The Modi Government has enacted by ordinance a Uniform Banking Code called the Banking Regulation Amendment Ordinance 2020 for offering full control on all banking sectors to the Reserve Bank of India with the intention of controlling nationalised, co-operative & private sector banks through targeted policy decisions. The Government seems to have accorded priority to Uniform Banking Code before the proposed and controversial Uniform Civil Code.

The basic principles of the Constitution of India are equality and economic, social and political justice. All bodies including the elected governments in states as well as the regulatory bodies appointed by the governments should be so structured that they would ensure the implementation of the basic principles. While all such bodies in various
states need to be scanned from this point of view, the more so is the case of the RBI as it has now statutory control over the national economy.

Articles 14-16 of the Constitution of India state that all laws including ordinance, order, by-laws, rules & regulations or notifications which abridges the fundamental rights are void. The RBI should there be so structured that all sectors being controlled by it should have proper representation. At present the Director Board seems to be consisting of Governor and Deputy Governors who are mostly bureaucrats and academicians without knowledge of ground realities in the respective sectors and Executive Directors most of whom are RBI officers elevated to posts of the same. No proportional representation is given to farmers, small scale industries, self-employed entrepreneurs and other deprived classes who still need social and economic justice.

What happens due to lack of such representation is confirmed after scanning the ground reality in the farming sector and the way the RBI has acted in its regulatory norms and rules. Industry requires capital, man power and production. Farmers have land, themselves, their family members, crop share or hired workers as capital, and crop is the produce. In other industries, we see representation of companies ranging from small scale, MSME’s to large scale entities. The agricultural sector also has similar bifurcation in the form of small land holding farmers who form a crucial part of this industry but still find no representation in the banking sector.

As due representation is not given to the agricultural sector, most of the farmers have not received relief benefits announced by the Union government. The criteria laid down by the RBI & NABARD make it very difficult for money to be transferred to the debt-ridden farmers through the nationalised banks.

What are these restrictive criteria?  After the Union government’s announcement the RBI issued a circular failing to remove the prohibitive factors that may throttle the very spirit of providing relief. For instance, the condition of the NPA, (the non-performing assets) which means that any account of a borrower turns in to a black tag if loan repayment is delayed by 90 days from the date of loan disbursal. The black tag blocks all transactions of that account so that while the borrower is not eligible to get any other benefit he or she is liable to face legal action for the recovery. This concept is not suiting to the farm sector because as per 90 days criterion, only wage earners would be able to pay instalments regularly every month as their wages are fixed and available on monthly basis.

Small land holding farmers & professionals in the allied sectors do not get their dues on a monthly basis and this hampers their ability to pay the loan instalments on time. 

In a specific query, the RBI has clarified that moratorium of three months or three instalments is applicable to all loans including personal as also to agriculture term loans, crop loans and retail loans and the period of monthly instalment payment is extended by three months or extension of three instalments is considered for repayment. The monthly instalments criterion is quite beneficial to monthly wage earners. For instance, even if the farmers are not able to pay two months instalments and pay the third month instalment, then their moratorium period will be extended for three months more without having the threat of a black tag on them. 

This benefit is taken by borrowers getting regular monthly wages and banks also are encouraging them to pay at least one and enjoy three months criterion. But In the case of agriculture, instalments are annual and hence moratorium of three instalments should mean moratorium of three years. But the same criterion of 90 days is made applicable to farm loans also. Even while announcing the package, finance minister stated that 3 crore farmers with loans of over 4 lakh crores would avail the benefit of 3 months moratorium. But the nationalised & co-operative banks have denied relief to farmers due to their NPA tag and the criterion of 90 days.

 According to a Marathi daily Agrowon, (first daily in India, fully dedicated to agriculture), 25 lakh farmers have not yet received relief in the crisis and only 30 percent of crop loans are disbursed while others are blocked on pretext of RBI’s undue NPA concept.

Urgent action is therefore necessary for the modification of the NPA concept in view of the annual repayment instalments and for releasing all blocked relief measures so positively and liberally provided by the Modi Government. The bureaucracy in both the RBI and NABARD may fail the governments if the matter is delayed further. The delay in restructuring the director boards with proportional representation before the formation of the Uniform Banking Code would also amount to statutory illegality and violation of the Constitution of India.

Prabhakar Kulkarni

Prabhakar Kulkarni is a journalist with 60 years of experience in various publications like The Free Press Group, Indian Express Group, The Times Group, The Hindu & The Business Standard. His articles on wide variety of subjects have appeared in The Telegraph, The Tribune, Deccan Herald, Excelsior, Mainstream, Woman’s Era , Alive and also Web Papers like The Citizen, Indus Scrolls, Counter-view and others.

The views and opinions expressed in the article are those of the authors and do not necessarily reflect the official policy or position of The Tilak Chronicle and TTC Media Pvt Ltd.

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