‘Pro-rich’ policy makers must end step-motherly treatment against debt-ridden farmers

In mid-September last year, two farmers in Haryana’s Hisar district were served with an arrest warrant by the local court for defaulting on a loan repayment. Both the farmers had taken a loan of Rs. 6.80 lakh from the State Bank of India. Unable to pay the instalments after their standing crop was damaged some years back, the bank moved the court seeking their arrest.

Quite ironically, just a few weeks earlier, Yes Bank had written off Rs. 5,000 crore standing in the name of media tycoon Subhash Chandra, who ‘owed’ Rs. 6,500-crore. As per news reports, Subhash Chandra paid Rs. 1,500 crore to the asset restructuring company, JC Flowers, and regained control of the family’s stake in Dish TV, Zee Learning and three properties, including a bungalow in New Delhi. While there may not be anything that goes against the books, the manner in which a lender paid just 20 per cent of the outstanding and got away certainly raises eyebrows.

Moneylife observes that if only Yes Bank had got into a one-time settlement with the media baron without involving the intermediary JC Flowers, perhaps it could have recovered a higher amount.

That’s what infuriated protesting farmers who staged a dharna outside the bank premises in Hisar district. “If a businessman can get a waiver of Rs. 5,000 crore, why should we be jailed,” they asked.

It is in reality a tale of two defaulters. It depends on which side of the fence you are. If you are a poor farmer the chances are that you will face a jail term. And if you happen to be a rich defaulter, you can easily walk-off with the public sector bank taking the loss.

Noam Chomsky had called this obvious policy discrimination as ‘tough-love’ – tough for the poor, and love for the rich.

This brings me to a more recent case. The Bombay High Court has in an interim order held the arrest of the former ICICI Bank chief Chanda Kochhar and her husband by CBI as illegal saying that the arrests were not as per the law. Chanda Kochhar had allegedly advanced crores of rupees to a firm set up by her husband and the industrialist Venugopal Dhoot. This case pertains to 2019 when an FIR was registered against them.

If arrest can be held illegal in this case, I sometimes wonder if the farmers had a battery of big names among lawyers to fight their case, probably all farmers who are routinely put behind bars for failure to pay instalments, could have also walked free. After all, using bounced cheques to convert a civil case against a farmer into a criminal case is something the lawyers could have easily challenged. But as I said earlier, it depends on which side of the fence you are from.

More recently, the All India Bank Officers Confederation and the All India Bank Employees Association in a joint said statement opposed Reserve Bank of India’s directive to nationalised banks to treat 16,044 wilful defaulters with kid gloves. They collectively owed the banks Rs 3.64-lakh crore and the banks have been asked to get into a compromise settlement with them, and wherever possible issue them fresh loans after 12months.

This is what I meant by kid gloves. Wilful defaulters are the rich borrowers who do not pay back the outstanding to the bank although they have the capacity to do so. As I have often said, instead of sending the wilful defaulters behind bars, the RBI acts as ‘raksha kavach’ for them. Poor farmers on the other hand do not enjoy the same luxury, and face a jail term for petty amounts.

The bank unions say the compromise settlement to wilful defaulters not only leads to erosion of public trust in the banking sector but also undermines the confidence of the depositors. They also say that wilful defaulters have a significant impact on the financial stability of banks and the overall economy. But it is the poor farmers who are invariably blamed for upsetting the country’s balance sheet.

A lot of news reports appear from time-to-time about the amount of bad loans being written-off by the banks in the past few years. If it is Rs. 2.09-lakh crore written-off in 2022-23; another report says Rs. 10.57-lakh crore was written off in the last five years; and yet another report saying Rs. 11.17-lakh crore have been written-off in six years. To end the confusion, let’s add up the numbers, and the final figure arrives at a total of Rs. 14.56-lakh crore that has been written-off by banks since 2014-15, as per the data made available to Parliament in August 2023.

Although, the write-offs are technically speaking not a waiver, but allows shifting the bank balance from one ledger to another, meaning the recovery proceedings will continue, the reality is that not more than 13 per cent of the toxic loans have been recovered.

Add to it the waivers, called as ‘haircuts’ that have been accorded under the Insolvency and Bankruptcy Code of 2016, wherein creditors have been able to realise only 31.85 per cent of the admitted claims. With many industrialists accepting it, IBC has become a legal way to get an easy walkover and that too by keeping the assets in the control of the borrowers or their family members and allies. These are the billionaire bankrupts, who very cleverly using a legal mechanism to get a walkover ensuring that the losses are borne by the public.

In other words, the massive bank write-offs of toxic loans and the huge ‘haircuts’ that the rich get only shows that the economic design the world had drawn ensures profits for the rich, and leaves the cost to be borne by the public.

In fact, we pay public money on a platter to the rich to stay rich and continue to add on to their wealth. In lot many ways, this kind of broken financial system is what has acerbated inequality the world is faced with. Since the wealthy get an easy walkover and do not have to end in jail, they continue to live a lavish lifestyle. The sledge hammer blow on the other hand that farmers receive keeps them perpetually in debt, neglect and poverty.

This is how the banks help make rich richer, and keeps the poor farmers somehow surviving along the poverty line.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)