Farmers have been shunned by the banks as money-lenders turn vigilant due to rising bad loans. Dnyaneshwar Siddhanth, a farmer from Maharashtra, last month was in desperate need of money to buy seed and fertilizer as the monsoon sowing season has approached. He was rejected by his bank for a loan after several attempts, thereafter Siddhanth had to borrow ₹ 1.5 lakh from a moneylender at a rate of 60 percent annually.
Due to the novel Coronavirus pandemic, millions of farmers like Siddhanth have been shunned by banks, money-lenders have turned vigilant due to increasing bad loans. These situations have forced farmers to turn to illegal moneylenders who are charging increasingly outrageous rates.
In India, agriculture accounts for 15% of the economy and is a source of income/livelihood for more than half of the people in this country. Increased interest rates will reduce farm earnings, impact overall rural incomes which are key to rescue the economy.
Siddhanth said, “Most of the profit goes to paying interest to a private moneylender. Everything now depends on monsoon rains. If the crops fail, then I will have to sell land to repay the loan”.
Until the last year the private money-lenders charged around 24-36 percent interest, the rates have now increased to 60% as there are more farmers seeking loans. Usually, the interest rate of banks for crop-related loans is 4-10%.
According to the head of agriculture lending, though the schemes have been introduced and announced by some states, the money hasn’t reached the bank which makes the farmer’s account a non-performing asset for the bank, and hence they aren’t able to give more loan till the outstanding gets cleared.
Siddhanth already owes a bank ₹ 1.78 lakh from a previous loan, which was covered under the scheme. However, the state government is yet to provide funds to repay it, and nearly one-third of the loan remains outstanding.
According to the statistics of this year, between March and June, the agriculture sector contracted 1.8¬cording to the Reserve Bank of India. The lending to the sector has grown by 6.7&% compared to 11%in the same period the previous year.