We are a society with set and preferred precedents. We meet a small boy and ask him what he wants to become when he grows up. We show admiration for him if he says Doctor, Engineer, Scientist, Pilot, IAS or IPS. We say – wow! What a choice! We meet a small girl and ask her the same question. We look at her with awe if she says the same – Doctor, Engineer, Scientist, Teacher, IAS. We hug her, we bless her. The parents of these small kids take pride in themselves for having such an offspring.

Can our urban outlook reconcile with an ecosystem which says farming can be a respectable, decent, honourable and profitable occupation? Probably not. We can’t reconcile, rather we don’t want to.

The above is the story of Vishal Pawar who was an exception. His father Namdev Pawar was a police constable and wanted his only son to become a policeman. But Vishal had different thinking, he always had farming in his mind. In order to pursue his dream, he started working in a pesticide company to gather knowledge about different pesticides available for farming. He left his job in 2010 and started cotton farming on their 15 acres of land. He was educated, hence was not reluctant to use modern methods of farming. In 2013, due to severe drought, the well that he built in his farm which gave him enough water for the entire 15 acres, turned dry. Despite managing to dig a small pond and setting up boring which would help him having sufficient water for irrigation, things did worsen only. Left with no other option, Vishal took extra 10 acres on lease with a view to repaying the loan that he had taken from a bank (Ner Urban Credit Co-operative Bank) as well as from one of his fellow farmers. Vishal had a belief that with the hard work that he would put in on this 25 acres of land, he would be able to repay the debts.

However man proposes, nature disposes. The worst was yet to come. In 2015, he reaped only about 10% of his expectations from this 25 acres and on December 18, Vishal ultimately gave up. The burden of consecutive crop failures and debts were too much for him to handle. He wrote four suicide notes and left the world with his passion for farming remaining unfulfilled. His suicide note to his small daughter was heart rending:

“My daughter, Vaishnavi, Beta you are a kid now but I am leaving you considering you are a grown up kid. I never wanted to be an irresponsible father but situation were such that I couldn’t become a good father. As a father, I couldn’t give you much, hence leaving you alone.Please forgive me. When you grow up, you will realize my situation. Please do me a favour — Please don’t cry, missing me. Grandfather, Grandmother, Uncle and Mother will love you so much that you will never miss me. That’s the only thing I pray for.”

Vishal’s story is not one of its kind. It was pathetic and not ideal. It still remains an unpleasant fact which should disturb us. It is neither the beginning nor the end. If Vishal, who had to meet such fate having fair idea about modern farming, it is dreadful to imagine the conditions of the farmers who are uneducated when monsoon plays truant.

Over the years, farmer suicides have remaineda contentious issue in India. The political fraternity has left no stone unturned to make it more of a political issue than a socio-economic issue. It has been a practice for the authorities to contestwhether every suicide by a farmer can be linked directly or indirectly to agricultural distress such as crop failure, unpaid loans, drop in the market price of the crop and so on. They argue that if a farmer’s suicide cannot be linked to agriculture, it should not be considered a farmer suicide at all. But The National Crime Records Bureau under the Ministry of Home Affairs, which is entrusted with collecting and summarising data on farmer suicides across the country, failed to address these contentions even when the issue was given a chapter of its own in the 2015 report. The bureau publishes this data in an annual report titled Accidental Deaths and Suicides in India. The data for each year is published in the subsequent year’s report. NCRB started publishing farmer suicide data as a separate section for the first time from the 2015 report.

As per Entry 14 of State List of Seventh Schedule of Constitution of India, Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases is a subject matter of the State, hence overall responsibility of promotion and development of agriculture lies with the State Government. However, Government of India through Ministry of Agriculture and Farmers Welfare supervises and assists States and Union Territories in development and welfare of people involved in agriculture. Agriculture still continues to be the principal source of livelihood for more than 55 percent of the population of the country. Despite involvement of more than 50-55 percent of workforce in agriculture sector, contribution of agriculture in Gross Domestic Product is merely 14 percent. Agricultural sector has not reached its full potential due to small land holdings, over dependency on monsoon, insufficient irrigation facilities, lack of cheap credit and insurance etc. Highly erratic and inadequate monsoon can aggravate the problems for persons engaged in farming sector and in extreme situations can lead to farmers’ suicides. Considering the paramount importance of this issue, the NCRB in consultation with Ministry of Agriculture and Farmers Welfare and Ministry of Home Affairs started collecting data on exclusively farmer suicides since 2014. Data on suicides in farming sector now include suicides committed by farmers/cultivators as well as agricultural labourers. For the purpose of this report, ‘Farmers/Cultivators’ include persons whose profession is farming and who either cultivates his/her own land or who cultivate lease land with or without the assistance of agricultural labourers. ‘Agricultural Labourers’ are those persons who primarily work in farming sector (agriculture/horticulture) and whose main source of income is from agricultural labour activities.

As per NCRB data, a total of 12,602 persons involved in farming sector (consisting of 8,007 farmers/cultivators and 4,595 agricultural labourers) had committed suicides during 2015, accounting for 9.43% of total suicide victims of 1,33,623 people in our country. The corresponding figures of suicides were 11,772 and 12,360 persons in the years 2013 and 2014 respectively.

Year Suicides in farming sector Total suicides Percentage
Farmers/ cultivators Agricultural labourers Total
2013 N.A. N.A. 11,772 1,34,799 8.73%
2014 5,650 6,710 12,360 1,31,666 9.39%
2015 8,007 4,595 12,602 1,33,623 9.43%

State and Union Territory wise analysis of suicides during the year 2015 reveals that majority of the suicides were reported from the following 7 states which together accounted for 87.49% of the total suicides :

States No. of  suicides Percentage of total suicides
Maharashtra 4,291 34.05%
Karnataka 1,569 12.45%
Telangana 1,400 11.11%
Madhya Pradesh 1,290 10.24%
Chhattisgarh 954 7.57%
Andhra Pradesh 916 7.27%
Tamilnadu 606 4.81%
Total for these states 11,026 87.49%

Further analysis of data divulges that out of the 8,007 suicides of farmers/cultivators, 7,566 were male and 441 were female. Majority of suicides committed by farmers/cultivators were reported in Maharashtra (3,030) followed by 1,358 such suicides in Telangana and 1,197 suicides in Karnataka, accounting for 37.84%, 16.96% and 14.95% of total such suicides respectively during 2015. Chhattisgarh (854), Madhya Pradesh (581) and Andhra Pradesh (516) accounted for 10.67%, 7.26% and 6.44% of the total farmer/cultivators suicides reported in the country respectively. These 6 States together reported 94.12% of the total farmer/cultivators suicides (7,536 out of 8,007 suicides) in India during 2015. Bihar, Goa, Himachal Pradesh, Jammu & Kashmir, Jharkhand, Mizoram, Nagaland, Uttarakhand and West Bengal along with all 7 Union Territories have reported NIL incident of farmers/cultivators suicides during 2015.

Similarly, a total of 4,595 agricultural labourers have committed suicides during 2015. Out of 4,595 suicides committed by agricultural labourers during 2015, 4,018 were male and 577 were female. The State and Union Territory analysis reveals that majority of such suicides were reported in Maharashtra (1,261) followed by Madhya Pradesh (709), Tamil Nadu (604), Andhra Pradesh (400), Karnataka (372), Gujarat (244) and Kerala (207), these States together accounted for 82.63% of total such suicides (3,797 out of 4,595 suicides) in the country during 2015. Goa, Manipur and West Bengal and all Union Territories (except Puducherry) have reported NIL incident of agricultural labourers’ suicides during 2015.

This leads us to the inevitable question – what are the reasons for these unfortunate suicides among the famers, cultivators and agricultural labourers.

Again, as per NCRB Data and analysis, ‘Bankruptcy or Indebtedness’ and ‘Farming Related Issues’ are reported as major causes of suicides among farmers/cultivators, accounting for 38.68% (3,097 out of 8,007 suicides) and 19.51% (1,562 out of 8,007 suicides) of total such suicides respectively during 2015. The other prominent causes of farmer/cultivators suicides were ‘Family Problems’ (933 suicides), ‘Illness’ (842 suicides) and ‘Drug Abuse/Alcoholic Addiction’ (330 suicides), accounting for 11.65%, 10.52% and 4.12% of total farmers/cultivators’ suicides respectively. Similarly, in case of Agricultural Labourers. ‘Family Problems’ followed by ‘Illness’ are reported as major causes of suicides among them, accounting for 40.11% (1,843 out of 4,595 suicides) and 18.98%(872 out of 4,595 suicides) of total such suicides respectively during 2015. The other prominent causes of suicides among agricultural labourers were reported as ‘Drug Abuse/Alcoholic Addiction’ (312 suicides), ‘Poverty’ (178 suicides), ‘Bankruptcy / Indebtedness from Financial Institutions’ (155 suicides), ‘Bankruptcy / Indebtedness from Non-Financial Institutions/Money Lenders’ (100 suicides), ‘Property Disputes’ (93 suicides) and ‘Marriage Related Issues (Dowry, Non-settlement of marriage, Divorce etc.)’ (90 suicides), accounting for 6.79%, 3.87, 3.37%, 2.18%, 2.02% and 1.96% of total such suicides respectively. The following table will present the data vividly.

Farmers/Cultivator Agricultural Labourers
Reasons No. of cases % Reasons No. of cases %
Bankruptcy or indebtedness 3,097 38.7% Family problems 1,843 40.1%
Farming related issues 1,562 19.5% Illness 875 19.0%
Family problems 933 11.7% Drug abuse/alcoholic

addiction

312 6.8%
Illness 842 10.5% Poverty 178 3.9%
Drug abuse/alcoholic

addiction

330 4.1% Bankruptcy/ Indebtedness from financial institutions 155 3.4%
Bankruptcy/ Indebtedness from non – financial institutions/Money Lenders 100 2.2%
Property disputes 93 2.0%
Marriage related issues 90 2.0%

It is clear from the above that as per NCRB data, bankruptcy or indebtedness is the main cause of farmers/cultivators’ suicides. If the same is painstakingly analysed further, we would be faced with the following facts:

1. 67% of suicides in Maharashtra (1,293 out of 3,030), 79.03% in Karnataka (946 out of 1,197 suicides) and 46.53% suicides in Telangana (632 out of 1,358 suicides) were due to ‘Bankruptcy or Indebtedness’.

2. Among 3,097 suicides committed by farmers/cultivators due to ‘Bankruptcy or Indebtedness’, 2,474 farmers/cultivator have taken loan from ‘Financial Institutions like Bank/Registered Micro Financial Institutions’ and 302 of them have taken loan from ‘Money Lenders’ during 2015.

The above is enough to correlate that bankruptcy/indebtedness is the main cause for suicides of farmers/cultivators in the year 2015 and the indebtedness were to the formal banking sector as well as informal banking sector. In fact, among the farmers/cultivators who committed suicide in 2015, most of them borrowed from formal banking sector. Whether the banks/MFI harassed them or not for non-repayment of debts is subject to conjecture as there are not enough empirical data to prove the same. Moreover, the proportion of loan availed from money lenders where there are perceived use of muscle power and exorbitant rate of interest, was substantially lower.

This brings us to moot question – has the formal rural banking sector has failed to deliver so far as affordable rural credit is concerned?

The institutional banking channels that take part in the rural credit delivery system mainly consist of the Regional Rural Banks, Rural Credit Co-operatives, State and Central Credit Co-operative Banks, State Co-operative and Primary Co-operative Agricultural and Rural Development Banks and Micro Finance Institutions. Most of these banks are under the supervision and regulation of NABARD.

In March 1979, The Reserve Bank of India (RBI) at the insistence of the Government of India, constituted a Committee under the Chairmanship of Shri B. Sivaraman, former member of Planning Commission, to look into critical aspect of institutional credit in boosting rural economy. The Committee’s interim report, submitted on 28 November 1979, outlined the need for a new organisation for providing undivided attention, forceful direction and pointed focus to credit related issues linked with rural development. It recommended the formation of a unique development financial institution which would address these aspirations and accordingly NABARD came into existence on 12 July 1982 through Act 61 of 1981 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC) for fostering rural prosperity. It was dedicated to the service of the nation on 5thNovember 1982. NABARD today is fully owned by Government of India.

As stated, the rural economy of our country, which is mainly agrarian, demands a strong and efficient credit delivery system, capable of taking care of the expanding and diverse credit needs of agriculture and rural development. More than 50% of the rural credit is disbursed by the Co-operative Banks and Regional Rural Banks. NABARD is responsible for regulating and supervising the functions of Co-operative banks and RRBs.

Let us take the case of Regional Rural Banks (RRBs) of India in respect of sufficiency of rural credit delivery.

Regional Rural Banks (RRBs), otherwise known as Gramin Banks,are Government owned scheduled banks mainly serving the rural areas of India on a regional basis with basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too.The area of operation of RRBs is limited to the area as notified by Government of India covering one or more districts in the State. RRBs also perform a variety of different functions which may consist of, inter alia:

  • Providing banking facilities to rural and semi-urban areas.
  • Carrying out government operations like disbursement of wages of MGNREGA workers, distribution of pensions etc.
  • Providing para-banking facilities like locker facilities, issue of debit and credit cards.

Regional Rural Banks were established under the provisions of an Ordinance passed in September 1975 and the RRB Act 1976 to provide efficient banking and credit facility for agriculture and other rural sectors. These were set up on the recommendations of The Narasimham Committee Working Groupwith a view to including rural areas into economic mainstream. The Regional Rural Banks are owned by the Central Government, the State Government and the Sponsor Bank jointly who hold shares in the ratio 50%, 15% and 35% respectively.However, the RRB Act was amended in 2015 whereby such banks are permitted to raise capital from sources other than Centre, State and Sponsor bank but even after stake dilution, the shareholding of the Centre and Sponsor Public Sector Bank cannot fall below 51%.

RRBs are recognized by the law and they have legal significance. The Regional Rural Banks Act, 1976 reads – “For the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto”. It is thus ample clear that RRBs can be a vehicle of growth and support so far as rural credit is concerned.

Subsequent to review of the financial status of RRBs by the Union Finance Minister in August, 2009, it was felt that a large number of RRBs had a low Capital to Risk weighted Assets Ratio (CRAR) and following the recommendation of K C Chakrabarty Committee, which was formed in September 2009, the Government of India approved the recapitalization of Regional Rural Banks (RRBs) to improve their Capital to Risk Weighted Assets Ratio. Currently, RRBs are going through a process of amalgamation and consolidation. As on 31 March 2016, there were 56 RRBs but the Govt. intends to bring down the number further to 36 from the existing 56.

As on 31.03.2017, 56 RRBs operated through 21,422 branches covering 648 districts. 49 RRBs earned profits to the tune of Rs. 2,604 crore and 7 RRBs incurred losses to the tune of Rs. 387 crore. Gross Loans and Advances outstanding under various schemes stood at 2.26 lakh crore and the GNPA stood at 8.07%. In 2017, there were about 700 odd districts in India and it seems that more than 90% of the districts of India are covered by RRBs.

As per NCRB data, most of the suicides of farmers/cultivators took place in Maharashtra, Karnataka, Telangana and Madhya Pradesh. The following table will show what the coverage of RRBs for these four states is as on 31.03.2017:

State No. of RRBs No. of branches No. of districts covered Total no. of districts in the State Coverage in percentage
Maharashtra 2 645 33 36 92%
Karnataka 3 1460 30 30 100%
Telangana 1 397 18 31 58%
Madhya Pradesh 3 1132 50 52 96%

Apart from the RRBs, in 2013-14, there were 31 Central Co-op Banks in Maharashtra and it accounted for 8.38% of the total no. of Central Co-op banks in India. The figures for Karnataka and Madhya Pradesh are 21 (5.68%) and 38 (10.27%) respectively. Each of these states had State Co-operative Banks as well as State Co-operative Agricultural and Rural Development Banks.

It appears from the above that the above states are well covered so far as rural banking is concerned. However, small villages not properly connected with the mainland might not be covered under this network and money lenders might have a free hand there. A search about the Marwadi village in Ner Taluka where Vishal Pawar used to live reveals that the village has a population of only 439 and it is not viable for a banking institution, howsoever small it may be, to operate therefrom. Data is not sufficient to form an opinion whether there were rural banks or co-operative banks in near vicinity. Reports suggest that Vishal Pawar took a loan from Ner Urban Credit Co-operative Bank where interest rates could have been exorbitant.

Two pertinent questions crop up here –a) did Vishal Pawar had access to rural credit at an affordable rate of interest, and b) did he have crop insurance? The issue of crop insurance is beyond the purview of this write up, hence we would concentrate on whether he did have access to affordable rural credit or not.

As stated, Marwadi village did not have a bank at all. Sub-District HQ Ner where Vidarbha Konkan Gramin Bank had a branch is at a distance of 15 km only. This gives rise to the obvious question – was it difficult for him to approach the bank for an affordable credit? Was he forced to take a loan from a reportedly private bank? What prompted him to take a loan from one of his fellow farmers also? Reports available in various media don’t seem to cover these issues.

To address the issue of indebtedness and the resultant farmers’ suicides, the Government from time to time formed inquiry committees, provided relief packages, waived debts and given one time grants. These are more of ad-hoc measures which are, in most cases, ineffective, misdirected and flawed and have political overtones. The direction should have been on availability of affordable rural credit, agricultural productivity, crop insurance, proper marketing outlets, abolition of unnecessary middlemen etc. which would result in farmers’ income and prosperity. Loan waiver and debt relief just postpone the problem but fail to face the problem head on. There were loan waivers in the past too, but had it been successful in bringing down the cases of farmers’ suicides? Statistics don’t prove that. Moreover, loan waiver applies to loans from formal banking sector only, whereas a large portion of the debt taken by the small and marginal farmers from money lenders on an exorbitantly high rate of interest remains unaffected.

Therefore the final question still remains – have the institutional and formal rural banking mechanism in India been able to address the issue of rural credit and farmers’ indebtedness efficiently and successfully as of now? The answer is probably no.

This main questions carries with it a set of related but equally important issues:

1. Should the institutionalised formal rural banking prioritise profit?

2. Should the main target of such banking mechanism be to penetrate into rural areas as much as possible irrespective of financial consequences?

3. Should private banks be forced to take part in rural credit delivery?

4. Can or should there be a blanket ban on all kinds of chit funds, private money lending and privately run finance co-operative societies?

5. Should Regional Rural Banks with robust capital adequacy, complete mechanisation of operations and extensive network of branches be the only banking institution to operate in rural areas and all other channels be got rid of?

Let the experts and policymakers enlighten us on the above.

*****

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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Company: SANKAR MAJUMDAR & ASSOCIATES
Location: GUWAHATI, Assam, IN
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