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Are Indian farmers wilfully defaulting on loans in hope of a waiver?

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Chiefs of nationalised bank have told the government of India that farmers who have taken loans for agriculture are increasingly becoming wilful defaulters. In a meeting convened on Monday by the Finance Ministry, bankers expressed concerns over farmers refusing to repay loans in the hope of a waiver. The trend, bankers claim, is increasing at an alarming rate. There are, however, some within the banking community who do not agree.

Are Indian farmers wilfully defaulting on loans in hope of a waiver?

If one were to go by Monday's meeting, bankers are of the opinion that it is not Vijaya Mallya alone who is a wilful defaulter. Anticipating loan waiver, farmers, bankers claim, are refusing to repay loans. While some look at it as deliberate escapism, others within the community strongly feel that farmers are genuinely unable to repay loans due to bad produce or crop loss. Whatever the reason, financial institutions are forced to grapple with a pile of bad debt.

"As bankers, any kind of default is unacceptable for us. We will fight against it but I do not feel that farmers are deliberately defaulting on loan repayment. We have seen the actual trouble that they are in. Severe crop loss and bad produce have made their life difficult. The percentage of farm loan is less in comparison to corporate loans," said Ajay Manjrekar, the General Secretary of Canara bank employees union.

Bankers are of the opinion that not just farm or corporate loans but defaults are being witnessed in personal and education loans as well. The total farm loans in the country are estimated to be just under Rs 10 lakh crore. The scenario is similar in the state as well as centralised banks.

"Farm loan defaulters are harassed"

"While defaulting on a loan is bad, I know for a fact that bankers harass farmers. Despite the difficult conditions that they live in, farmers are humiliated in public. While corporate loan defaulters are not touched, poor farmers are targetted and shamed," Manjrekar added.

Bankers have told the Finance Ministry that in the recent months, default rate in various states of India has increased up to 50 percent. While in some places farmers are said to be emptying their bank accounts to avoid deduction, in others they are coming together to demand a loan waiver or extension of the deadline in the hope of government waiving off their loans.

As of June, Andhra Pradesh, Telangana, Uttar Pradesh and Maharashtra have announced loan waivers. Madhya Pradesh and Tamil Nadu government are working out a special package for farmers while Karnataka is awaiting funds from central government to undertake relief measures. Generally, states heading to elections are keen on offering loan waiver and the farming community, bankers say, hope for the same. AP had waived off loans a little over Rs 40,000 crore after N Chandrababu Naidu won the assembly polls in 2014. While the waiver clears out credit books of the banks, defaults impact overall payment culture, the banks feel.

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