Debt

The article is based on a primary survey carried out to ascertain the magnitude and determinants of deaths of farmers by suicide in six districts of Punjab. It recommends the provision of financial compensation to victim families, waiving of debt, and strengthening of public healthcare and education system as the main policy measures for addressing this tragic phenomenon.

The evidence of a decline in the non-performing assets ratio in India’s banking system points to a significant improvement in the health of banks. However, this may have occurred partly through the use of write-offs that erode the capital base of banks and also because of the time-bound moratorium on debt repayments announced as part of measures to address the effects of the pandemic on small units and other selected borrowers. In the circumstances, even though new pandemic-linked lending to micro, small and medium enterprises was partly guaranteed by the government, a rise in the NPA ratios and further erosion of bank capital seem inevitable.

The present paper relies on the census survey of the suicide-affected farmers’ households from the two most vulnerable districts of Maharashtra from 2014 to 2017 when the largest number of farmers’ suicide cases was reported after the 2008 farm debt waivers. A complex mix of social, economic, and psychological factors
play their role in translating into farmers’ suicide. The study covers the districts of Usmanabad from Marathwada and Yavatmal from the Vidarbha region of Maharashtra, respectively. 

Ironically, agricultural households now earn “more” income from wages than from crop farming.

The finance minister’s Budget speech 2021 revealed the government’s plans to establish an Asset Reconstruction Company to take over bad debt from the books of public sector banks for eventual disposal. That suggests that the ARC route rather than recapitalisation would in the coming months be the main means of refurbishing capital in the public banking system. Since there are as many as 28 ARCs already in existence, the reason why the creation of one more would resolve a problem that is expected to worsen over the coming year is unclear. In fact, past experience indicates that ARCs have not helped enhance the actual recovery of lock-up in stressed assets. This suggests that the move is a means to postpone the problem of bad debt resolution so as to avoid having to recapitalise the banks with budgetary resources, which would widen the central fiscal deficit.