Press Release | 16.08.2024
- Call upon banking and non-banking financial institutions to follow suit and initiate
write offs - Demand disaster-sensitive loan & credit policies nationally
- Demand sensitive and cautious investment practices in ecologically fragile regions
The Financial Accountability Network India and Centre for Financial Accountability congratulate and commend the Kerala Bank (Kerala State Co-operative Bank) for its decision to write off loans of the affected people in Wayanad landslide. The landslide, which shook the nation on July 30, 2014 resulted in more than 400 people losing their lives, one of the biggest casualties seen by landslide in recent time. Settlements were washed away completely destroying houses, commercial establishments such as shops, service centers, and vehicles.
In an unprecedented move, the Kerala Bank has announced that it will be writing off the loan liabilities of the landslide victims in Wayanad. The write-off of loans from Chooralmala branch will include the liabilities of those who died and those who lost properties in the disaster.
Loan recovery amid a tragedy
The Kerala Bank has taken this decision at a time when the loan recovery agents are harassing people who lost everything and their near ones, their houses and property, demanding monthly repayment installments even at the relief camps. With no income and assets to repay, people were forced to come together to demand write off of their loans for those who got directly affected by the landslide. Many had home loans, vehicle loans, finances raised through pawning of gold and land for building these assets. Others had loans for starting small businesses which do not exist anymore and no foreseeable income as the local economy has come to a standstill.
In a memorandum submitted to the District Collector, district and state credit committees and lead banks, along with the state government, the landslide affected people under the banner of Chooralmala Relief Centre, demanded write off of loans and return of security provided without affecting the credit ratings of the people and to give an extended moratorium for people repayment for those whose livelihood are affected and are indirectly affected through loss of business, jobs and livelihoods.
Need for disaster-sensitive banking practices to be institutionalised
It has to be noted that people in the area have loan debts in not just public sector banks and cooperative banks, but regional rural banks, private sector banks and other non-banking financial institutions which in particular have a very bad track record when it comes to their harsh recovery practices. The distraught people who have pawned their gold, property etc, need immediate relief. It is important that private banks and non-banking financial institutions follow the lead by Kerala Bank and announce write offs of loans immediately.
The instance also highlights the need to follow humane and sensitive banking practices when it comes to loan recovery norms in disaster affected areas nationally. As livelihoods and assets are lost en masse, part of the relief and compensation efforts should also include loan write-offs and specially targeted credit disbursal for rebuilding. And such measures, instead of being perceived as “charity” need to be perceived as rights. It cannot be left upon the affected communities to demand such measures from time to time after disasters strike. Given that climate extreme events are only going to increase in the coming decades and exact a toll on people, the RBI needs to formulate guidelines and policies for lending institutions and systematically address the question.
To exercise caution when it comes to investments in ecologically sensitive regions
Financial Accountability Network India & Centre for Financial Accountability consider the decision of Kerala Bank to write off the loans of those affected by the landslide as exemplary. Responsible banking in the age of climate extremes need more such steps. It should also include making environmental and social safeguards integral part of projects and their investments. And environmental assessments need to take a cumulative approach to see the bio region as a whole when it comes to investments by financial institutions in such ecologically sensitive regions.
In recent times there are too many instances of big investments failing and exacting a very steep human and ecological toll, whether it is the land subsidence at Joshimath in Uttarakhand or the washing away of Teesta stage 3 dam. A relevant case in point in this instance is the proposed Wayanad – Kozhikode tunnel, bankrolled by the Kerala Infrastructure Investment Fund Board, very close to the landslide site.
The Wayanad tragedy therefore yet again emphasizes that development needs to serve the long term interests of people and the ecology. Urgent rethinking and course correction is needed when it comes to development in Western Ghats. It is also time to cast the spotlight of accountability on the financiers – the banks, NBFCs, financial institutions- pouring money into tourist and transport infrastructure, power projects etc. in sensitive areas. The Wayanad tragedy allows us to pause and reflect on several of these fronts before another tragedy unravels.