Similarly, the Regional Rural Banks which came into being in 1975 with the mandate of providing finance exclusively to the poor — small farmers, marginal farmers, agricultural labourers and others below poverty line in rural areas — have undergone a drastic change whereby they have lost their right to be called social banks and have transformed into pure commercial banks — in fact more commercial than the most commercial banks. Their lending to the poor has come down to 15 per cent from 100 per cent.
These 'poor people's banks' have made Rs.12,589 crore profit in five years 2008-09 to 2012-13 and gave Rs.9,318.27 to the center's exchequer as income tax. The recent amendment to the RRB's Act facilitates them to become even more commercial.
To add to this, the government and RBI have created an enabling environment for commercial microfinance to thrive through financing to the poor. The MFI have earned a profit of Rs.6,560 crore in a single year 2013-14 , on their gross outstanding portfolio — loans given to the poor — of Rs.33,517 crore.
The MFI borrow cheap, mostly from the banking system, and flourish on charging exorbitant interest from the poor although the poor people's activities hardly generate any surplus. In fact, a farmer with as high as 25 acres of land is getting a paltry monthly income of Rs.5,681 as per the Arjun Sen Gupta Committee report. Worse still, the small and marginal farmers spend 36 per cent more on farming than their incomes from it.
There are moves to further strengthen the MFIs while distancing the poor from the commercial banks' credit. The recent change in the priority sector norms, for instance, have removed the distinction between direct and indirect agricultural credit and facilitated the way for sanctioning more loans to big farmers and the corporates in the name of agriculture.
These trends of declining cheap and easy credit to farmers have the portents of deepening the agrarian crisis. If food and employment securities of the people are of any concern, the government is left with no choice but to reverse them and strengthen the lending institutions to increase, not weaken, the support to the farmer in the country. Are we hoping against hope?