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Bank loan waiver may not be politically beneficial

By Ajay Modi in Meerut
June 12, 2008 12:06 IST
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The bank loan waiver for small farmers is unlikely to give any significant political mileage to the United Progressive Alliance in western Uttar Pradesh, home to hardy farmers and their leaders like Ajit Singh and Mahendra Singh Tikait.

For many years now, the Congress and its allies have not had any noteworthy representation from the area. The loan-waiver package may not improve things in the next general elections in 2009, Business Standard found out in an extensive tour of the area.

Most farmers said they did not find it worthwhile to go to a bank for loan because the process was too cumbersome. "Getting a loan from any bank is tedious. They ask for innumerable documents and make us run for months before sanctioning a loan," said Gyan Singh, a farmer.

Consider this: Only 16 per cent of the 42,000 farmers associated through loans with the 79 branches of the Punjab National Bank in the Meerut circle will benefit from the loan-waiver package. Of the Rs 268 crore (Rs 2.68 billion) outstanding dues of farmers to the bank in the circle, only Rs 28 crore (Rs 280 million) will qualify for loan waiver and relief.

The upshot is, there is enough prosperity in the area for the farmers to queue up in front of banks for loans. Farmers in the area cultivate sugarcane in large numbers to feed the sugar, gur and khandsari mills that dot the landscape. The Uttar Pradesh government has always kept the purchase price of sugarcane high to be in the good books of this politically active group of farmers.

In spite of the current payment problems the farmers face from the mills, there are visible signs of prosperity all over. Most rural houses are pucca structures with a vehicle or two in the courtyard. Farmers send their children to far-off places like Ghaziabad and Noida to study in expensive public schools.

A PNB officer, who works
in the region, said that a large number of farmers in and around Meerut have made a killing after they sold their land to real estate developers like Parsvnath and Ansals. As a result, the banks have gained deposits but it has led to reduction in demand for credit.

Bank officers, meanwhile, are busy implementing the waiver. Most are now required to work even on Sundays. In addition, about 45 officers from the bank's zonal office have been deputed to monitor the package at the branch level.

Most of the records are compiled manually. "The old loan accounts are manual while the recent ones are computerised. We have to go through each of them individually and no software can be of use in this situation," another bank officer said.

The bank also found out that soon after the package was announced, even well off farmers stopped the repayments. "Many borrowers who are not eligible for the waiver got the notion that they too will benefit and stopped the repayments. It is a challenge for us to explain to such borrowers that they need to pay," said PNB Executive Director JM Garg, who recently visited a few branches in the circle. 

To stem the rot, PNB held interactive sessions with farmers at two villages in Meerut last Saturday. Every senior officer at the PNB headquarters in New Delhi has been assigned to visit 10-15 branches to ensure smooth execution of the scheme.

Their numbers might be small, but some farmers did say that if they got relief they would vote for the Congress. Some, however, felt that the scheme discriminated between big and small farmers. "Devi Lal had announced a uniform loan relief of Rs 10,000 for every farmer, small and big. Every farmer was treated equally," said Kuldeep Tyagi, a farmer of Sara village. Devi Lal was the deputy prime minister in the VP Singh-headed National Front government in the late-1980s.
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Ajay Modi in Meerut
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