“Time was when many of us lived under the constant threat of a ‘ kurrki from the sahukar ’ (harsh reminder from the moneylender) and some of us would end up paying interest many times over our principal amount,” reminisces the 92-year-old Ramchandra of Agrola Kalan village in Amroha district of Uttar Pradesh.

Echoing him, Hasan Mian of Aghapur recalls that even some of the rich families fell into the clutches of moneylenders after their crops failed. “They had to ultimately part with their huge havelis (mansions).” Both, however, agree that things have changed after the opening of rural banks in their area and borrowings from sahukars are few and far between.

Prathama Bank, the first regional rural bank in the Moradabad, Sambhal, Rampur and Amroha districts, had nearly 35 years ago launched a concerted effort to free villagers from debt traps. The bank claims that over a hundred villages have since been freed from the clutches of sahukars . Today, at least one member from every household in the four districts is an account holder with the bank. In addition to simplifying the lending process, Nabard’s Debt Swap scheme too came to the rescue of many poor farmers.

Babu Khan from Noorpur village was facing harassment from a local moneylender after borrowing ₹10,000 at a monthly interest of 10 per cent. Under the debt swap scheme, the bank directly paid the moneylender ₹10,000 and persuaded him to waive off the interest rate. It lent Babu Khan ₹5,000 to carry on his popcorn selling business. “Babu Khan paid back his loan of ₹15,000 through monthly payments of ₹500,” says KK Nafees, Senior Branch Manager of the Sihali Jageer village branch of Prathama Bank.

According to Prathama Bank Regional Manager and spokesperson Sunil Kumar Saxena, nearly 1,151 families in 353 villages (with debts totalling ₹3.15 crore) have been freed from unscrupulous moneylenders across the four districts.

The Kisan Credit Card (KCC), too, has come as a ‘saviour’ for many farmers. It allows the farmer to withdraw up to ₹1 lakh without providing any security. Villagers admit that while they use the credit primarily for farm inputs, they sometimes also use it for other exigencies and functions like marriages.

Mahendra Singh from Taharpur used his KCC to buy land, which has now trebled in value. The withdrawal limit is based on landholding.

There are 3,23,728 KCC holders in the region, and loans amounting to ₹2,789 crore were disbursed until the end of last month. Loans up to ₹25,000 each are given to artisans, weavers and small entrepreneurs without collateral security. The strategy for financial inclusion is two-pronged, says Prathama Bank Chairman MS Arora. “Providing loans and encouraging savings.”

However, the sahukars now target the poor and illiterate, especially women. On kishtiyas (instalments), they offer a loan of ₹10,000 and take back ₹1,000 right away. They then arrive on the appointed date every month to collect an instalment of ₹1,000. “The borrower ends up paying ₹13,000 by the end of the year for the ₹9,000 they actually got,” explains a bank official.

“Our aim is to open at least one bank every 5 km, so that every household has access to easy credit,” Arora says. The bank has over 380 branches and hopes to open 20 more by the end of the fiscal.

The writer is a senior journalist based in Delhi

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