Maharashtra Government encouraging money lenders

Published in The Hitavada CityLine on April 1, 2013

Pvt money lenders tightening grip over farmers in State

Number of money lending licences issued and renewed has increased steadily in past five years while that of suspension/cancellation of licences has decreased

By Kartik Lokhande

With rising penetration of banks in rural areas, institutional finance is increasing. At least, this is popular perception. However, reality is far from this. In fact, in Maharashtra Government’s own admission, number of private money lenders is increasing steadily in the State. More shockingly, number of borrowers from these private money lenders has doubled in past five years!

The Government’s own authentic data incorporated in Economic Survey of Maharashtra for past five years reveals that number of licences issued to private money lenders by the Government has increased steadily. In 2008, the Government had issued new licences to 1,212 private money lenders. The figure rose to 1,595 in 2012. Similarly, the number of persons availing loan from money lenders increased from 4,23,213 in 2008 to 8,56,472 in 2012. During the same period, number of licences renewed of private money lenders increased from 7,089 to 8,185. Surprisingly, number of licences cancelled/suspended declined from 301 to 179.

According to sources in Co-operation Department, the rise is mainly due to steady exclusion of farmers from institutional credit mechanism. Despite implementation of loan waiver and one-time-settlement scheme, the entry of loans on farmers’ 7/12 extract did not change. In some cases, the entry was made and farmers availed loan from banks again but defaulted. In both the scenarios, banks did not provide loan to farmers again. Left out of institutional credit mechanism, farmers had no other option than to go to private money lenders, who charge minimum 2 per cent interest per month (24 per cent per annum).

“But, they are not caught as every private money lender maintains two books -- one for the Government and another for his own use,” said an official. According to him, rise in number of licences and renewal of licences was on account of interest shown by private money lenders in getting licence. They applied for licences in increasing number as they did not want to face action after being dubbed as ‘illegal money lenders’. So, they availed the opportunity offered by the Government.

MLA Devendra Fadnavis, who has been raising the issue in Legislative Assembly consistently, told ‘The Hitavada’ that farmers were being denied institutional credit and hence they were forced to go to private money lenders. “As far as loan waiver scheme is concerned, CAG has pointed out that 7/12 extracts of many farmers were not cleared of loan. Banks capitalised on this and refused loan to farmers in several cases,” he said. Besides, in Vidarbha region, many co-operative banks were under liquidation or on the verge of liquidation. This again forced farmers to go to private money lenders.

Kishor Tiwari, President of Vidarbha Jan Andolan Samiti, said that though input cost per acre increased tremendously over the years, institutional credit did not cover more than 20 per cent of needy farmers. “Previously, input traders were money lenders. Now, they have become output traders also. Thus, farmers get inputs from money lenders and are forced to sell agriculture produce to the same persons at the rates specified by the latter. It is a vicious cycle,” he said. He added that some ‘money lending sharks’ had become elected representatives in Panchayati Raj Institutions as well as Legislature, and hence the Government was not acting against them.

Money-lending in Maharashtra

------------------------------------------------------------------------------------------------------------------------

Particular                                                Year

                                        2008        2009         2010         2011         2012

------------------------------------------------------------------------------------------------------------------------

New licences issued     1,212         1,026       1,184        1,331         1,595

Licences renewed         7,089         5,837       6,452        7,292         8,185

Licences cancelled/

suspended                         301             99          389           303            179

Number of             

loans advanced       4,23,213       5,74,046    5,55,018     6,77,165    8,56,472 

------------------------------------------------------------------------------------------------------------------------