Government sits on reforms Bill to rein in moneylenders

The government has stopped short of driving a stake though the heart of the cause of farmers’ suicides in Vidarbha — heavy exploitation at the hands of moneylenders. Last year, it talked tough on major reforms and cracking the whip on dishonest moneylenders. But a Bill on it has been shoved into cold storage due to differences within the government over ‘flaws’ in it.

In 2006, then chief minister Vilasrao Deshmukh announced a package of Rs1,050 crore for farmers; Prime minister Manmohan Singh extended a generous package of Rs3,750 crore, which included a loan interest waiver component of Rs750 crore and Rs1,296-crore rescheduling of credit.

But despite such efforts, the number of farmers’ suicide cases in the districts of Yavatmal, Buldhana, Washim, Akola, Wardha and Amravati of Vidarbha region has only shot up. Reason: several lakhs of cotton-growing farmers rely on private moneylenders, who inflate their interest rates to 20%-50%. The farmers are driven to private moneylenders as financial institutions keep out loan defaulters.

moneylenders have a free run, thanks to the several loopholes in the existing laws. They lay claim to a farmer’s land, showing it was voluntarily sold to them for a certain amount. In many cases, there is not even a paper to prove the high interest rates they charge. And since they enjoy political patronage in their respective regions, none from the local administration and the police  raises a finger against them.

A senior Congress cabinet minister said, “We understand that Rs2,000-crore package (announced for farmers of cotton, soya, and paddy on Wednesday) is not the final solution. Financial institutions refuse to clear fresh loans for defaulting farmers.

Private moneylenders often come to their rescue, albeit seeking a bigger price.”