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NEW DELHI, MARCH 11: The Rs 60,000-crore bank loan waiver to relieve the debt distress of 4 crore small and marginal farmers may end up touching less than a quarter of them.
That’s the finding of a recent survey which shows that barely 22.5% of such farmers have borrowed from the “institutional credit system” (banks) over the last two years. Of the 1 crore farmers who availed of credit between 2005 and 2007, an estimated 75% are likely to have resorted to “informal channels” for obtaining loans.
For this major chunk, maximum borrowing came from sources like moneylenders, friends and relatives. The highest number, 36%, of small and marginal farmers approached moneylenders, while friends and relatives accounted for 32% of all loans. Farming households earning less than Rs 32,500 a year and those with land holdings less than five acres have been defined as small and marginal by the National Sample Survey.
These findings are part of a sample survey analysis of 10 lakh households and 1 lakh in-depth interviews carried out last year by Dataworks, Invest India Market Solutions. This firm is providing research support to the Raghuram Rajan committee on financial sector reforms that is likely to submit its report in Parliament later this month.
According to the survey, just over a fifth of small and marginal farmers are expected to have secured loans from formal institutional channels like commercial banks, regional rural banks (RRBs), cooperatives and micro-finance institutions. And that 21% of small and marginal farmers borrowing from informal sources have bank accounts. In doing so, over half of small farmers end up borrowing money at interest rates greater than 36%, while only 18% manage to get loans at rates less than 12%.
“The small farmer is forced to approach the moneylender because institutional credit given by banks, especially cooperatives, takes too much time to be sanctioned. In crises or emergency situation, or when small amounts are to be borrowed, the moneylender is easily available,” says Vinay Hardikar, national secretary of the Swatantra Bharat Party. “Also, banks do not give loans unless earlier loans are repaid, and the farmer is often already a defaulter.”
With recent Reserve Bank of India Trend and Progress data also suggesting that total overdues by small farmers to commercial banks, cooperatives and RRBs is not likely to exceed Rs 23,000 crore, experts have said that those unaddressed by the loan waiver should be a cause for worry.
“Even though a loan waiver is the neatest means of providing income to the farmer, the government needs to worry about the 75 per cent that it has left out,” says Rajiv Kumar, director and chief executive, ICRIER. “The issue of small and marginal farmers having little access to credit is not going to be solved by such a measure. The basic problem of a largely unremunerative and unviable agricultural economy can only be addressed by fundamental policy changes.”
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