumed to be. There have been suicides by borrowers unable to repay loans, raising the question whether micro-credit’s role as an income-generating mechanism was ‘overstated’.
Farmer suicides because of inability to pay loans as low as `10,000 are a direct result of lack of institutional financial inclusion. This is why the government’s ambitious Pradhan Mantri Jan Dhan Yojana, launched last year with a promise to end ‘financial untouchability’, is crucial. It will enable farmers to borrow from banks at interest rates far lower than the extortionate charges levied by moneylenders. Also, the methods to recover money in the case of default will not be coercive simply because sensitivities are built into institutions despite being process-oriented inanimate entities. Besides, a good record in operating a bank account will offer an over-draft facility to enable cash-starved farmers to tide over unforeseen developments. Most importantly, bundled with life and health insurance, a bank account can offer a safety option for the family in the eventuality of the death of a penurious farmer.