Maharashtra: Despite good monsoon forecast, farm credit offtake dull as farmers report hurdles in getting fresh loans

Slow disbursal, according to officials of the Cooperatives department, could continue for the remainder of the season, and banks are expected to once again fail to meet the farm credit target. For three consecutive years now, farm credit has not crossed 55 per cent of its target. Two loan waiver schemes have been implemented during this period.

Ahead of the 2019 kharif season, farmers struggled to avail fresh credit amid banks’ worries about high NPAs in agriculture sector advances. This year too, of the Rs 38,800 crore outstanding in crop loans, Rs 10,015 crores have become NPAs by March 31, according to the agenda for the May 29 meeting of the SLBC. This does not include outstanding dues for the district central cooperative banks, whose data was not submitted.

While bankers have been instructed to process fresh farm credit nevertheless, this year farmers are additionally finding it difficult to even establish contact with bank branches owing to the pandemic and rules against gathering there. This is especially true of the more remote regions where a trip to the taluka town could mean half a working day lost.
In Marathwada’s Hingoli district, Maruti Korde-Patil, a farmer and office-bearer of the Prahar Janshakti Party, led a delegation of farmers to meet the district collector last week, seeking relaxations in the number of documents to be submitted for seeking fresh credit.

“Because of the fear of Covid-19 and the new rules about social distancing, the banks don’t want crowds of farmers at their branches. Government offices also don’t want crowd. And yet, to apply for a fresh farm loan, we have to produce a ‘ferfar’ extract or details of ownership mutation, even when the old and new loans are against the same account holder and land survey number,” he told The Indian Express. “This is just a way to harass farmers seeking a new loan. And poor farmers are running around to various offices and Internet-enabled centres trying to compile their documents.”

In Beed’s Georai, small farmer Sushil Takle said he plans to sow cotton and pigeon pea. The rains arrived over the weekend in most of drought-prone Beed, and farmers are keen to begin sowing. Takle had an old loan of Rs 45,000 taken three years back, and he received the benefit of the previous loan waiver scheme. With less than 4 acres of land, he would like to avail up to Rs 1 lakh in fresh credit, mainly for fertiliser and other inputs.
“A bag of fertiliser that was Rs 1,800 is now retailing locally for Rs 2,200. I genuinely need the fresh credit,” Takle told The Indian Express over the phone. “But the problem this year is simply that there is no contact between the bank officials and the farmer. As they do not want crowds of customers in the branch, bank officials are travelling to some villages and taking details of those seeking fresh loans. Those customers are supposed to be summoned to the branch on a date. But in fact, there is no progress at all in this elaborate programme, and we’re now facing the start of the kharif sowing season without sufficient cash,” he rued.

Farm credit is a ‘priority sector lending’ for banks though short- and long-term loans. ‘Crop loans’ are short-term credit at 7 per cent rate of interest at the start of a cropping season, including an interest subvention of 5-6 per cent on the condition of timely repayment.

Yet, alongside deepening rural distress, credit offtake in agriculture in Maharashtra has fallen well short of targets since 2017-18, with year-on-year disbursal actually dipping by 9 per cent in the last financial year. The dismal progress of disbursals until the end of May 2020 hints at the trend continuing for the financial year 2020-21 also.

Declining growth of farm credit has been a pan-India trend for a few years, and researchers have repeatedly found fresh credit slowing after a loan waiver scheme is implemented, with banks wary of growing NPAs and blaming disturbances in the repayment culture.

In 2017, the Devendra Fadnavis-led BJP-Shiv Sena government announced a Rs 24,000-crore farm loan waiver. In December 2019, Chief Minister Uddhav Thackeray announced a further farm loan waiver with an increased ceiling of Rs 2 lakh that is to cost the exchequer a little over Rs 20,000 crore.

While 44 lakh farmers got the benefit of the previous loan waiver, another 32 lakh farmers are to benefit from the fresh scheme. About 60 per cent of the target was reached in March with nearly Rs 12,000 crore transferred into 19 lakh loan accounts. However, more than 11 lakh eligible accounts are yet to benefit, due to shortage of funds and delays due to the Covid-19 pandemic and lockdown. On May 22, the state government issued instructions that these 11 lakh farmers should not be barred from getting fresh loans.

According to the minutes of the SLBC meeting of May 29, the large NPAs are on account of unseasonal rains and floods in western Maharashtra in 2019, and the Covid-19 pandemic in the last quarter of the financial year. Bankers also believe that in anticipation of the Devendra Fadnavis government’s loan waiver scheme, many farmers became wilful defaulters. A more exhaustive farm loan waiver was also a major electoral promise of the Shiv Sena, Congress and NCP during their separate campaigns for the 2019 Assembly election.

“For people who were regular in their repayment, these loan waivers do not make sense. So, they default in the hope of also benefiting from the scheme,” said a senior banker.

The defaults add up to ever-larger NPAs, and lower fresh loan disbursements. In fact, in April last year, Bank of Maharashtra, the lead banker in the SLBC, actually issued a circular instructing branches in six drought-hit districts not to issue fresh crop loans at the branch level but to despatch applications to the headquarters. The bank’s NPAs as a percentage of total agriculture sector advances had been growing — from 11.3 per cent on March 31, 2017; to 15.38 per cent on March 31, 2018; and standing at 18.36 per cent at the end of 2018-19.