June 21, 2024


Imagination at work

A banker’s thought for our ‘Covid Casabiancas’

In his exquisite travelogue “Chasing the Monsoon”, Alexander Frater weaves a fascinating tale of the journey of our rains. As the clouds gather down south, along with the subcontinent’s farmers, there is another community gearing up.

In about two lakh branches of banks, RRBs and agricultural cooperatives in rural/ semi-urban India, staff now receive applications, process paper and disburse money to crores of Small and Marginal (SM) farmers, renewing their crop loans. Some are given new loans. These farmers own less than five acres of lands.

It is a massive seasonal exercise which goes mostly unsung, unhonoured. The borrower takes on an average less than ₹1 lakh. In the cities, nobody would give a banker a second look for that sum. But this amount is the difference between a livelihood and not having one for farmers.

The loans given for crop cultivation, popularly known as Kisan Credit Card (KCC) loans, sustain India’s food grains production and a bulk of them are given in Kharif. At last count, the KCC loans aggregated about ₹7 lakh-crore, given to nearly as many farmers. Out of our 14 crore farmers, 85 per cent are SM. A couple of crores till less than this size. No loan reaches them because they are lessee/tenant/share-croppers.

SM farmers

The SM farmers are more entrepreneurial than other entrepreneurs and give “margin” or own contribution for loans – their land which they hold dear, come high water or total drought. This should be good “collateral”. Bankers should know. In Kharif, paddy, soya bean, cotton, sugarcane and pulses are their favourites. Banks have to measure credit like good old “rations” of the Sixties. You do not have a Scale of Finance (SoF – denoting the amount of loan that can be given per acre) for any other type of loan. Some wise “babus” long ago decided this SoF has to be fixed by the District Level Technical Committee.

The SoF concept remains immutable. You can redefine God but not “SoF”. You may theoretically have about 730 “SoF” for, say, paddy because we have some 730 districts. Someone attempted to propose a theme like ‘One Nation, One Farmer, One Crop, One SoF’. Logical because the output price the Sarkaar pays is ‘One Nation, One Commodity, One Price’. But those who know better are yet to accept this logic.

Till the harvest is taken, the rains themselves can be a spoilsport. If the crop survives, then comes the market price which could be like a yo-yo. Except for paddy, where procurement at MSP works. Then, the farmer goes back with the cash to repay both principal and interest to renew his loan for his next crop. Mostly this is cash. Digital is yet to be the norm. The cycle continues. The government provides interest subsidy of 2 per cent. Plus 3 per cent for those who repay promptly.

But Covid surge 2.0, has made the small and marginal farmer more vulnerable. Last year, he saw to it that his segment stands out, making for a positive accretion to national income. They then are the “Covid Casabiancas”. This season, field reports are bad due to the second wave. Even for the hardened son of the soil, this blow is a little too hard. Can governor Shaktikanta Das, whose ‘radical empathy’ is self-evident, spare a thought for the SM farmer lot borrowing up to ₹3 lakh? Purely as a one-time measure, up to March 31, 2022, tell banks that if interest alone is serviced, farmers need not be treated defaulters? We owe it to our Anna Daataas in this Covid-Kharif.

(The author is top public sector bank executive. Views are personal)