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Last Updated : Mar 14, 2018 04:33 PM IST | Source: Moneycontrol.com

Decoding why Maharashtra farmers are going to moneylenders despite loan waivers

The total crop loans granted by banks in Maharashtra in the current fiscal (April-Feb 2017-18) has reduced by almost 40 percent from the previous fiscal (2016-17).

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The state of Maharashtra is dealing with a collapse of institutional credit in terms of crop loans granted to farmers, while the implementation of farm debt waiver scheme. The total crop loans granted by banks in Maharashtra in the current fiscal (April-Feb 2017-18) has reduced by almost 40 percent from the previous fiscal (2016-17), according to a report in The Indian Express.

Institutions such as scheduled commercial banks and district central cooperative banks, including regional rural banks, saw lesser disbursement of loans in 2017-18, than in 2016-17.

The report quotes State Level Bankers’ Committee (SLBC), a forum of institutional lenders and top government officials, saying, “Reasons for low credit offtake this year can be attributed to the announcement/ implementation of farm loan waiver scheme by Government of Maharashtra.”

Ramesh Thorat, chairman of Pune District Central Cooperative Bank said, “Uncertainty over loan waivers has given way to more non-performing assets in this year, as many farmers defaulted in the expectation of benefitting from the scheme, which made some of them ineligible for new crop loans.”

Loan waivers by five state governments yet have made banks reluctant to disburse loans to the farmers, which could push them in the hands of private moneylenders. As opposed to government interest rates post subvention, moneylenders’ rates are far too high.

In the Economic Survey of the Maharashtra government, there was a sharp rise of 28.7 percent in loans granted by private lenders from 2015-16 to 2016-17. As of March 2017, the number of active, licensed moneylenders in the state were 12,214.

In March 2018, state Finance Minister Sudhir Mungantiwar announced waiving off of loans worth Rs 13,782 crores for over 35 lakh farmers. Banks had also been permitted to write off loans worth Rs 23,102.1 crores against over 46 lakh farmers in the state under the Chhatrapati Shivaji Maharaj Shetkari Sanman Yojana.

On Monday, over 35,000 farmers marched from Nashik to Mumbai demanding a complete loan waiver, among other compensations and price negotiations.
First Published on Mar 14, 2018 04:33 pm
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