In Telangana, caught between life and debt

Ravi’s wife Yadamma now works as a farm labourer to support her sons. Harsha Vadlamani
Ravi’s wife Yadamma now works as a farm labourer to support her sons. (Source: Harsha Vadlamani)
Written by Sreenivas Janyala | Karimnagar |Posted: November 20, 2014 4:30 am

On the night of July 4, Korishala Ravi stepped out of his house that is right across a branch of the State Bank of Hyderabad in Kodakandla village of Medak district in Telangana. The 35-year-old farmer had applied for a loan to the branch three times but his plea was rejected each time, forcing him to turn to moneylenders. Few hours later, not too far away from the bank branch, he was found dead, his body hanging from a tree.

Ravi’s village is part of Telangana Chief Minister K Chandrasekhara Rao’s Gajwale constituency. Rao had identified it to be developed as a model village.

On September 23, Polu Rajaiah, a 48-year-old landless farmer of Thotapalli village in Karimnagar district, got himself a hair cut and asked his wife to make his favourite curry. After lunch, he went to their field about one km away, drank pesticide and died. Rajaiah had been borrowing money, first to take two acres on lease, then another four acres, and to purchase seeds and fertilisers, but his maize crop had failed, leaving
him with a debt of Rs 3 lakh.

Since Rao took over as the chief minister on June 2, there have  been 79 farmer deaths officially recognised as ‘suicides’ in the newly formed state. Beera Ramulu, a farmer and RTI activist associated with NGO Rythu Swarajya Vedika, puts the number at more than 300. Most of these farmers died in Warangal (83), Karimnagar (40) and Medak (70) districts. However, Agriculture Minister P Srinivas Reddy says not all farmer suicides are related to crops.

Like most of the others, Rajaiah and Ravi were both tenant farmers, and they did not fit anywhere in the system designed to help and protect farmers — be it loan eligibility cards, crop loans, easy bank credit, farm-loan waiver scheme or agriculture subsidies — as they had no land to show as collateral. That left them at the mercy of moneylenders charging interest rates as high as 24 per cent per annum. Now their families have to prove the deaths were solely linked to their crops to be entitled to ex-gratia — another uphill battle.

On November 13, the RBI issued a circular to all banks on financing ‘Bhoomi heen kisan (landless farmers)’, as per an announcement in the Budget. Under it, landless farmers can form ‘Joint Liability Groups’ and avail of loans through NABARD for farm and non-farm activities, standing as guarantors for each other. The measure, it is believed, would go a long way towards resolving denial of loans to landless farmers. Union Agriculture Minister Radha Mohan Singh has proposed financing at least 5 lakh joint farming groups this financial year.

Ravi’s brother Balanarasimha, a taxi driver, says Ravi’s loan applications were rejected because he didn’t own any land to show as collateral. “They asked for land ownership documents first to even consider the application,” he says. Ravi had taken five acres on lease to grow cotton, maize and paddy, of which two acres belonged to a relative who had already taken a loan on the land. The owner of the remaining three acres refused to give him a lease agreement, which would have made Ravi eligible for loan. State Bank of Hyderabad Kodakandla Branch Manager Sheikh Abdul Kareem says, “Farmers seeking loans have to give us a copy of the land title in his name, or, in case of tenants, a copy of the lease agreement signed by the owner. We cannot give loans if the documents are not clear or there is a dispute regarding ownership.” The Korakandla branch caters to nine nearby villages, with at least 7,000 farmers. Since January, it has given 500 new crop loans and rescheduled 700 old loans under the Telangana government’s crop loan waiver scheme, but the amount of loan given is very small. For cotton crop, it is Rs 20,000 while for paddy, it is Rs 18,000 per season. The Telangana Rashtra Samiti (TRS) government in the state had announced a Rs 17,000 crore farm loan waiver scheme, to fulfill its poll promise. Under the scheme, outstanding amounts as on March 31, 2014 on crop loans up to Rs one lakh are waived off. This rescheduling of loans makes farmers eligible for fresh loans. The government order issued on August 13, however, clearly stated that the scheme covers only institutional loans and not loans from non-institutional sources. Ravi also tried to get a loan from Telangana Scheduled Castes Cooperative Finance Corporation Ltd through the bank, but the policy is still under discussion. Managing Director of the corporation B Jayaraj says once the budget is passed in the Assembly, the government will decide the loan and subsidy ratio. Admitting a “few inherent deficiencies”, State Bank of Hyderabad General Manager J Sitapathy Sarma says, “Denial of loans to landless farmers is a major issue and needs a change of policy which will make them eligible even if they are unable to show collateral.” He, however, insists that farmers must make an effort to at least get a loan eligibility certificate from the village or mandal revenue officer. The State Bank of Hyderabad is the convener of the State-Level Bankers’ Committee (SLBC). Meanwhile, in order to meet their 18 per cent target fixed for farm loans, banks classify all kinds of loans under the agriculture sector. For example, the SLBC said in July that banks in Telangana had given Rs 49,564 crore loans to the agriculture sector in 2013-14. But when the state government sought details of the accounts of individual farmers who were given loans, SLBC revised the figure to Rs 12,000 crore on March 31, 2014. Banks were apparently also bunching agricultural loans with those taken by farmers for jewellery, marriages, and other non-farm expenses. There are many examples of farmers taking loans for digging or repairing bore wells and paying children’s fees. When crops fail, all these add to their loan burden. “Thousands of farmers are caught in a vicious cycle of debts due to low yields or total crop failure. There is constant pressure from moneylenders and when it does not rain and crops start failing, all they can think of is escaping it by taking their own lives,” says activist Beera Ramulu. TRS politburo member and Karimnagar MP B Vinod Kumar admits the plight of landless farmers who take land on lease. “We need far-reaching reforms in the lending process to include landless farmers in the credit system. In 2010-11, banks introduced business correspondents in villages to make the process of giving loans easier but the correspondents recommend only those who have something to mortgage,” Kumar says. With no options, Ravi had borrowed money from relatives and other villagers at 24 per cent per annum. Documents show he took two loans at 18 per cent interest each, to pay Rs 50,000 upfront to take five acres on lease, and two loans at 24 per cent interest each. “The yield of the maize crop was not good due to inadequate rainfall. The paddy also failed,” says Ravi’s brother. Ravi’s wife Yadamma now works as farm labour, earning Rs 100 a day to support her sons Shiva and Sai. Rajaiah never thought of approaching a bank although three — Andhra Bank, State Bank of Hyderabad and UCO Bank — have branches in Husnabad, 25 km from his Thotapalli village. “We don’t own even a small piece of land, bank officials do not even look at your application. He did not get the loan eligibility card so there was no point going to the bank,” his wife Komaramma says. In 2011, the AP Government introduced a system of giving loan eligibility cards to tenant farmers. Village Revenue Officers, tehsildars, Mandal Revenue Officers could issue the card to a tenant farmer after ascertaining that farming is his only profession, is a genuine farmer, and has taken land on lease. In the presence of the village sarpanch and witnesses, a gram sabha is held and the farmer is given the eligibility card. “But revenue officials are wary of giving the eligibility cards fearing that they will be held accountable if the farmer fails to repay although the government order states that it is not the responsibility of government officials. When officials verify and find that the farmer has some outstanding loan already, they don’t issue the card. This way the system has slowly stopped working and very few cards are given,’’ says RTI activist and member of Rythu Swaraj Vedika Kondal Reddy. In Mallampalli village of Mulug Mandal in Warangal, Merugu Achala, 21, works up to eight hours in a cotton field for Rs 100-130 per day. Her husband killed himself recently over pressure from moneylenders after their cotton crop failed. Achala borrowed Rs 15,000 recently to pay the school fees of her daughter and son, in Class I and kindergarten respectively. The loan outstanding in her husband’s name is already around Rs 1 lakh, but Achala is determined to keep her children in a private school. “My husband did not want them to work in the fields and wished they got proper jobs when they grew up. I too don’t want them to ever work in agriculture,” she says. – See more at: http://indianexpress.com/article/india/india-others/in-telangana-caught-between-life-and-debt/4/#sthash.CXKQ5uO9.dpuf

Memorandum to AP Chief Secretary on Loan Waiver

140622 Chief Secretary Telangana final Download

Rytu Swarajya Vedhika has a submitted a memorandum with the following demands.

  1. As a first measure, the Government must delink the loan waiver proposal from distribution of Kharif loans for the current agricultural season and should immediately take action to disburse crop loans  without delay to all the farmers including Tenant farmers.
  2. While the farming community is in deep crisis due to indebtedness, loan waiver is not a solution to end the crisis. The crisis is still continuing even after the debt waiver and relief extended during 2008.   A comprehensive solution lies in bringing in policy changes related to all aspects of agriculture (Credit, input support, extension and marketing) as well as pursuing the land reforms agenda with renewed vigour to bring about a meaningful change in the agriculture sector to help close to 85% ofsmall and marginal farmersto secure and sustain their livelihoods. . A piecemeal, myopic solution to the problem in the form of loan waivers alone is a grossly inadequate solution to the larger, complex set of problems ailing the farming sector in the State.
  3. Tenant farmers, dalits, tribal and women farmers who received lands under various land distributionschemes do not have access to institutional credit. They are taking loans from private money lenders, input dealers or Microfinance Institutions at a higher interest rate (as high as 60% Rs. 5 per Rs. 100 per month).  These farmers  are in deep crisis and constitute a large chunk of farmers committing suicides. This loan waiver is of no help  to them.
  4. Government should make immediate effort to increase access to institutional credit to real cultivators.  One of the problems often expressed by the bankers in giving crop loans to these farmers is the lack of a guarantee for repayment. The state government should establish a Credit Guarantee Fund for small and marginal farmers which can give collateral security to the tenant farmers.
  5. All the real cultivators who are not covered under institutional credit are to be organised into cooperatives and linked to the institutional credit.  All their high interest private loans can be swapped with low interest bank loans.
  6. Loans of all farmers who have committed suicides since 1997 have to be waived and their private loans be swapped with no interest bank loans.
  7. Government should introduce special budget for agriculture with an allocation of atleast 10% of the total budget.
  8. Government must ensure that the loan waiver does not benefit non-cultivating, absentee land owners who have other major sources of income or livelihood and have taken loans in the name of agriculture. Specific mechanisms must be evolved to identify and eliminate the above categories of landowners from the purview of the loan waiver scheme. Further, steps must be taken to identify the actual cultivators and update the revenue records accordingly. Government must also actively explore mechanisms (e.g. setting up a separate Committee) for evolving a set of criteria to enable eligible farmers benefit from the loan waiver scheme in a meaningful manner.
  9. Government should also take care that the loan waiver does not apply to ineligible loanees through the following measures
    1. Restricting the loan waiver only to crop loans
    2. In case government decides to waive short term and allied sector loans, it should be restricted to small and marginal farmers only (up to 4 ha in rainfed areas, 2 ha in irrigated areas)
    3. Exempting Hyderabad district from the purview of the loan waiver. A thorough enquiry should be conducted and if need be waiver can be extended in the second phase. Pending this, the crop loan waiver up to one lakh for all farmers in the other district should be done immediately.
  10. Government should with stain from any effort to impose additional taxes or issue bonds and transfer the burden on to people or the next government.

The real cost of credit constraints: Evidence from micro-finance

In December 2010, the Indian state of Andhra Pradesh passed a law that severely restricted the operations of micro-finance institutions and brought the micro-finance industry to an abrupt halt. We measure the impact of micro-credit withdrawal in this unique natural experiment and find that average household expenditure dropped by 19 percent relative to a control group after the ban. The largest decrease was observed in expenditure on food. There is some evidence of higher volatility in consumption after the ban. All households were affected and not just the borrower households, which may suggest general equilibrium effects.

http://www.igidr.ac.in/pdf/publication/WP-2013-013.pdf

 

వచ్చే ఆర్థిక సంవత్సరంలో వ్యవ’సాయం’ రూ.63వేల కోట్లు నాబార్డు ప్రతిపాదనలు

హైదరాబాద్, ఫిబ్రవరి 14: వచ్చే ఆర్థిక సంవత్సరంలో వివిధ రంగాలకు రుణ మంజూరుపై నా బార్డు కసరత్తు చేస్తోంది. ఇందులో భాగంగా వ్యవసాయానికి దాదాపు రూ. 63 కోట్ల మేర ఇచ్చేవిధంగా ప్రతిపాదనలు సిద్ధం చేసింది. ఈ మేరకు స్వల్ప, దీర్ఘకాలిక రుణాల కింద రూ.59818.95 కోట్లు, భూమి అభివృద్ధికి రూ. 654.75 కోట్లు, యాంత్రీకరణకు రూ.2432.12 కోట్ల మం జూరుకు ప్రతిపాదించింది. వీటిని రాష్ట్రస్థాయి బ్యాంకర్ల కమిటీ (ఎస్ఎల్‌బీసీ)కి పంపనున్న నేపథ్యంలో సోమవారం వ్యవసాయశాఖ అధికారులతో సమావేశమై సూచనలు స్వీకరించింది. ఈ సందర్భంగా అధికారులు వివిధ అంశాలను ప్రస్తావించారు. 

సమస్యల పరిష్కారానికి చొరవ చూపాలని నాబార్డు ఉన్నతాధికారులను కోరారు. ఇక నీటిపారుదల రంగానికి రూ.1061.38 కోట్లు, ఉద్యాన రంగానికి రూ.1441.72 కోట్లు ప్రతిపాదించింది. ఇక పశు సంవర్ధక శాఖ కింద రూ.2113.05 కోట్లు పాడి పరిశ్రమాభివృద్ధికి, రూ.1088.16 కోట్లు పౌల్ట్రీకి, రూ. 554.43 కోట్లు మేకలు, పందుల పెంపకానికి ప్రతిపాదించారు. మత్స్యరంగానికి రూ.1320.06 కోట్లు నాబార్డు ప్రతిపాదించింది. ఫుడ్ ప్రాసెసింగ్‌కు రూ.637.69 కోట్లు ప్రతిపాదించారు. నాబార్డు ప్రతిపాదనలు… ఎస్ఎల్‌బీసీ ఆమోదం బాగానే ఉన్నా.. ఆచరణలో మాత్రం బ్యాంకు లు శ్రద్ధ చూపడంలేదన్న విమర్శలున్నాయి.

No access to credit to Tenant Farmers in AP: RDI Study

A study done by Rural Development Institute in 22 villages in Warangal, Nalgonda,Vishakapatnam, East Godavari and Kurnool districts of AP concluded that tenant farmers access to credit is still very low inspite of govt initiating loan eligibility cards

  • As per the revenue records AP has 17,47,901 tenant farmers
  • during 2011-12, 6,80,226 tenant farmers have applied for loan eligibility cards and 5,13,655 of them have received the card.  in this only 2,37,522 have renewed during the following year
  • situation became worse in 2012-13. only 4,80,083 tenant farmers have applied and 3,95,207 farmers have received the cards
  • 2011-12 the total agricultural credit received by tenant farmers is Rs. 390 cr which about 1% of total agricultural credit.  during 2012-13 it is only Rs. 133 cr.
  • in most of the villages still money lenders play important role

State gets more teeth to curb moneylenders: Maharastra clears Maharastra Moneylenders (Rules) Act 2009

http://www.freepressjournal.in/FPJ/FPJ/2010/02/25/ArticleHtmls/25_02_2010_011_013.shtml?Mode=1

THE State Cabinet on Wednesday cleared the Maha- rashtra Moneylenders (Rules) Act, 2009 for implementation in the state. This new act will replace the Bombay Money- lenders Act, 1946 that was amended in 2006. Since the last three years, the law had been awaiting a formal nod from the Central Government. Though the Central nod was received last year, the implementation of this Act got further delayed due to the elections held then.
Subsequently, this Act was re- introduced in the cabinet on Wednesday and formally cleared. The provisions of this Act will be announced in the form of a government resolu- tion after the nitty-gritties are worked out.

This act is being implement- ed in a bid to provide protec- tion to poor farmers burdened by money lenders who lend at exorbitant interest rates and is meant to cap the problem of farmers committing suicides.

Though this is considered to be a landmark move, activisits say that it will not be of much help in reducing suicides by farmers. Kishore Tiwari, presi- dent of the Vidarbha Jan Andolan Samiti feels that this legislation is too little and too late. “The moneylenders have already donned different garbs to exploit farmers. Now, they have opened shops of pesti- cides, fertilisers and seeds and sell them on credit at huge lending rates. Once the farmer is unable to pay back, they officially file a recovery suit against them,” Tiwari told FPJ.
He explained that this legisla- tion would not have much impact because children of moneylenders are now lend- ing using this position in con- juction with multi-national firms and businessmen. This gives them official sanction to lend at exorbitant interest rates. They not just lend but also are traders for buying cot- ton and soyabean. This means that the farmer ends up com- pletely dependent on him, accuses Tiwari.

Maharashtra to announce Rs 5,000 cr farm loan waiver

http://www.business-standard.com/india/news/maharashtra-to-announce-rs-5000-cr-farm-loan-waiver/00/36/344103/

Makarand Gadgil / Mumbai December 23, 2008, 0:27 IST

With the Lok Sabha elections around the corner, the Maharashtra government is set to announce another farm loan waiver package to cover all those who were excluded by the central government’s waiver package. The latest package is likely to cost between Rs 5,000 crore and Rs 7,000 crore, and benefit 2.7 million farmers. A senior minister in the state cabinet said: “During the monsoon session of the state Assembly, the government had promised a loan waiver package for those not covered by the central government’s Rs 71,000 crore loan waiver scheme. We will be announcing this during the winter session.” However, he refused to divulge the details of the loan waiver package.

The discussion on the Opposition sponsored debate on agriculture distress in the state began today and Chief Minister Ashok Chavan is expected to reply to the discussion on Tuesday. In the course of his reply, he is likely to announce the package, sources said. The high number of farmer suicides from the six cotton growing districts of the Vidarbha region was one of the major reasons that compelled the central government to announce the loan waiver package. However, majority of the farmers from Vidarbha got no benefit from the package as it was given to farmers having less than 5 acres or 2 hectares of land.

Traditionally, Vidarbha has a higher number of landholdings compared with the Western Maharashtra or Konkan regions. Since Vidarbha’s farming is mostly dryland farming, landholding remained large even after the implementation of the Land Ceiling Act. According to the government’s own estimates, out of the 4.5 million farmers in Vidarbha, only 40 per cent received the benefit of farm loan waiver package.

Taking advantage of the resentment among the Vidarbha farmers, Opposition parties Shiv Sena and BJP had organised protests over the last six months, demanding that all farmers should be given benefit of the loan waiver.

The government was put on the back foot by the aggressive posturing of the Opposition.

Many farmers who had paid their dues by taking loans from money lenders or by selling ornaments, were also feeling cheated. “There was a feeling among them that if you default on your loan, instead of punishing you, the government rewards you. So it was necessary that these farmers also get some benefit of their honesty,” said a senior government official.

Technorati Tags:

Govt modifies rehab package for suicide-prone districts

CABINET DECIDES

BS Reporter / New Delhi October 09, 2008, 1:25 IST

The government today modified the rehabilitation package for the farmers in suicide prone districts of Andhra Pradesh, Karnataka, Kerala and Maharashtra.

The government had earlier announced a rehabilitation package on September 29, 2006 for 31 identified districts in Andhra Pradesh, Karnataka, Kerala and Maharashtra, involving a total amount of Rs 16,978 crore.

After the feedback from implementing agencies, the Union Cabinet today decided to extend the period for implementation of the non-credit component of the package by two more years or up to September 30, 2011.

It has also given in-principle approval for provision of need-based additional financial support to the concerned ministries and departments of the Government of India for implementation of the programmes.

The rehabilitation package aims at establishing a sustainable and viable farming and livelihood support system through debt relief to farmers, complete institutional credit coverage, crop-centric approach to agriculture and assured irrigation facilities.

Other modifications in the scheme include increase in per farmer area limit under the Seed Replacement Programme from 1 hectare to 2 hectares, adoption of ‘Cafeteria Approach’ for participatory Watershed Development Programmes, and inclusion of ‘Women Farmers’ Empowerment Programme’ under extension services.

The Union Cabinet today also approved new legislation that seeks to set up a National Judicial Council (NJC) to conduct inquiries into allegations of incapacity or misbehaviour by judges of the High Court and Supreme Court. “The provisions of the new Bill would bring in transparency in the functioning of the judiciary and would also enhance its prestige,’’ an official handout said.

The proposed Bill would incorporate recommendations of the parliamentary standing committee that had looked into an earlier Bill — Judges (Inquiry) Bill, 2006.

Turnaround of rural banks has in fact worked as a turn-away strategy

By – P S M Rao

Focus on profitability has taken them away from the original goals and left them trailing other banks
Bangla Gramin Bank, the brainchild of Muhammad Yunus, is treated as a success story in providing credit to the poor.
The bank has, jointly with its founder, a Nobel Prize to boast of and there has been a rapid spread of its replicas across the globe to reap similar benefit.
India’s own Gramin Banks, the regional rural banks (RRBs), are a success story, too, for a different reason. These banks have shown tremendous improvement in their financial performance as a result of several revamping measures the government has implemented, in doses, from 1993.
Original goals
The RRBs, called by different names in different states, such as Grameena Banks, Gramin Banks, Grama Banks, Gramya Banks, Elaquai Dehati Banks, Gaonlia Banks, etc were started in 1975, i.e. during the Emergency days, with the aim of providing credit to small and marginal farmers, agricultural labourers, rural artisans, street vendors and all those living below the poverty line as the preamble of the Regional Rural Banks Act, 1976 proclaimed in unequivocal terms.
The need for the new genre of banks was felt as then existing institutions – commercial banks and cooperatives -were found to be suffering from some weaknesses vis-à-vis rural credit, particularly for the weaker sections.
Based on the recommendations of a working group, hurriedly set up under the chairmanship of M Narasimham (who was then working as the additional secretary banking and became popular during the early 1990s with his recommendations on financial sector reforms), the experiment of these new banks, tiny scheduled commercial banks in the central sector with one or two districts as their area of operation, was started in 1975. Their share capital was apportioned by the central government, the respective state government and another commercial bank, called the sponsor bank, in the ratio of 50:15:35.
Social cost for social benefit
As these banks were designed to exclusively cater to the credit needs of the poor in the rural and far-flung areas, it was presumed that they would incur some losses. The framers of the RRB policy spelt this out in the very beginning, not as if they were discovered subsequently. These losses were supposed to be treated as the necessary social cost for the social benefit of covering the rural poor.
In fact, the RRBs lived up to this expectation; as many as 196 RRBs were established by 1990 with more than 14,500 branches across the length and breadth of the country, taking banking services to the unbanked rural, tribal and other interior areas. About 123 million persons, belonging to the weaker sections, benefited from these banks.
But the performance evaluation was made in terms of the viability of the RRBs. The accumulated losses of Rs 621 crore by 1991-92 and 152 out of 196 RRBs being in losses was a big cause of concern that provoked the corrective measures. If the performance were viewed keeping the establishment goals in view, this loss, which worked out to Rs 18 lakh per RRB per year, would be peanuts compared with the service they rendered to the poor.
Profit mantra
But the policymakers who became monomaniac wanted the profitability to be increased at any cost – even at the cost of distancing the RRBs from the rural poor – and set out with revamp measures.
As a first measure, the barrier of financing exclusively to the weaker section was removed. In other words, the non-target group, or the rich, became their new target group.
The second main objective, cheap credit, was given a go-by in tandem; the rates of interest charged on the loans at RRBs have become higher than any other commercial bank.
The third objective of mobilising rural savings and channelling them for the development of the same area and to access funds from urban markets for the benefit of rural people also suffered a setback as a result of excessive profitability concern, as indicated by a low credit-deposit (CD) ratio. The CD ratio of RRBs has fallen from around 100% in the beginning to around 50% today.
Instead of attracting funds from the urban centres, the RRBs are taking the rural resources to urban centres as evidenced by their high investment-deposit (ID) ratio, ranging between 55% and 60% during the last three years. The RRBs invested in securities of Rs 45,666.14 crore against their deposit base of Rs 83,143.55 crore in 2007.
The fourth major objective was to take banking services to the door steps of the rural poor. The RRBs’ spread has been heartening and rapid – 196 RRBs opening 14,500-odd branches all over rural India, accounting for 20% of the total bank branches. But, the reform measures did not allow the RRBs to continue with their rural and regional character. As of March 2008, of the 14,458 branches, only 11,353 were in the rural areas, 2,561 in semi-urban areas and 584 in urban areas. Stranger still, as many as 60 branches of RRBs are in metropolitan areas even as many as 1,014 rural branches were closed or shifted between 1998 and 2007 on the plea of non-viability.
The regional character also suffered a setback following the consolidation exercise that started in September 2005. The number of RRBs has reduced from 196 back then to 88 by May 2008 and the principle of each RRB functioning in a homogeneous agro-climatic area is given a go-by. There is a distance of 1,000 km or more between some of the amalgamated RRBs and the districts covered are not contiguous as the rule for amalgamation was ‘one RRB for one sponsor bank in one State’.
So, all the original characters of the RRBs have undergone a transformation; rather, they have become more commercial than the pure commercial banks.
The RRBs have no doubt turned from eternal loss makers into profit-making entities following the revamping measures. The net profit generated in the RRBs in 2007-08 was Rs 625.11 crore. Though higher than the previous year’s Rs 617.13 crore, it was lower than the profit earned in the year before of Rs 748.11 crore.
This raises doubts on the sustainability of even the commercial character of these banks, which have sacrificed their social responsibility. At times, the external factors such as loan waivers and rescheduling of instalments on account of drought and the resultant reduction in non-performing assets favorably influence their financial results.
In fact, the accumulated loss in the system during 2007-08 of Rs 2,759.49 crore was higher than the previous year’s Rs 2,636.85 crore.
Also to be viewed from the commercial angle is the fact that their business volume is disproportionately low compared with their share in branch network. While RRB branches account for 19.58% of the total bank branches, their deposit of Rs 83,143.55 crore accounts for only 2.6% of the total bank deposits in India and advances of Rs 48,492.59 crore constitute a still lower share of 2.01%.
Similarly, the rural branches of the RRBs account for 36.94% of the total rural branches of all the banks put together. But, their share in institutional agricultural advances is not more than 10%.
While it is clear that the turnaround strategy of RRBs has clearly turned them away from their original goals, their profits, induced through sacrificing the rural weaker sections’ credit and other measure, do not seem to be sustainable. Also, the business levels of the banks are nowhere comparable to their size in terms of number of offices.
The situation calls for a relook at the policies and introspection. Why should the RRBs exist as separate entities? Should it be for commercial purpose or for equity goals? Are these goals attainable through the strategy applied? Can their new dispensation help them yield better results than the other commercial banks given that the failure of commercial banks was the raison d’etre for the birth of RRBs? These are some of the questions for which the RRBs’ reforms cannot provide answers.
raopsmrao@gmail.com

Technorati Tags: ,,

Less for farmers, more for votes


NSS data and other studies have shown that the income of farmers have been low and stagnant due to several problems viz. increasing risk and uncertainty in cultivation, absence of a proper crop insurance scheme, spurious seeds and pesticide serious water problems, lack of extension services particularly for commercial crops, lack of proper marketing, remunerative prices for their crops, lack of irrigation facilities, lack of non-farm activities in rural areas and lack of health facilities. Finance Minister is non-attentive to these problems.

As this huge amounts were not written off, banks have to keep it as their assets and have to bear the consequent burden of it. These assets are called “Non-performing Assets” i.e. the assets which are actually not in existence. Virtually under the pressure of banking sector, the Finance Minister has shifted his treachery to the state treasury. How and wherefrom will the huge money come? Will he take resort to his new economic guru Keynes’ panacea of printing money? Definitely it will raise the inflation, concomitant effect of which will be felt in commodity market as well.

As a result of this lavish subsidies, the US and EU countries are flooding our market with artificially cheap agri-products with the help of their export subsidies, domestic supports and our free-market access policies.

UPA government is doing nothing to protect the agriculture sector besides appeasing a few farmers for voting purposes. Farm loan waiver scheme is nothing but a political agenda to woo the few gullible and credulous farmers. UPA government has actually buckled down the US and EU countries by agreeing to their conditional ties to harm our agriculture sector.

Shri P. Chidambaram, the ardent follower of Friedman brand of market-driven economy and critic of Keynes’ brand of state- controlled economy, has now taken the Keynesian panacea of using state exchequer to the tune of Rs. 60,000 crore to write off farm loans.
The Finance Minister has announced a complete loan waiver for marginal farmers with land holdings of up to two hectares and for other categories of farmers, he has proposed One Time Settlement (OTS), with the government giving a rebate of 25 per cent if a farmer pays 75 per cent of the loan overdue. Total burden on the exchequer will be Rs 60,000 crore. Definitely private banks will not be affected with this waiver because they have very little direct loans exposure to farmers.

Now the question which invariably arises in the minds of the common people is what will it actually benefit the target agriculturist and the agriculture sector of the country as a whole? How far it will provide respite to the small and marginal farmers? At present half of the farmers are in the small and marginal category i.e. more than four crore. As per budget speech of 2006, out of the total number of cultivator households only 27 per cent receive credit from formal sources and 22 per cent from informal sources. The remaining households, mainly small and marginal farmers, have virtually no access to credit.

The same Finance Minister is announcing respite to small and marginal farmers from bank farm loans. Is it not statistical jugglery? Or a mere paper adjustment? During earlier Congress regime it was the practice of the Government to write-off bank loans, as a result of which banks became moribund and the state-controlled bank capital converted to political capital. The amount of outstanding bank credit swelled from Rs 7,04,087 crore in 2003 to Rs. 21,82,311 crore in 2008, up to January.

As these huge amounts were not written off, banks have to keep it as their assets and have to bear the consequent burden of it. These assets are called “Non-performing assets” i.e. the assets which are actually not in existence. Virtually under the pressure of banking sector, the Finance Minister has shifted his treachery to the state treasury. How and wherefrom the huge money will come? Will he take resort to his new economic guru Keynes’ panacea of printing money? Definitely it will raise the inflation, concomitant effect of which will be felt in commodity market as well. There will be artificial scarcity of essential commodities and consequential spiraling of prices.

Now let us see whether the Finance Minister of Congress Communist-led UPA Government has actually taken honest endeavour to improve our agriculture. In the foregoing paragraph I have shown that 73 per cent farmers have no access to formal sources of credit. Quite evidently they are easily vulnerable to local money tenders. It is therefore, quite understandably true that this farm loan waiver scheme will have no tangible effect on the agricultural sector of India.

The whole scheme is just statistical jugglery.
The huge amount of state capital will be turned into bureaucratic political capital. It is not correct that this fact is not known to the Finance Minister. In July, 2007 the expert group on agriculture indebtedness submitted their report to the Finance Ministry and noted that most marginal farmers were highly dependent on private money lenders. The formal banking institutions account for only two-fifth of the total outstanding loans in the country. About 77.4 per cent of the farmers own only 0.01 hectare of land whereas the Finance Minister’s present magic scheme is meant for farmers owing less than two hectares of land.
As per expert group’s study it is therefore clear that 77.4 per cent of Indian farmers who own less than two hectares of land but are miserably stuck with money lenders, are out of the purview of Prime Minister’s onerous scheme. For this vulnerable section the expert group suggested the creation of Money Lender Debt Redemption Fund. But the Finance Minister did not pay any heed to this suggestion in this budget. Rather he walked through the easiest way of winning our age-old credulous villagers. To him, target voters precious than the Indian agriculture.

NSS data and other studies have shown that income of farmers have been low and stagnant due to several problems viz. increasing risk and uncertainty in cultivation: absence of a proper crop insurance scheme: spurious seeds and pesticides; serious water problems; lack of extension services particularly for commercial crops; lack of proper marketing; remunerative prices for their crops; lack of irrigation facilities; lack of non farm activities in rural areas and lack of health facilities.

Finance Minister is non-attentive to these problems. Farmers are not getting minimum prices, not to speak of profitable prices.
Commission for Agriculture Cost and Prices (CACP) has recommended substantial increase in Minimum Support Price (MSP) for all crops. Swaminathan Commission has suggested a formula of calculating MSP as cost of production plus an additional 50 per cent. Communist supported UPA Government is very much averse to all these recommendations and suggestions.

But why aversion? When it was clearly revealed in New York Times that developed world funnels nearly $ 1 billion a day in subsidies to encourage over-production and drive down prices; Oxfam, and internationally famed NGO, accuses the rich countries of giving more than $ 300 billion annually as subsides towards agribusiness. Even World Bank President, Paul Walfowitz admitted that the developed countries are spending $ 280 billion to support agricultural producers.

Our Indian Government allocates a bare minimum amount in agricultural research. The expenditure on agriculture research is only around 0.3 per cent of the Gross Domestic Product (GDP). This is much lower than the level of one per cent GDP for developing countries.

As a result of this lavish subsidies, the US and EU countries are flooding our market with artificially cheap agri-products with the help of their export subsidies, domestic supports and our free-market access policies.

Under South Asia Free Trade Agreement (SAFTA), Government of India has reduced the duty to zero per cent on meat, fish, milk, dairy products and dry fruits from Bangladesh, Nepal, Bhutan and Maldives and drastically reduced the duty on such goods imported from Pakistan and Sri Lanka.
Indian markets have become the dumping ground of foreign cheap products.
Indian farmers, in absence of domestics subsidies on geographical, environmental and natural hazards, export subsidies, remunerative Government supported price, proper exploitation of free market and honest research work, are now languishing under severe hunger and debt-trap of money lenders leading to thousands of cases of farmer suicides all over the country.

The greatest problem of Indian agriculture is the lack of proper marketing. Our Government had never tried to create a strong marketing infrastructure for all the crops.

As a result, some experts say, that there is a huge influx of cheap imported agricultural products. The subsequent bumper crops in some states of India, led to several cases of farmer suicides from 2006 on wards as farmers had to sell their farm produce very cheaply. Government did nothing to buy and conserve or find market for the produce by giving export subsidy.

UPA Government is doing nothing to protect the agriculture sector. It is only appeasing few farmers for voting purposes.

Farm loan waiver scheme is nothing but a political agenda to woo the few gullible and credulous farmers. UPA Government has actually buckled down the US and EU countries by agreeing to their conditional ties to harm our agriculture sector.

Our farmers are only born to die on expectations and disappointments year after years of budgets.

(The author, senior trade union leader can be contacted at B-35/4, Kalindi Housing Society, Lake Town, Kolkata-700 089.)