Two successive loan waivers amounting to Rs16,000 crore by the BJP and Congress governments have left the cooperative sector banks in a financial mess. The banks are facing a cash crunch and have been able to meet only 50 percent of their lending targets, according to bank officials.
The Rajasthan State Cooperative Bank Ltd and Rajasthan State Land Development Bank Ltd are the main banks that give short-term and long-term loans respectively to farmers.
Post the farm loan waivers, not only the recovery of dues, but also the lending capacity of the banks have been hit, the officials said.
Moreover, this time farmers are getting loans at a high interest rate of 12.1 percent from the RSLDB.
The RSLDB lends to farmers at an interest rate of 12.1 percent of which the government gives a 5% interest subvention or grant to the bank. So effectively, farmers get the loan at 7.1 percent.
However, this time the government has not announced the interest subvention so farmers are getting loans at 12.1 percent, RSLDB managing director Jitendra Prasad said.
The Rajasthan State Cooperative Bank Ltd, or apex bank as it is also known, had a target of lending ₹10,000 crore for the Kharif season but it managed to lend only ₹5,000 crore, said the bank’s Managing Director Inder Singh.
{{/usCountry}}The Rajasthan State Cooperative Bank Ltd, or apex bank as it is also known, had a target of lending ₹10,000 crore for the Kharif season but it managed to lend only ₹5,000 crore, said the bank’s Managing Director Inder Singh.
{{/usCountry}}For the Rabi season, the target is to give ₹6,000 crore worth of loans to 15 lakh farmers in the state, Singh said.
The cooperative bank is saddled with over-dues of ₹1500 crore and is offering an incentive scheme to farmers to improve recoveries. “Farmers who renew their loans will get 25% more on their loan amount,” he said.
Similarly, the Rajasthan State Land Development Bank (RSLDB) too has been unable to meet the lending target.
Jitendra Prasad said the bank has a target of lending ₹250 crore but has so far lent only ₹43 crore. Last year, they had given loans worth Rs168 crore.
He admitted that the loan waiver had damaged the sentiment among farmers to repay loans. Giving freebies is not the way to improve agriculture. It has led to fiscal stress in the banks,” he said.
The Rajasthan State Land Development Bank has 36 primary land development banks in the districts with 125 branches. Of these, 18 banks are in poor financial shape and have been shut down.
In 2018, the BJP had announced a one-time loan waiver of up to ₹50,000 for farmers who had taken loans from cooperative banks. The waiver cost the state exchequer ₹8,000 crore.
The Congress, which came to power in December 2018, has given loan waivers of up to ₹2 lakh for farmers who had taken loans from cooperative banks and primary land development banks. The loan waiver cost the state exchequer ₹8,500 crore.