Mandya, Karnataka: For eight long years, N. Shivalingaiah, a farmer from Gopalapura village in Karnataka’s Mandya district, stayed away from a local cooperative bank from where he had taken a crop loan.
He now has a reason to go back to the bank.
This marginal farmer from Mandya, 100km southwest of Bangalore, is a beneficiary of the loan waiver scheme that was rolled out across the country last week.
“I can take a fresh loan now,” says Shivalingaiah, 45, whose dwindling income from a plot of 26 guntas (just over half-an-acre) has forced him to take up additional work as an agricultural labourer.
While the defaulters, about 1.2 million in Karnataka, will once again become part of the banking system by taking fresh loans, the scheme has created resentment. “Only some 20% of the farmers (in the district) have benefited,” says V. Ashok, state secretary of Karnataka Rajya Raitha Sangha, or KRRS, a farmers association. “The scheme has caused a lot of disappointment.”
G.S. Siddaraju of Gopalapura shares the sentiment. He had sold half-an-acre to repay part of a Rs57,000 loan, only to discover that he would have been better off as a defaulter.
Those who defaulted on payments say they could not have paid anyway, but many, such as Shivalingaiah, had repaid loans to local moneylenders even when their dues to bank were mounting.
“Their priority is to repay the moneylender first,” said K. Boraiah, a KRRS secretary from Gopalapura village. The rates of interest these moneylenders charge could be as high as 2-5% a month.
This is mainly due to the flexibility in the amount of loan and repayment that a moneylender offers, unlike a bank, reasons R.S. Deshpande, head of the Agricultural Development and Rural Transformation Centre at the Institute for Social and Economic Change in Bangalore.“There is a dichotomy between the bank as an institution and the farmer. It’s not so with the moneylender,” he said.
Banks in Karnataka have written off bad loans of nearly Rs3,000 crore through the scheme, but its impact here has been lower than other states because of a similar waiver implemented by the state government in April 2007, covering farmers who borrowed from cooperative societies. The Centre’s scheme waived loans overdue as of December 2007 but fresh loans taken by these farmers do not fall under the category.
An official in a nationalized bank says it will only be detrimental to the farmers if they were to wilfully default. “The interest will keep mounting and sooner or later, he would have to pay,” he said.
Besides, farmers say the number of defaulters in irrigated places such as Mandya would always be low because overdue loans are regularly renewed.
“They (bank officials) said my loan is running and that I am not a defaulter,” says G. Siddalingaiah, a marginal farmer whose loan has been renewed and who fails to understand why he is being left out of the waiver.
For many others in this sugar cane belt, arrangement that banks have with factories to route spot payments through them also ensures there are no defaulters. The bank deducts its dues and gives the farmer the remaining amount.