Banks fall in line, agree to extend moratorium on farmers' loans

Banks fall in line, agree to extend moratorium on farmers' loans
Farmers were severely affected by the floods in August 2018.

It looks like the LDF government has had its way with the banks. The State-Level Bankers' Committee has decided to write to the RBI once again seeking an extension of the moratorium on farmers' loans till December 31. The decision was taken after Chief Minister Pinarayi Vijayan, Agriculture Minister V S Sunilkumar, and senior state officials held talks with the SLBC representatives here on Tuesday.

This means that banks would not initiate attachment proceedings against debt-ridden farmers at least for the time being. The decision is expected to benefit over 1.25 lakh farmers who had taken loans, and who had applied for the restructuring of their loans before December 31 last year. These farmers can withhold their interest repayment till the end of the year.

On June 23, the SLBC had put out a public notice hinting that the banks would begin recovery proceedings after July 31, the original deadline. The government had earlier pushed the deadline to October 31, and then to December 31, in both the instances after taking the SLBC into confidence.

However, the SLBC's announcement that it would write to the RBI once more seems like a face-saving move. Agriculture Minister V S Sunilkumar had told in the Assembly on June 20 that the RBI had not really objected to the extension of the moratorium when the SLBC had written to the RBI earlier seeking permission for granting moratorium. “The RBI has only said that loans taken after December 31 last year cannot be restructured. As for the moratorium, the RBI has said that it could be decided at the level of the SLBC,” the minister had said.

Malayala Manorama, too, had reported on Tuesday that the RBI had indeed told the SLBC to take a call on extending the moratorium. This was stated in the RBI's reply to a poser by the SLBC on whether it could extend the moratorium on loans to December 31, as decided by the government.

Now that the RBI had put the ball back in the court of the banks, what was the need for the SLBC to write to the apex court again. Sources said that this would save some embarrassment for the banks, which were on the offensive till the other day, and also give the impression that they were sensitive to the needs of farmers.

Chief Minister Pinarayi Vijayan told the banks about the need to be supportive of the farmers in these times of crisis. Chief Secretary Tom Jose, who was also present, said that the government would stand by the farmers.

Bankers were already told that the government would not cooperate if they go ahead with attachment proceedings under the SARFAESI Act. The bankers needed the help of both the revenue and police departments to go ahead with their recovery proceedings.

Some hard questions were also put to the bankers. If they were so insistent on rules, they were asked why then they were hesitant to grant loans to farmers. On paper it would look as if the banks were disbursing generously to the primary sector. Fact is, most of the loans given to the primary sector are agricultural gold loans. The government provided figures to show that these were not availed of by farmers.

The government said that if the banks were adamant on moratorium then it would insist that agriculture gold loans should be given only to bonafide farmers, only to those who submit a certificate from the agriculture officer. The banks found themselves on a weak wicket here as such gold loans were one of their biggest money spinners.

The government also questioned the selective implementation of the SARFAESI Act by banks. Under article 31 (i) of the SARFAESI Act, agricultural lands are exempted from the extraordinary provisions of the Act. But banks in Kerala consider only paddy fields as agricultural lands, treating all other farmers - spices, rubber, fruit and vegetable - just like ordinary people. The SLBC was asked to include all farmers within the scope of exemption.

The banks on their part said it was unfair to blame the banks for the suicides of farmers. The SLBC convenor G K Maya said that a public notice was put out to tell the public the facts about moratorium.

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