The Reserve Bank of India is looking into alleged irregularities by certain private and public banks while lending for agricultural activities under priority sector lending.
The RBI move follows a complaint by Kishore Tiwari, Chairman of the erstwhile Vasantrao Naik Sheti Swavalamban Mission (VNSSM), an organisation affiliated to the Maharashtra government. Tiwari, a well-known activist, in a telephonic interview with BusinessLine alleged that credit earmarked for farmers is being diverted by banks and microfinance companies. “It is a conspiracy of siphoning off money in the name of farmers. Most of the nationalised banks, which managed to get credit through Nabard, are involved in this scam,” he alleged.
Banks are supposed to earmark 18 per cent of their net loans disbursed in a year for the agricultural sector. On February 12, the Finance Ministry’s Department of Financial Services (Vigilance Section), directed the Chief Vigilance Officer of the RBI to look into the issue.
Tiwari, in a letter to Prime Minister Modi, said the modus operandi adopted by banks is to claim that they have achieved lending targets by forming fictitious Joint Liabilities Groups (JLGs), created in collusion with some agro-processing industries.
They prepare fraudulent and forged documents in the name of farmers. The credit disbursement is then pocketed directly by these companies. Their gains from this exercise could run into hundreds of crores, he wrote.
“Most of the accounts have been classified as NPAs and recovery proceedings are said to have started in Debt Recovery Tribunals against such non-existing farmer members of JLGs. In this way, most of the targets and sub-targets are shown to have been achieved. But farmers are being blamed for fraud; (but they) only exist on paper. It is a very serious fraud in the name of agro credit,” the letter said.