Chief Minister Basavaraj Bommai’s populist plan to help farmers by restricting banks from taking action when they do not repay loans could put the finance minister in him in a fix amid concerns over rising bad debts.
At an event in Chitradurga last month, Bommai said his government would “ban” banks from seizing houses, properties and valuables belonging to farmers when they do not repay loans.
Farmer leader Kuruburu Shanthakumar said he was elated when Bommai told a delegation recently that an order would be issued on this matter.
A move like this could have a direct bearing on repayment of loans in the agriculture sector in which an estimated 60-65 per cent of the state’s population is engaged.
“We might have to amend the existing laws. We might even need a new law,” Cooperation Minister S T Somashekhar told DH.
“What we’re looking is for farmers to be given sufficient time instead of action being taken on them,” he said, adding that there are plans to table a Bill in the winter session of the legislature.
Somashekhar heads a department that lends to farmers in a big way. In the current fiscal, the cooperation department wants to give agricultural loans worth Rs 24,000 crore to 33 lakh farmers.
Agri NPAs at Rs 20k crore
However, non-performing assets (NPA) in the agriculture sector have risen from Rs 18,651.10 crore as on March 31, 2022 to Rs 20,621.12 crore on June 30, 2022, according to the latest available data.
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The total outstanding agricultural loan amount is Rs 1.73 lakh crore.
“It’s a sensitive issue,” Somashekhar admitted. “There’s a notion that action will lead to repayment of loans and the lack thereof would make farmers go easy. We really need to figure out how we can come up with something that won’t hurt both banks and the farmers,” he said.
At present, banks rely on the Karnataka Public Moneys (Recovery of Dues) Act and the Karnataka Agricultural Credit Operations and Miscellaneous Provisions Act for loan recovery.
A recovery certificate is issued to the deputy commissioner who can attach properties.
Agricultural economist M G Chandrakanth contested the notion that Bommai’s plan would make farmers lax.
“Even with all the urbanisation and loss of farmlands, agricultural growth remains better. Agriculture was the best-performing sector during Covid,” the former director of Institute for Social and Economic Change said.
“Property attachment is always for long-term loans. And, what immovable property will a farmer have of any real value? If anything, the CM’s statement will make farmers happy.”
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