'Why Can't Banks Be Instructed To Not Reduce Credit Rating Of Farmers Due To PRS Loans?' Kerala High Court Asks

The Kerala High Court on Wednesday queried the State why an administrative order cannot be issued to Banks instructing them that the credit ratings of farmers would not be reduced on account of Paddy Receipt Sheet (PRS) loan, and that SupplyCo would take full responsibility to ensure the same.

Justice Devan Ramachandran made this oral observation while considering a batch of petitions filed by aggrieved farmers who sold their paddy to the State Government through Supplyco but had not received any payment in return. The Court had disposed the writ petitions, directing payments to be disbursed to the farmers without delay.

When the matter was posted for compliance, the Court was informed that farmers were being treated as borrowers by the banks under the paddy procurement scheme and that their credit ratings were also affected. The Court was also informed that the paddy receipt sheet showed farmers as borrowers.

"Why don't you instruct all the banks you are dealing with, through admin orders that none of the farmers credit rating will be reduced on account of PRS Loans, and that you will take full responsibility for it? No person would want to be known as a person having liability. Bring out an administrative instruction that PRS loans will not be taken for purpose credit ratings, which means they will not report to the CIBIL," the Court said.

Standing Counsel for SupplyCo Santhosh Peter responded that no such instruction was necessary, since no untoward incident had ever occurred. 

"There is no default on PRS loans. There is a period of 15 months to repay PRS loans. Within 8 or 9 months itself, it is cleared with Central Government’s funds. It is only to bypass this period that this arrangement has been made for farmers. There is no burden on the farmers, no security document is being executed either. The guarantor is SupplyCo. Famer is only considered as borrower for the purpose of collecting the cash," the counsel submitted.

The Court at this juncture reminded SupplyCo that it could not be condescending towards the plight of citizens. 

"You cant be condescending, you cant be patronizing to your own citizens. Every citizen is a sovereign, they are your Master. You are not their Master, you must realize that. I am living in a democracy, in a republic. India is a Republic. Every citizen is a sovereign, you can’t ask them to live in fear. Let them live in peace. Supplyco has to come clean. I am only saying to please to tell Banks not to report PRS loans to the CIBIL and transunion. Why should it be such a big issue," it said. 

Justice Ramachandran proceeded to explain that rating would fall even if repayment was late by a single day. 

"You don’t know how CIBIL works. If it has to be paid in 10 instalments, if it is late even by a single day to repay the 1st instalment, the rating will fall. You don’t know that. I know it, because I was part of the manner in which it was evolved as a counsel for the IBA. If you’ve paid first 2 instalments but not 3rd, rating will again fall. Once there is violation, it remains forever. You don’t know how it works. So it is possible that Govt may delay repayments. If you delay, their rating will fall. Same goes in case of One-time Settlements, etc. How the loan has been repaid matters a lot," he added. 

The counsel for the respondents thus submitted that a statement would be filed addressing the said issues. 

The matter has been posted for further consideration after 2 weeks. 

The plea has been moved through Advocates Millu Dandapani, Legith T Kottakkal, P.R.Banerji, Binoy Vasudevan, Sreejith Sreenath, S.Ranjit, Gokul Das V.V.H., T.K.Sandeep, Veena Harikumar and Swetha R.

Case Title: K Sivanandhan V State of Kerala and other matters

Case Number: WP(C) NO. 23267 OF 2023, WP(C) NO. 24835 OF 2023, WP(C) NO. 25152 OF 2023, WP(C) NO. 25410 OF 2023, WP(C) NO. 25575 OF 2023