In the Malwa region of Punjab, banks behave like petty moneylenders

Amloh, Punjab: In the 15 years between 2000 and 2015, a shocking 14,667 farmers committed suicide in Punjab, a recent government survey has revealed. As many as 83 percent of them were deeply indebted to banks and money lenders. What is striking is that most of these deaths occurred in the agricultural heart of Punjab, the rich, cotton-growing Malwa region, where the stigma of being branded a defaulter appears to have been the trigger.

Banks in the region have come under pressure from the state government to go easy on farmers who are unable to service their loans. Says Davinder Pal Singh, assistant general manager of Ludhiana Central Co-operative Bank, “Some months ago, even (arrest) warrants were issued in case a farmer defaulted on his loan but that practice is not being used now.” His bank has outstanding loans with 60,000 farmers.

Under a growing burden of non-performing assets (NPAs) in the banking system, bank managers are being held to increasingly strict standards of loan recovery. But they are also facing a growing backlash from farmers’ unions and political parties over their loan-recovery tactics. An even graver threat to the survival of the rural-credit system comes from the propaganda spread by some farmers’ unions that with a loan waiver imminent, farmers need not repay loans. As the farm loans are classified as priority sector lending and are relatively cheap, they account for over 40 percent of farmers’ borrowings.

Not easy to monitor loan spending

H P Singh, a senior manager at the Punjab & Sind Bank in Ludhiana, which is lead bank of the district, says that banks have been working under intense pressure because of the agrarian distress in the state. “On the one hand there is a risk of crop failure, on the other, there’s a campaign by a section of farmers not to return loans to banks. This has come to haunt the banks,” he says.

 In the Malwa region of Punjab, banks behave like petty moneylenders

Jasvir kaur, wife of Sikander showing the bank passbook from where he husband had availed loans. 101Reporters

Farmers take loans for farm machinery, fertiliser, seeds and in some cases even to pay their electricity bills. While the loans taken by small farmers could range from Rs 20,000 to Rs 1 lakh, bigger farmers take loans of more than Rs. 20-30 lakh for agricultural operations.

Singh says that in many cases farmers divert the loans availed for farming purposes to fund non-productive consumption, including children’s marriage or their children education in foreign countries. It’s not easy to monitor how loan funds are spent. “While we can verify assets in case where a farmer has availed loans for machinery, we cannot do that in case where the loan is for seeds, manure and other such items,” says Singh. “How will the economy function if the banks don’t get back their loans?” he asks.

The Punjab government last year announced a loan-waiver scheme under which farmers with landholdings of up to five acres would get relief. The scheme was based on the recommendations of an expert group headed by eminent economist Dr T Haque. It recommended waiver of the entire crop loan up to Rs 2 lakhs of all small and marginal farmers (who farm up to 5 acres each) and relief of Rs 2 lakh each to other farmers irrespective of the amount of land they cultivated or the loan they had contracted.

‘More inputs, less profit’

But even the manner in which the state government has gone about publicly identifying waiver recipients has come in for criticism. As renowned economist Sardara Singh Johl mocked, “What an innovative way the Punjab government has found to demean and humiliate the farming community! Banks under secrecy clause are not disclosing the names of defaulters of crores and crores of rupees, but our government has decided to put the names of small and marginal financially stressed farmers, who are to be given a debt waiver of mere Rs 2 lakhs, on village walls!”

Sukhpal Singh, head of the economics department of Punjab Agricultural University that conducted the survey of farmer suicides in Sangrur and other districts of Malwa region in Punjab, says the major reason for farmer suicide is the increasing cost of inputs and decreasing profitability. “The 3,818 suicides in Sangrur in 15 years is proof of the frustration among farmers,” he says.

Ajay Vir Jakhar, chairman of Punjab State Farmers’ Commission, says that a simple agriculture policy, easily understandable by Punjab farmers would be formulated. “The policy would cover agriculture and allied occupations to ensure the economic well-being of the state farmers who are affected due to different factors.”

Naresh Gaur, general secretary of the All-India State Bank of Patiala Employees’ Federation, says there is a need for awareness among farmers that they should return the loans they have availed from the banks. “It is the taxpayers’ money that we give as loans and we cannot cheat them by not recovering the loans,” he points out. “Banks are stuck in a vicious circle where they are tagged as fraudulent if their NPAs increase and come under social pressure while trying to recover their loans if a farmer commits suicide.”

(AK Sharma is a Punjab-based freelance writer and a member of, a pan-India network of grassroots reporters)

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Updated Date: Apr 18, 2018 20:38:36 IST