The Hindu Business Line : Banks lend farmers a hand to escape moneylenders' clutches

MONEYLENDERS have made the plot of many a novel and film and have been blamed for farmers' suicides in recent months. But this is a story of a knight in shining armour who has come to the rescue of farmers caught in the clutches of the village sahukaars.

When Shivabhai Chowdhury of Chala village in Gandhinagar, found that his existing bore-well was refusing to oblige with water to irrigate his 17-acre cotton farm, he was forced to shell out Rs 2.5 lakh for a new well.

With not enough funds in the house, he had to raise a loan of Rs 1.25 lakh from the village moneylender at a whopping "5 taka" (5 per cent a month or 60 per cent a year) rate of interest. In a little over a year, the farmer had paid more money as interest than the original amount and the principal stayed where it was.

That was till the Finance Minister, Mr P. Chidambaram, announced on June 18 that banks should help farmers extricate themselves from moneylenders' clutches. Initially hesitant to approach the local Dena Bank branch in his village, Chowdhury availed himself of the kisan credit card facility to pay off the moneylender and is now paying only 10 per cent simple interest a year on his outstanding amount.

The same story has been replicated by over 150 farmers in Balwa, about 40 km away.

"Strictly speaking, the kisan credit card scheme does not provide for such refinance. But we have been given the discretion of granting such loans because we are aware of the ground realities and know that the money is being used for agricultural activities, even if it is done indirectly," says Dena Bank's Balwa Branch Manager, Mr Harish Tomar.

Under the kisan credit card scheme, the bank assesses the beneficiary's creditworthiness and sets a limit to his borrowings. An account is opened in his name and the borrower has the option of taking the full amount or in parts. Part repayments can also be made and the bank charges interest only for the period the amount was borrowed.

The only condition is that at the end of the year, the entire principal, along with the interest, has to be deposited. The bank then instantly renews the account and money can be taken out again. This is just to ensure that the bank is sure of the creditworthiness of the borrower and is able to meet the norms of the kisan credit card scheme that only allows for crop loans, Mr Tomar said.

Vishnubhai Chowdhury of the same village, who used the facility to repay a Rs 1-lakh loan taken from the moneylender at "teen taka" (36 per cent), says he views the Rs 3,000 interest which he would have ended up paying to the sahukar as savings.

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