National Sample Survey Office data from 2012-2013 shows that only 18 percent of farmers take loans from institutional sources.
A key agriculture expert at NITI Aayog has stated that the recently announced blanket farm loan waivers by state governments will benefit less than ten percent of the distressed farmers.
Professor Ramesh Chand of the government policy think-tank, told Hindustan Times that the National Sample Survey Office (NSSO) data from 2012-2013 points out that only 18 percent of farmers take loans from institutional sources, relying heavily on informal money lenders who do not come under the waivers’ influence. NITI Aayog puts the number of farmers, who borrow money from money lenders, at 50 percent.
The money lenders charge an exorbitant interest rate — three to four percent — in states such as Uttar Pradesh, Punjab and Haryana.
The latest data from the National Bank for Agriculture and Rural Development (NABARD) puts repayment figures at 70 percent. This means that only small section of farmers default on their loans in the first place. “So, eventually, loan waivers benefit around five to 10 percent of farmers and not all of them are non-wilful defaulters.”
“Waiving loan can bring short-term relief, but there has to be a full strategy in place to ensure that loans reach to them and their dependence on money lenders is minimised,” said a senior public sector bank official, who did not wish to be identified, reported Hindustan Times.
A majority of the low-interest credit goes to the farmers that are well-off.
Finance minister Arun Jaitley had increased the total agricultural loan target by Rs 1 lakh crore to Rs 10 lakh crore for 2017-18, in the Union Budget on February 1.
Previously, the RBI governor Urjit Patel, financial experts, institutional equities and even activists have given their arguments against the move.
On the other hand, protests by farmer organisations demanding loan waivers were supported by opposition parties.