The Reserve Bank of India (RBI) has stepped in to help farmers hit by the double whammy of severe drought and demonetization. The central bank asked banks to ensure cash availability for the current rabi crop season, and disburse crop loans to farmers on priority.
"At a time when there is a cash crunch, we've taken note of the fact that some scheduled banks are selective in loan disbursal and are ignoring farmers," said a senior RBI official.
The RBI has particularly upped its ante over the fact that several banks maintaining currency chests are utilizing the available money to woo their own customers and not distributing notes equitably .
In an advisory on December 2, 2016, the RBI said: "A perception has also emerged that banks with currency chests are according priority towards supplying cash to their own bank branches. These banks with currency chests are, therefore, advised to make visible efforts to dispel the perception of unequal allocation among other banks and their own branches."
The main focus of the advisory is to nudge banks to help farmers. "To ensure cash availability for the rabi crop season and adequate allocation of bank notes for rural branches, post offices and DCCBs, banks are advised to involve the district coordinators State Level Bankers' Committee (SLBC) in distribution of cash from currency chests," the notification said.
A reality check, however, reveals a different story: Farmers are not able to withdraw the required amount of money from their accounts, leave alone getting crop loans. Of the targeted Rs 18,000 crop loan for rabi, banks have disbursed over Rs 1,500 crore in October. No significant amount was released as crop loans after November 8, when Rs 500 and Rs 1,000 notes became obsolete.
"While the government has failed to help mitigate the effect of drought, demonetization has only added to our misery . Normally , farmers bank on private moneylenders for loans. Due to demonetization, even moneylenders are of no use," said Kurubur Shanthakumar, president of the Indian Sugarcane Farmers' Association.
Farmer leaders are now planning a widespread agitation. "Various organizations, including the Raitha Sangha and Dalit Sangharsha Samithi will meet on December 10. We will chart out an agitation in protest against the indifference of both the Centre and state government," said KS Puttannaiah, Melkote MLA and leader of the Karnataka Rajya Raitha Sangha.