The noose of blank cheques around farmers

Devinder Sharma
Food & agriculture specialist.

Gurpreet Singh is a small farmer from Kishangarh village in Moga district of Punjab. He owns 3.5 acres of land and had defaulted in repaying an instalment on a Rs 5.6-lakh crop loan that he had taken from the State Bank of India (SBI). A year ago, he was sentenced to rigorous imprisonment for two years. His fault: he had failed to make repayment as per the schedule. "As I had an SBI account, they took blank cheques from me," he told a newspaper. 

Gurpreet Singh is among the thousands of farmers who have been served legal notices under Section 138 of the Negotiable Instrument Act, 1881. Hundreds of them have served jail terms over the years and numerous others are on bail and await trial. In all cases, the modus operandi is the same. Banks take blank cheques from farmers when they seek loans, and fill in the amount due when it becomes apparent that the farmer is unable to repay an instalment, and file for a criminal case. What should otherwise be a civil case, thereby turns into a criminal offence, which I think is patently wrong. "Almost 99 per cent of the farmers who draw loans from the banks, whether private, cooperative or nationalised, and fail to pay back face this ordeal, "says Bharti Kisan Union (Ugrahan) leader Sukhdev Singh Kokrikalan. 

Seven farmer unions had joined hands against the unsavoury practice by banks of using blank cheques to recover the unpaid dues. "These days, banks are taking triple securities from farmers - pledging of land, signing by a guarantor and blank/post-dated cheques, "said Buta Singh Burjgill, president of the BKU (Dakunda) faction. While numerous reports have appeared from Haryana, Uttar Pradesh, Rajasthan and Madhya Pradesh of public auction of farm lands or tractors mortgaged with the banks, it is invariably the blank cheques that land more and more defaulting farmers behind the bars in Punjab. This is primarily because Punjab has banned the auction of mortgaged land or 'kurki. Even this is denied by farmers who say that 'kurki' orders are issued frequently but it's only because of pressure from farm unions that auctions are not allowed.

Now compare this with Mudra loans. Minister of State for Finance Shiv Pratap Shukla informed Parliament that loans worth Rs 7,277.31 crore of public sector banks till March 2018 under the Pradhan Mantri Mudra Yojna (PMMY) had turned bad. Subsequently, an RTI revealed that Rs 11,000 crore of Mudra loans belonging to 13.85 lakh account holders had turned into non-performing assets (NPA) till August 3, 2018, Interestingly, while the government has set up a Credit Guarantee Fund for Micro Units (CGFMU) which guarantees payments against default in micro loans up to Rs 10 lakh to eligible borrowers, no such provision exists for defaulting farmers. Bad loans of Punjab farmers are in reality far less when compared with Mudra loan defaults. 

Strange, while post-dated/blank cheques are taken from farmers at the time of applying for bank loans, there is no such condition for Mudra loans. In fact, borrowers don't need to pay processing charges or offer any collateral. Or else, 13.85 lakh borrowers who have defaulted on Mudra loans would have been served legal notices, and hundreds of them would have been behind the bars. Therefore, the question that arises is why the practice of taking blank cheques at the time of granting a loan is confined to farmers? Is it because given the level of illiteracy and economic depravity, the farmer is a soft target?   

Take the case of the new scheme offering loans up to Rs 1 crore within an hour, or 59 minutes to be exact. For the medium, small and micro-enterprises (MSME), an automated, contact-less provision has been enacted for providing loans from Rs 10 lakh to Rs 1 crore. For these loans, collateral is not mandatory considering that these loans are covered with a Credit Guarantee Fund Trust for Micro and Small Enterprises (CGFTMSE).  Again, if the state can act as a guarantee for defaults for MSME business loans, I see no reason why a similar guarantee fund should not be created for farm loans. After all, the farmer is an entrepreneur and farming too is a business activity. 

Banks' argument that the practice of obtaining blank cheques serves as a security for farm loans is in fact discriminatory. The high-handedness being shown by banks to use the blank cheques from gullible farmers so as to easily convert these civil cases into criminal ones, defies logic. Meanwhile, Punjab's Cooperation Minister Sukhjinder Singh Randhawa, who after prolonged negotiation with agitating farmers and bankers, has assured that banks will withdraw cases and return the blank cheques to farmers owning up to 5 acres of land and loan up to Rs 10 lakh. Around 6,000 small farmers will benefit if the bounced checks are returned, but the protesting farmers want this practice to be withdrawn completely.  

Although banks have promised before the Punjab and Haryana High Court to return blank cheques for the small farmers in a week or so, I don't see any reason why the practice of drawing blank cheques is not completely dispensed with. Banks cannot be allowed to wilfully exercise a discriminatory policy against farmers. There have been cases when banks have attached a farmer's pension to recover outstanding dues. According to National Crime Record Bureau statistics, 80 per cent indebted farmers who committed suicide in 2015 had taken loans from banks and registered microfinance institutions. This defies the common understanding which blames private money lenders for adopting unlawful recovery tools. 

Farming is a risky enterprise, which operates under difficult economic as well as climatic conditions. But the dual approach adopted by banks to recover outstanding farm loans from farmers using coercive means, while going soft on massive corporate loan defaults besides other business loans, clearly shows that the credit policy is designed to benefit the rich at the cost of the poor. Let me illustrate. As per a report presented by the Public Accounts Committee of Parliament, the total outstanding loans of the public sector banks, termed as NPAs, stood at Rs 6.8 lakh crore in March 2014. Out of this, 70 per cent belonged to the corporates whereas only 1 per cent default was of the farmers. Corporate NPAs presently stand at a whopping 10.3 lakh crore. Did we ever hear of any of the corporate defaulter going to jail for bounced cheques?