Tamil Nadu Farmers Struggle with High-Interest Loans Amid Cooperative Delays

Farmers in Tamil Nadu's delta districts are increasingly turning to private money lenders due to delays in crop loan disbursement from cooperative societies. With interest rates soaring between 36% to 60%, many are at risk of losing their pledged properties. The bureaucratic requirements, such as obtaining a 'no-dues' certificate from banks, are causing significant delays, pushing farmers into a cycle of debt. Activists and farmer associations are calling for urgent reforms to streamline the loan process and prevent reliance on exploitative private credit. As the next planting season approaches, the urgency for action grows, highlighting the need for immediate solutions to safeguard farmers' livelihoods.

By Narendra Chaudhary Jun 30, 2025, 12:23 IST

Farmers Turn to Private Lenders Due to Loan Delays

Chennai, June 30: In the delta regions of Tamil Nadu, known as the state's rice bowl, numerous farmers are compelled to seek assistance from private money lenders and microfinance institutions. These lenders impose exorbitant interest rates ranging from 36% to 60% due to delays in crop loan disbursement by cooperative societies. Many farmers, in their desperation, risk losing properties they have put up as collateral.

Farmers across various districts have expressed their frustration over the increasing demands from cooperative societies, particularly the requirement for a 'no-dues' certificate from their banks before loans can be approved. This bureaucratic hurdle can take weeks to navigate, often leaving farmers in a tight spot as they prepare their fields for planting.

Manikantan M.R., a farmer from Thanjavur, shared his experience: “The local cooperative society postponed my crop loan, insisting on a no-dues certificate from my bank. The process would take too long, and with the sowing season nearing, I had no option but to approach a private lender charging 60% interest,” he explained.

He noted that he had to pay the interest upfront, with the lender deducting the total amount before providing him with the remaining funds. “I used that money to begin cultivation,” he added, highlighting that his previous loans from cooperatives had been interest-free.

This troubling situation has ensnared many farmers in a relentless cycle of debt. The combination of steep interest rates and immediate payment requirements significantly amplifies their financial strain.

The looming threat of losing pledged assets is ever-present, and the costs associated with cultivation are rising sharply.

In response to this crisis, P. Viswanathan, president of the Tamil Nadu Tank and River Irrigation Farmers Association, has urged lawmakers to find solutions during the upcoming monsoon session of Parliament.

“The state government should advocate for measures to streamline the disbursement of crop loans to the Union government,” he stated.

He also called for a formal directive, known as a Government Order (GO), to address issues related to CIBIL (Credit Information Bureau India Limited) score requirements that are obstructing timely loan approvals.

Viswanathan stressed the need for cooperative societies to simplify their documentation processes and expedite loan approvals to prevent farmers from resorting to high-cost private lenders. “If the banking process itself is causing delays, we must reassess its legal validity when lives and livelihoods are at risk,” he remarked.

Farmers’ groups and activists have rallied for reforms, warning that if cooperative societies do not resolve procedural issues, the increasing dependence on exploitative private credit could severely undermine agricultural productivity and threaten financial stability in rural areas.

The state agriculture department has acknowledged these concerns and announced plans to review the current loan process. However, farmers are eager for prompt action as the next planting season approaches, bringing with it the risk of another cycle of high-interest debt.