Scheme brings no relief to conscientious debtors

Scheme brings no relief to conscientious debtors
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First Published: Wed, Jul 02 2008. 12 57 AM IST

Disillusioned: Darichetti Linganna, 70, owns 3 acres of land on the outskirts of Chityal village in North Telanga. He is among many farmers who say they might not be paying their loan instalments this
Disillusioned: Darichetti Linganna, 70, owns 3 acres of land on the outskirts of Chityal village in North Telanga. He is among many farmers who say they might not be paying their loan instalments this
Updated: Wed, Jul 02 2008. 12 57 AM IST
Adilabad: After losing their turmeric crop because of a poor monsoon, Narsiah and his wife Attole Muuttavva had no money to repay their bank loans. But rather than default, the couple borrowed from local moneylenders at a high cost and paid their loan instalments on time.
Disillusioned: Darichetti Linganna, 70, owns 3 acres of land on the outskirts of Chityal village in North Telanga. He is among many farmers who say they might not be paying their loan instalments this year. Photograph: K. Sudheer / Mint
Being honest didn’t pay, says Muttavva. The couple, with a 2.5-acre farm plot on the outskirts of Chityal village, missed out on the Union government’s loan write-off and went into debt to moneylenders, who often charge exorbitant interest rates, as high as 50%.
“We lost both ways.” says Muttavva, whose family had taken a Rs30,000 loan from a cooperative bank and more than Rs13,000 from State Bank of Hyderabad’s Chityal branch. “The government should have announced some relief scheme that would have benefited all the farmers uniformly.”
Muttavva’s story varies little from that of farming families all over the country that missed out on the Centre’s Rs71,680 crore farm debt waiver because they had been conscientious about paying back their loans. These families have nothing to gain from the write-off that’s expected to benefit 43 million farmers nationwide.
Muttavva’s family had borrowed from moneylenders in the past too, to pay bank loan instalments and stay eligible for fresh advances. “If everyone defaults, then how and where will banks get money to lend to farmers again?” questions Muttavva.
But in the north Telangana district of Adilabad, many farmers who see the waiver skewed in favour of defaulters plan to stop paying their loans so they can benefit from any future write-off. That could result in loan defaults swelling, tipping banks and the region’s economy into crisis.
“I have decided not to repay my loan instalment this time. Who knows there could be a similar waiver again in view of elections in the state next year,” says Amgoth Jaithram, who owns 2.5 acres of land in the tribal village of Beeravelli.
Andhra Pradesh’s state level bankers’ committee (SLBC) has estimated that 7.79 million farmers in the state would benefit to the tune of Rs12,557.68 crore under the debt waiver against outstanding dues of Rs31,862 crore as of 31 March 2007.
Bankers say they are finding it difficult to face honest farmers who repaid loans on time, and dreading the thought of defaults mounting. “Ours is a branch with a healthy track record of around 98% recoveries for years including last year,” explains D. Satyanarayana, deputy manager at Deccan Grameena Bank, Manjulapur. “We will be losing that healthy status now with not more than 5% recoveries during this season, with farmers preferring not to repay in anticipation of a debt waiver scheme in the near future, in the backdrop of ensuing assembly elections in the state,” he added.
State Bank of Hyderabad’s Chityal branch had loans outstanding of Rs1.3 crore from around 500 farmers as of March 2007. Only 24 farmers are benefiting from the debt waiver to the tune of Rs6.04 lakh, said C. Chandar Rao, the branch manager.“Not all of them had good crops last year,” he says about those who paid. “Majority of them suffered crop losses owing to unfavourable monsoons. But somehow they managed money to pay their instalments to ensure that their accounts do not turn bad.”
Interestingly, not all defaulters will benefit. Cooperative banks, under the purview of Andhra Pradesh Cooperative Bank Ltd (Apcob), have been resorting to a scheme of “book adjustments” for several years to access continued financing from state-owned National Bank for Agriculture and Rural Development, Nabard.
Such adjustments would show even bad loans as being serviced, and hide the true level of defaults. Of the Rs12,557.68 crore of crop loans eligible for the waiver, Apcob accounts for Rs5,027 crore, or 40%. Chairman Vasantha Nageswar Rao says that the bank is yet to arrive at the exact outstanding amount eligible for the loan waiver.
Meanwhile, new loan customers are expected to come knocking on banks’ doors. Like Ramavath Hariya, a farmer with one acre of land near Beeravelli village. “Fearing the paperwork, guarantees and collaterals, I never ventured to avail of a bank loan till date,” he says. “Maybe I should try a bank loan this time and I hope I will be lucky to get a loan and a waiver subsequently.”
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First Published: Wed, Jul 02 2008. 12 57 AM IST