Why Are Banks Deducting Money From Farmers' Accounts Without Permission?

Banks are deducting 'crop insurance premiums' from farmers' current accounts without their knowledge.

In the Bhivani district of Haryana, a 49-year-old farmer, Bansi Lal, complained that Rs 2,480 was deducted from an account that was linked to his Kissan Credit Card (KCC), without his knowledge. Upon enquiry, the bank informed him that the money was deducted under the Pradhan Mantri Fasal Bima Yojna (PMFBY). But when he told the bank that he had not even applied for the insurance scheme, the bank could not give a satisfactory answer. Bansi Lal then filed a case against the bank and is now also waiting for responses to several RTI applications filed over the matter.

A similar case was reported from Bhabisa village of Uttar Pradesh’s Shamli district where a farmer, Kisan Nand Ram, complained, “Last year, when I took a loan, the bank deducted Rs 5,000 from it without giving any satisfactory reason.”

These are not isolated cases. A number of farmers from across the country have made similar allegations that money is being deducted from their accounts under the PMFBY without prior information.

Prime Minister Narendra Modi unveiled the crop insurance scheme on January 13, 2016. The scheme aims to bring 50% of India’s farmers within the crop insurance net by 2019. However, 22.33% farmers have already been covered under various existing insurance schemes. According to data collected after the completion of one year of the scheme, a total of 26.5% farmers have been brought under its purview. This means that instead of the targeted 10%, only 5.5% farmers were covered in one year.

It is worth noting that the government had initially allocated Rs 5,500 crore per year for the scheme but by the end of the year, the actual expenditure was estimated at Rs 13,240 crore. Despite spending an extra amount of Rs 7,740 crore, the government failed to achieve the target.

The farmers allege that in order to achieve its target, the government is forcefully registering them for the insurance. It might appear to some that Rs 2,480 deducted from Bansi Lal’s account is not a huge sum of money, but keeping in mind the 70th National Sample Survey Office survey report, which reveals that the average annual earning of a small or medium level farmer does not exceed Rs 20,000 (Rs 1,667 per month or Rs 56 per day), it turns out that for a farmer, it is a big deal.

Insurance has been made mandatory for farmers who took a loan under this scheme. This means premium is automatically deducted from the account of any farmer who possesses a KCC. There is no provision of seeking permission from farmers who obtained a loan.

“To bring more and more farmers under the scheme, insurance has been made compulsory for those who take a loan. At the time of a disaster, the farmer is not in the condition to pay the premium, which is why the money is deducted at the time of issuing the loan,” says an official of the Department of Agriculture Cooperation and Farmers Welfare.

As of March 31, 2016, 75,272,000 KCCs had been issued to farmers in India. Does it mean premium will be deducted from the accounts of all KCC holders?

Union agriculture minister Sompal Shastri says, “The policy has been framed in collaboration with the insurance companies in such a way that the unit is not an individual farmer but an entire group. If 70% crop of the entire group is damaged, only then will they get a compensation. This is why many farmers are not getting a compensation despite a premium cut.”

“When cars and refrigerators are not covered under group insurance, why are farmers covered under it?” he asks.

Ashish, a farmer from Bhabisa, claims that the insurance policy does not include crops damaged due to fire caused by a short circuit. “No matter how much crop we lose in such an accident, we do not get any compensation despite deducted premium,” he says.

Commenting upon the prime minister’s crop insurance scheme, Avnesh Kumar Gupta, general secretary of the World Economic Forum and associate professor of Delhi University, says, “An inhuman practice is being carried out against the farmers. If the insurance policy were good enough, farmers would themselves opt for it. It is absolutely wrong to forcefully deduct money from their accounts.”

Under this scheme, a premium of 2% has been set for khareef crops like rice and soya bean, and 1.5% for rabi crops like wheat and gram. That is, for an insurance of Rs 25,000 for one acre land, the farmer must pay a premium of Rs 500; 10% of the rest of the money is paid by the Centre while another 10% is paid by the state. The total amount is deposited with the insurance company. Ten private companies including ICICI Lombard and Reliance General Insurance have been roped in for the scheme.

Raja, a Bhivani farmer, says, “The bank never sends any one to check what crop is growing in the fields. They deduct premium for rice even when it is a sugarcane crop.” Raja took a loan of Rs 20 lakh and lost four acres of crop to a fire last year. But no compensation has been paid.

Nitika Kakkar and Deepak Vaishnav are students of journalism.

This article was originally published on The Wire Hindi and was translated by Naushin Rehman.