Mahatma Gandhi Community Forum

Need for better understanding between farmers and financing institutions in India


It is reported that Azhagar, a farmer belonging to Ariyalur district in Tamil Nadu , India committed suicide after his tractor was seized by a private finance company for defaulting on a loan taken by him . Azhagar was reported to have taken  loan of Rs. 7 lakhs a few years back and repaid Rs. 5 lakhs but did not pay remaining instalments.

A few days earlier, a farmer G. Balan in Thanjavur district in Tamil Nadu was reported to have been assaulted by the agents of the private bank and police , when the agents tried to seize the tractor due to non repayment of loan.

The above unfortunate incidents are  sending wrong signals and have caused considerable anxiety and anguish amongst the farmers, which has understandably made the farming community  to protest and agitate.


Severe debt burden :


Agricultural sector is  subjected to considerable stress due to fluctuating seasonal and monsoon conditions and non realization of adequate income by farmers due to variety of reasons including the inability to sell the produce directly to the consumers and excessive dependence on traders and middle men who take chunk of the profit.

As a result, many farmers  face severe  debt burden , as they take loan from private financiers at exhorbitant interest  due to the fact that the public sector banks have cumbersome procedures and take time to sanction loans to the farmers.



Can we find fault with financing institutions for enforcing guarantee ?:


The  issue of  non repayment of agricultural loan extended to the farmers by the financing institutions and seizure of the tractor in the event of farmer not repaying the loan should be dispassionately viewed from the point of view of the farmers as well as that of the financing institutions.

After all, no financing institutions can survive if the loan extended would not be returned along with the appropriate interest terms. Therefore, the financing institutions cannot be straightway faulted for trying to enforce guarantee given by the borrower in the event of not repaying the loan.

However, it is very important that the financing institutions, whether government owned or private ,should adopt lawful methods to recover the loan.

It is well known that in the case of a few multi national banks, Indian owned private banks and private financiers, coercive methods are sometimes  being used and the services of agents who employ goons and goondas, are utilised to recover the loans. If and when such private financing institutions adopt such rowdy like methods, certainly, the concerned executive belonging to the financing institutions should be straightaway arrested.


Duty of the farmers :


The  farmers should be conscious of the fact that they have a duty  to repay the loan along with the appropriate interest as per the agreed terms and conditions that they have signed at the time of availing the loan.

If they would be  unable to do so due to any reason, they have to keep the financing institutions informed and ask for rescheduling the loan. If such rescheduled loan would not also be honoured, then they should be willing to accept the right of the financing institutions to enforce the guarantee.

In the case of such distress situation, it is the duty of the government to come to the rescue of the farmer and the financing institution should not be denied it’s due.


Who is a deprived farmer ?:


It is possible that the term farmer  may be somewhat misunderstood today.

While the farmers are  generally described as those who own agricultural land , the other sector involved in agricultural field are those who do not own land but work on land as tillers and do other functions in the farm.

While some farmers holding small area of land do work on the land themselves , the other farmers who have large holdings do not  work on land themselves but employ agricultural labourers. There are also many “absentee farmers”, who live in towns and cities far away from their land holdings.

There are reports that some people who declare themselves as farmers are crorepathis. There are reported to be around 2746 persons in the country  in the nine year period from Financial year 2006 – 07 upto 2014-15, who have declared Rs. 1 crore and more of agricultural income.

Therefore, it is necessary to make a distinction between the  farmers who own small area of farm and work on the land themselves  and those who own land but employ others to work on the farm.


Both need each other:


As  it is extremely distressing to know about the suicide of the farmer, the financing institutions have to make a distinction between the farmers who hold less than 3 acres of land and those who have larger holdings, while taking measures  to enforce the guarantee.

The financing institutions should be considerate and persuasive while dealing with any loan default issue by the small farmers and enforce the guarantee only as a last resort.

While the farmers association and the farming community are fully justified in protesting against the use of un lawful  and coercive methods  by the banks  to enforce the guarantee, in case of default of loan by some farmers, at the same time, the farmers association also have the responsibility to advise the farmers to honour the loans.In the event of inability to honour the loans inspite of best of efforts, the farmers should be advised to cooperate with the financing institutions to enforce the guarantee.


Both the farmers and financing institutions need each other and a good understanding of compulsions of both the parties by both the parties will point to a solution for this vexed issue.


Nandini Voice for The Deprived

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