The Hindu Business Line : Give the farmer a chance

Death is a daily routine for farmers in the Vidarbha region of Maharashtra and on June 30 the Prime Minister, Dr Manmohan Singh, will be on a tour of compassion to try and mend broken hearts. Put down by two and more years of drought, farmers are bereft of funds, even to perform the last rites of a fellow farmer who has taken his life. The Prime Minister could forcefully insist on the banking system placing funds in the hands of ruined families. That may not be enough though, for a start, it will be the kindest response. New Delhi and the RBI have with them stacks of expert reports on rural distress, all making the point that money-flows from banks to the farmers should be continuous and non-disruptive. Also, it is not the cost of funds but their availability that makes the critical difference between living and dying.

In recent times, the RBI has crafted a tag-line — financial inclusion — to get the banking system interested in building up loan books of poor farmers and it has followed it up with the suggestion of a "no-frills account". But how does one get deprived farmers to open "no-frills accounts" with banks? Possibly, the panel under Dr C. Rangarajan on "financial inclusion" will come up with some fresh insights. One cannot but mention here that banks were nationalised in 1969 to reach funds to the rural poor; today, the vast rural network of co-operatives, regional rural banks and rural branches of nationalised banks have turned sick and unfit for the job. For bankers, priority sector credit is an irksome mandate and rural credit does not evoke passionate concern. How many government banks have a general manger or an executive director handling the rural credit portfolio? When the stock market dives, the RBI insists the financial system maintain fund flows and not cut them as it could worsen the fall. Can this rule not be applied to the rural sector when the rural branches of banks have a take on the financial status of their clients? By denying fresh funds on the plea that old loans have not been paid back, as has happened in Vidarbha, the broken farmer is made to do the suicidal run to the money-lender. Farmers with ruined crops staring them in the face can pay back old debts only if fresh loans are okayed.

Dr C. Rangarajan will readily agree that "financial inclusion" can work only if the various payments made to the rural population are routed through banks and farmers paid by cheque or electronic transfers, not in cash. Software technology from an Infosys or a TCS could help in designing an all-weather bank pass-book or card for the rural poor, valid across banks and their branches; the pass-book should enjoy a rollover, and a limited overdraft facility sans any collateral. An interest rate of even 10 per cent is an easier burden when the money-lender charges three per cent or more per month. It is time the farmer was given a fair chance to live.

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