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Resource centre on India's rural distress
 
 

Usurers cash in as bank loans to farmers dry up -Bhavika Jain

-The Times of India

MUMBAI: Demonetisation seems to have helped private moneylenders in Maharashtra. Of the Rs 13,558 crore of loans required for the rabi season, banks could disburse only about Rs 2,400 crore (18%), due to shortage of cash. Besides, there are restrictions on district cooperative banks (DCCBs).

Officials said the crisis gave moneylenders an opportunity to get rid of defunct notes as loans were disbursed in old notes and they will be paid back in new notes. The rate of interest levied by moneylenders ranges from 24% to 120% per annum as against the 9-15% charged by banks.

Of the amount disbursed, Rs 857 crore was from DCCBs and the rest from commercial and private banks. Sowing has been 120% of last year, and on 92% of the average area available for the rabi crop, which prompted increased borrowings.

The state government had allowed farmers to buy seeds and fertilisers using Rs 500 and Rs 1,000 notes, which helped moneylenders even more. "The area under rabi cultivation has gone up despite the small amount of bank loans being disbursed. This has meant that funds have been provided from sources outside the formal banking sector," said an official from the cooperatives department. Demonetisation was announced around the time sowing had just picked up in Maharashtra.

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