Western UP’s farmers will perhaps not have time to celebrate their ‘messiah’ Chaudhary Charan Singh’s birthday today. Not only do farmers in northern India continue to be rattled by natural calamities, but also by disastrous government policies. The latest instance of the latter is the Narendra Modi government’s demonetisation move.
Modi had promised long-term gains and pleaded with the people to bear the short-term pain. Farmers readily supported the initiative. But even as his self-imposed 50-day deadline nears, farmers’ pain is expected to last far beyond the stipulated time. Neither the government’s propaganda department nor the BJP on social media have been able to list the promised long-term benefits. Confused and left high and dry, farmers’ support for demonetisation is waning, and waning fast.
The solemn promise printed on Indian currency notes – “I promise to pay the bearer the sum of X rupees’”– was broken when, following a government notification, around 12 crore customers of all the 33 state cooperative banks (SCB) and 367 district cooperative banks (DCB) duly licensed under the Banking Regulation Act of the RBI, were barred from depositing old bills in their own accounts or even exchanging petty cash.
“Similarly governed urban cooperative banks continue to function as normal banks when the scandalous Axis bank (a private bank in which the government holds maximum shares) goes unscathed, accepting deposits and conniving with black money hoarders, to the detriment of the PM’s reputation.
About 260 commercial banks, all SCBs and most DCBs on the core banking solution (CBS) platform even issue RuPay debit cards. But in their previous stints, both Modi (as Gujarat CM) and Economic Affairs Secretary Shaktikanta Das (as Secretary in Tamil Nadu) have closely seen the working of cooperative banks and have genuine concerns for bank management.
Situation in Punjab
I can personally validate the apprehension among the vast multitude of farmers because of my experience in Punjab. Most banks in Punjab and elsewhere are controlled by politicians and run like personal fiefdoms with state government patronage. Lack of supervision and governance by NABARD and the politically-controlled registrar of cooperative societies have created this crisis. Between seeking to end black economy and crooked cooperative bank managements, farmers are being milled like wheat flour.
“Most small and marginal farmers take loans from cooperative banks. About 5 crore farmers, who have fulfilled KYC norms and received loans using Kisan Credit Cards, can’t even make repayments and continue to be charged interest.
Farmers usually repay loans after every harvest. Now, unable to repay loans in time, farmers won’t be eligible to claim 4 percent interest subvention either. New loans are only given on repayment of old loans and the rabi season loan off-take is also impacted.
Dismiss Cooperative Bank Managements
Politically-controlled cooperative bank managements must be dismissed for they are not representative of the interests of primary agriculture credit societies and farmers. If the managements had even the slightest shame they would have resigned. New currency notes being made available to various bank branches are not being equitably distributed but being garnered by bank managements by using the names and accounts of unaware customers.
“At the all-India level, the cooperative banks’ net outstanding crop loans stand at nearly Rs 2 lakh crore. One option would have been to allow DCBs to accept repayment of the crop loans in the old currency. Banks could later, at their discretion, re-issue loans.
Farmer loan NPAs with commercial banks have reduced substantially and this will be borne out when data is available. Meanwhile, cooperatives saddled with only defaulting customers are heading for failure. Another option would have been to let cooperative banks with CBS connectivity to work as other banks. But it’s too late in the day to do this now.
Banks’ Refusal Unjustified
Farmers were given loans by RBI-licenced banks. Now, after the harvest, when farmers want to return the loans, banks are refusing to accept cash deposits. On Kisan Diwas, it is only logical that farmers refuse to repay the loans.
The legal and supervisory issues left untouched during the UPA’s tenure now plague cooperative banks. Today, lawyers representing crooked cooperative banks managements have literally destroyed relief opportunities for farmers. Farmers will have to explore other legal options and are considering moving the Supreme Court after 31 December. Alternately, a face-saving solution for the government is to waive all farmer loans issued by cooperative banks.
Larger Crisis in the Offing
A larger crisis is brewing in the farming sector. Demonetisation has created a cash shortage. Therefore, consumers are buying lesser quantities of fresh produce and even traders have less money to trade with. As a result, the price of perishables (fruits and vegetables) is down, on a conservative estimate, by about 30 percent. Due to lesser spending power, the loss is then transferred to shopkeepers and traders.
“The prices of other produce such as fish, poultry, cotton, groundnuts, etc. are also down due to fewer cash transactions. When a person does not buy household goods or clothes etc., the demand is deferred for a few months. But when a person eats fewer fruits, vegetables etc, demand is lost forever.
Irrespective of demonetisation’s pangs, farmers are demanding that the PM sack the RBI governor immediately, not only because he failed to fulfill his mandate and wrongly advised the government, but also for the problem-ridden roll-out of new currency notes.