Maharashtra loan waiver: Banks submit lakhs of ghost accounts, but RBI says ‘don’t know, didn’t hear, didn’t see’

The Reserve Bank of India (RBI) doesn’t have any information regarding the major irregularities banks committed while compiling the list of names of farmers entitled to benefit from the Rs 34,000 crore farm loan waiver announced by the Maharashtra government, according to an RTI (Right to Information) response from the RBI. The RTI was filed by Firstpost on 27 November.

“The Reserve Bank of India has no information in this regard,” the RBI said. The central bank was asked to respond with its assessment on the banking mess and the likely action on the erring banks.

At the heart of the matter is a Firstpost investigation (read here) which probed the reasons why Rs 34,000 crore farm loan waiver committed by the Maharashtra government never reached the actual beneficiaries within the deadline. The investigation subsequently revealed serious wrongdoings on the part of banks.

To give a perspective, out of the loan details of about 11 lakh farmers submitted by the State Bank of India (SBI), about three lakh entries had serious errors, according to the report’s findings. In just one form submitted by SBI, more than 11,000 farmers were assigned one single Aadhaar number. Not just that, in some cases (read here) banks even hired students to enter farmers data, leading to errors and risking security breach of official records.

 Maharashtra loan waiver: Banks submit lakhs of ghost accounts, but RBI says ‘don’t know, didn’t hear, didn’t see’The story is largely the same for data furnished by other major banks including HDFC, ICICI, Canara Bank, Central Bank, Bank of Maharashtra and Bank of Baroda. The mess has irked even the Opposition parties with former Maharashtra chief minister Prithviraj Chavan demanding investigation against the banks that committed the fraud.

One possible excuse from the banks is that many farm loans that are eligible for the loan waiver scheme were disbursed years before Aadhar scheme became popular and even now many beneficiaries may not be having Aadhar numbers, which government agencies have insisted from eligible borrowers. But none of this offers an excuse to banks for furnishing wrong data, which might have either denied or delayed the benefit of farm loan waivers to the originally intended needy farmers.

The farm loan waiver was originally announced on 24 June, 2017, the government set 18 October for beginning the disbursal. Remember, this failure is not due to shortage of funds to implement the loan waiver but on account of sheer inefficiency or fraud on part of banks while compiling the list of loan waiver beneficiaries. This needs to be investigated.

In fact, this isn’t the first time a farm loan waiver scheme has run into a major roadblock. Take the Rs 36,000 crore scheme implemented in Uttar Pradesh. Many farmers complained that they didn't get what they were promised. Some farmers said they got loan waivers as minuscule as 35 paise. Even during the rollout of the Rs 70,000 crore loan waiver scheme sponsored by the Congress-led UPA regime in 2008, there were reports of needy farmers not benefiting from the programme.

How does a loan waiver work typically? When a government announces a loan waiver, the State Level Banking Committees (SLBCs), a lobby of banks, are tasked to collect the details of eligible farmers from individual banks. Depending on the waiver structure, these lenders may or may not include cooperative banks.

In the case of Maharashtra, the list of lenders included cooperative banks as well and some middlemen were also tasked to compile data. Once the SLBC gets this list, the same is passed on to the state government for final assessment and allocation of the loan waiver amount. In the case of Maharashtra waiver, this process was followed and the list with fake names (or erroneous ones) was passed on to the government without the facts being checked, either intentionally with the connivance of bank officers or due to sheer laxity on their part. The only difference here is that farmers also had an option to make their entries online. Here, the banks claimed that these entries did not match with their data. But, the data submitted by these banks itself was full of errors.

The very merit of the loan waiver schemes and its impact on farmers itself is a matter of debate. However, after committing to farmers monetary relief, the government is unable to deliver the promise on account of the mess created by banks while preparing the list. This raises serious questions on the systems and processes in the banks and the KYC follow-up. The bigger concern is, if banks can mess up data of their  clients to this extent as in the loan waiver case, the processes can go wrong elsewhere as well.

Last year, this website had reported a series of stories on how state-run Bank of Baroda wrongly identified people as board directors of failed airline Kingfisher and put a lid on their bank accounts. Such instances keep repeating. It is now the job of the Reserve Bank of India to dig into the details of how banks end up furnishing wrong details of lakhs of farmers in the loan waiver list. In an earlier column, Firstpost had said that at least now the regulator should come into the picture and wake up the sleepwalking banks. But the RBI’s RTI response that it doesn’t have any clue on the matter is disappointing. The banking regulator is supposed to have a tab on the issue concerning lakhs of customers. Many farmers are now living in uncertainty for no fault of theirs.


(Part of this piece was published earlier. The next part of the Firstpost investigative series will be published this week.)

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Updated Date: Dec 19, 2017 09:28:05 IST