Bombay HC asks banks to disburse loans and refund interest to farmers

In a major relief to over a lakh farmers who were being held at ransom by banks refusing to disburse loans for the ongoing Kharif season, till the farmers paid interest

In a major relief to over a lakh farmers who were being held at ransom by banks refusing to disburse loans for the ongoing Kharif season, till the farmers paid interest on the previous loans, the Aurangabad bench of the Bombay high court has directed the banks to release the loan amount. Court has also restrained the banks from demanding interest on the previous loan and directed the banks to return the interest collected from the farmers.

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The farmers eligible for loan waiver under the Mahatma Phule Karjmukti Yojna approached the court after banks refused to disburse the new loans to them even though the state had issued a government resolution in January 2020, stating that it would pay the banks the previous loan amount under the scheme.

A division bench of justices SV Gangapurwala and Shrikant Kulkarni while hearing public interest litigation (PIL) filed by Kishore Tangade, a resident of Aurangabad, was informed by advocate Satish Talekar that banks were resorting to arm twisting tactics with the farmers. Talekar submitted that the though the banks had been asked by the state government not to seek interest on the previous loans from October 1, 2019, and to disburse new loans to the farmers, the banks were holding the farmers to ransom and telling them that new loans would be released only if the farmers paid interest accrued after October 1 on the previous loans.

Citing the example of Aurangabad District Central Cooperative Bank Ltd, Talekar informed the court that even though it had passed an interim order on July 9 directing banks not to ask for interest and disburse new loans, the said bank was adamant and refused to release the new loans till the farmers paid interest accrued after October 1, 2019.

Talekar submitted that as the Kharif season was underway and the delaying tactics by banks would result in huge losses to the farmers who would not be able to take benefit of the season, due to lack of funds, the court should initiate contempt proceedings against such banks.

Senior counsel RS Deshmukh for the bank submitted that after the interim order, the bank had released loans to around 98,000 farmers, but was not releasing loans to chronic defaulters. Though the bank intends to challenge the order wherein they have been restrained from demanding interest on the previous loans after October 1, 2019, in light of the interim order they had stopped demanding interest.

After hearing the submission, the court observed that 2020 was a tumultuous year due to Covid but with timely rains, the agriculturists would suffer if they do not get short term loans on time. In light of this, the court directed the banks to not only disburse loans to the remaining beneficiary at the earliest but also refund the interest collected by them to the tune of ₹5 crore immediately to the farmers. The court then disposed of the PIL.