Banks bend for rich corporates, break farmers

The inequality is grotesque. Responding to an RTI plea, the Reserve Bank of India has informed that since April 1, 2014, the banks have written off a staggering Rs 16.61 lakh crore of bad loans of corporate India. On the other hand, speaking in Parliament the other day, Hanuman Beniwal, an MP from Rajasthan, said the outstanding farm loans in the country now exceed Rs 32 lakh crore.

More than 18.74 crore farmers are saddled with outstanding loans.

In fact, the total outstanding farm loans are 20 times higher than the outlay for the annual agricultural budget, Beniwal said, and asked the Finance Minister why no mention was made of any farm loan waiver scheme for farmers.

On the contrary, of the total write-off of Rs 16.61-lakh crore toxic loans of India Inc in the past 11 years (with only 16 per cent recovery), Indian banks appear not to have any second thought before writing-off Rs 10.6 lakh crore of the unpaid loans of India Inc in the past five years. Reports say that 50 per cent of the bad loans being struck belonged to large companies.

But when it comes to farmers, a bank in Shimoga, Karnataka, had showed the utmost urgency by summoning a small farmer who had to walk 15 km in the absence of a regular bus service to clear an outstanding balance of just Rs 3.46.

In the financial year 2023-24 alone, banks have written off Rs 1.7-lakh crore. A year earlier, in 2022-23, banks wrote off Rs 2.08-lakh crore. But when it comes to waiving farm loans, the Centre has done it only twice: in 1990 and 2008. Some state governments have done it separately, but it is not a burden on the banks as the states make the payments to the bank for the amount waived.

While the unpaid bank loans are written off with sagacity, as if the write-off adds to nation-building, it is so painful to see a video clip of a woman self-help group (SHG) member being dragged to a waiting police van for her inability to pay back Rs 35,000.

It appears as if it's only poor farmers and rural workforce that are responsible for upsetting the national balance sheet with their petty defaults, while the rich defaulters get an easy walkover. The rich defaulters include over 16,000 willful defaulters with an unpaid amount of Rs 3.45-lakh crore in bank loans, and who even the RBI acknowledges had the money but did not want to pay back. Certainly, these are the wealth creators, and the nation must applaud them.

Now take a look at this farmer from Pilibanga in Rajasthan. He took a loan of Rs 2.70 lakh from a finance company and had paid back Rs 2.57-lakh (including Rs 57,000 support received from the state during the pandemic). But unable to pay back the remaining amount, he comes home one day to find his house locked. Later, the lock was broken by outraged villagers.

This unsavoury event must be viewed in the context of a 92 per cent 'haircut' that banks and lenders undertook when Adhunik Metaliks, a leading manufacturer of alloy and steel in the eastern region, settled for Rs 410 crore against their outstanding dues of Rs 5,370 cr after its resolution plan was approved by the Kolkata branch of the National Company Law Tribunal (NCLT), in July 2018.

Obviously, with such a huge 'haircut', the promoters of the company said they are willing to complete all activities and start working towards reviving the flagship company. No wonder, once hailed as a transformative resolution mechanism — the Insolvency and Bankruptcy Code (IBC) — has come under the flap and the banks are no longer enthused to use it for recoveries. Reports say recoveries for banks and other lenders are coming down.

The bigger question, however, remains. If the house of a Rajasthan farmer can be locked for a non-recovery of a pending amount of Rs 20,000, why couldn't the NCLT lock the premises (and put the owners, like farmers, behind bars) of firms like Adhunik Metaliks instead of giving it cakewalk by simply waiving 92 per cent of the pending dues?

And, if such a massive 'haircut' is required for a big company, why shouldn't farmers get the benefit of a similar approach and, that too, in a relatively smaller way? After all, their individual outstanding loans are hardly a fraction of the corporate bad debts.

Moreover, why should banking laws be different for different categories of bank customers? Do banks ever treat those who take housing, car, tractor or motorbike loans with the same kind of kid gloves? How long can the banks go on justifying the need for owning the bad debts of the companies and, that too, in the name of economic growth?

When I see agonising videos on social media of farmers — those running tractors to re-plough their standing cauliflower and cabbage crops in Punjab and Haryana; and, more recently, the crash in tomato prices for farmers in Chhattisgarh and Madhya Pradesh — I am reminded of the Operation Greens scheme launched in the 2018-19 Budget with an outlay of Rs 500 crore to stabilise the prices of tomato, onion and potato.

While everyone agrees that adequate investment in agricultural infrastructure, including a network of cold chains, can help minimise the damages, the reality is that Operation Greens has failed miserably to stabilise the vegetable prices. One reason may be that the scheme is short of appropriate funding support.

This is untrue given the fact that in December 2023, the NCLT approved a resolution of bankrupt Reliance Communications Infrastructure Ltd (RCIL) which walked away with a 'haircut' of 99 per cent of the claimed debt. Against Rs 500 crore allocated for Operation Greens in 2018-19, the RCIL walked away by paying just Rs 455.92 crore against the admitted claim of Rs 47,251.34 crore.

If only the amount was, instead, recovered and invested in Operation Greens, there would have been no shortage of financial resources for investing in infrastructure required for stabilising the prices of fruits and vegetables.