Punjab to tighten law to save farmers from debt trap

In a bid to save farmers from debt trap, the Punjab Cabinet today decided to make it mandatory for the private money lenders to secure licence to run their business and limit the sum of farming loans that peasants can raise.

In its meeting chaired by Punjab Chief Minister Amarinder Singh, the Cabinet decided to provide for these and other pro-farmer measures by amending the existing Punjab Settlement of Agricultural Indebtedness Act, 2016, an official release said.

The Cabinet approved the bill to amend the 2016 law and decided to introduce it in the state assembly during its upcoming session starting tomorrow, it said.

 

To begin with, the Punjab Settlement of Agricultural Indebtedness (Amendment) of Bill, 2018, seeks to put a limit on the quantum of loan that peasants can raise against per acre of their land.

It would also empower the government to regulate the interest rate on farming loans by private money lenders, who will have to secure a licence to operate in the market.

The private money lenders operating without the licence would be deemed illegal and would not be entitled to move debt settlement forums to retrieve their loan, it said.

Only the licensed money lenders would be allowed to move the debt settlement forums with the proof of the amount lent to a farmer, it said.

The Bill also seeks to bring down the total number of existing debt settlement forums from 22 to five, which would be set up at divisional levels and headed by the divisional commissioners, the release said.

These measure would ensure a more systematic approach in handling farm debt cases, it said.

The decision to amend the existing law on farm loans was taken to curb the growing trend of agricultural indebtedness, resulting in mismatch between the cost of

agricultural inputs and minimum support price of the farming produce, the release said..

It added that the farmers often raise loans from both the institutional and non-institutional resources, which extend it on exorbitant rates, leading farmers to land in debt traps.

While the institutional loans are regulated through various special legislations, the non-institutional loans remain largely unregulated having no mechanism for redressal of the debtors' grievances, it said.